This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Getting Defensive

Today I want to finish up a look at defensive stocks as defined by Ben Graham and slightly tweaked by yours truly. We are basically looking for non-financial companies with a long history of profits and dividends to buy on weakness and hold for an extended period of time. On Monday, I mistakenly reported that the screen only found four stocks that qualified. The good news is that the screen was set incorrectly and need a tweaking -- when corrected, the total number of qualifying stocks rose to by 25%. The bad news is that only five stocks still made the grade for a defensive portfolio.

Reliance Steel and Aluminum (RS - Get Report) shares have pretty much tracked the market over the past few years, but the stock is cheap and will see strong growth as the economy continues to attempt a full-fledged recovery. The company provides metal processing services and distributes steel, aluminum, brass, copper and specialty metal products across a wide range of industries.

They have historically grown by acquisition and this year will be no different as the company recently announced the purchase of Florida-based Metals USA Holdings (MUSA - Get Report).

This article originally appeared on March 20, 2013, on RealMoney. To read more content like this + see inside Jim Cramer's $3 Million portfolio for FREE Click Here NOW.

The company guided first-quarter earnings to much lower levels but indications for the rest of the year are quite positive as orders from the aerospace and energy industries have been firming up. The company also believes that nonresidential construction will improve in the second half of the year and spark increased metals demand. The company has remained profitable and paid a dividend through the economically difficult period. The shares are fairly cheap, as the stock currently trades at 12x earnings and 1.4x book value. The yield is just 1.7% bit the dividend has grown by 15% annually on average for the past decade and it should continue to do so.

I have previously mentioned Archer Daniels Midland (ADM - Get Report) as an excellent defensive stock, but so far, it has not returned my affection. The shares are still well below the 2008 highs in spite of the company's dominance of the U.S. grain industry. The company processes, transports, stores and sells oilseeds, corn and related products. Weaker ethanol demand has hurt the company in the short term but, in the long run, increased global demand of protein meal and vegetable based oils should help boost earnings and the stock price to much higher levels.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Real Money
Try it NOW

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums


Chart of I:DJI
DOW 16,776.43 +304.06 1.85%
S&P 500 1,987.05 +35.69 1.83%
NASDAQ 4,781.2640 +73.4890 1.56%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs