Utility Consolidated Edison, toy maker Hasbro and pest control company Rollins Inc have each seen more fund managers adding shares this quarter, and as a result have each gained 3 percent or more year to date.
Utilities, meanwhile, which are attractive to investors mainly for their dividends rather than the prospects of share price appreciation, are up almost 13 percent since mid-December, partly on the prospects that a weaker U.S. economy could slow the Federal Reserve's plans to raise interest rates.
Still unclear is whether the move-to-safety is in itself a sign that the stock market will improve rather than continue to spill blood. The S&P 500 has gained an average of 18.5 percent in the six months after surges in defensive stocks such as telecoms and utilities, and 28.2 percent in the 12 months following the defensive jump, said Gina Martins Adams, equity strategist at Wells Fargo. Consumer discretionary and technology stocks are the most likely to outperform the broad market in the six months ahead, she said.
Eric Schoenstein, co-portfolio manager of the Jensen Quality Growth fund, said that defensive stocks will likely continue to outperform as investors prepare for the first prolonged downmarket since 2009. His fund only invests in companies that have been able to post a 15-percent return on equity every year for the last 10 years, and has its largest positions in PepsiCo Inc, Microsoft Corp and surgical tool company Becton Dickinson and Co.
"We've had six years that have unfolded almost entirely as a bull market and people have been taught to pursue momentum," he said. "We are looking for companies that are able to weather the storms."