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Buying defensives that make cash and hand money back to shareholders via buybacks and dividends is a popular strategy at the moment , as macro headwinds keep the bulls at bay.
Analysts at Morgan Stanley have been asking if this strategy has run its course, their conclusion, no.
“The factors behind our more defensive stance have not changed and the key catalysts we’ve identified to turn more positive are not yet in place” said Graham Secker, the UK equity Strategist at Morgan Stanley in London said in a research note.
“We would be surprised if we had already reached the end of this period of defensive rotation given that outperformance of the defensive group is still modest so far and that non-commodity cyclical sectors are trading close to relative highs”
Given this stance, Secker is advising investors to look at reliable growth stocks and those paying a high and secure dividend yield.
The stocks that tick both those boxes in Secker’s view are AstraZeneca , BAT, H&M, Imperial Tobacco and Sanofi-Aventis. Buying drug makers and tobacco stocks is something we have heard again and again at CNBC in recent months and Morgan Stanley believes four factors continue to back this view.
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