The market may be down 600 points today. If the selling picks up, it is hard to predict a bottom.
There are a very few shares which should be a good defense because of their size, balance sheets, dividends, global revenue diversity, and lack of exposure to the financial industry.
Microsoft (MSFT) is still riding the wave of Vista adoption. Even if this does slightly less well than planned, the company is now profitable in its game division so that is no longer a drag on earnings. Its software sales margins are still the envy of the industry. The company has about $20 billion in cash.
Altria (MO) is the largest global cigarette company. As a habit, smoking is hard to kick. Lighting up in emerging markets where health restrictions are not tight is growing. MO has a 3.9% dividend. It has $7.3 billion in cash. Its forward P/E is less than 16 and it has a 17% operating margin.
Exxon (XOM) will do extremely well even if oil drops below $80. It did well when oil was at 60%. It margins in refining should stay strong. XOM has an unusually low forward P/E of 11. In the last reported quarter, the company made $17 billion on just over $100 billion in revenue.This is a close to a "high gas price, high oil" price play as investors can get.
Procter & Gamble (PG) will benefit from the fact that people will buy diapers, razors, and soap, even if the economy moves down. The company has a modest forward P/E of 17. Its yield is over 2%. P&G may not be the fastest growing company in the world, but it is one of the safest.
Douglas A. McIntyre
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