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Why Investors Need to Be in Defensives Stocks: Pros

Thursday, 5 May 2011 | 12:04 PM ET

With stocks on the decline for the fourth session, investors should look into the defensive sector, according to David Spika, VP and investment strategist at WHG Funds, and Steve Massocca, managing director at Wedbush Securities.

Play Defense With Drugs & Utilities?
David Spika, WHG Funds, and Steve Massocca, Wedbush Securities, discuss whether now is the time to buy classic defensive plays like big pharma and utilities.

“The pharma and utility space is an area where companies trade at 30 to 40 percent discount to the market, with dividend yields 2 to 3 times higher. And [they have] much more predictable revenue streams,” Spika told CNBC.

“So we expect those to perform well in this type of environment.”

In the meantime, Massocca said while earnings have been “far better than anyone had expected,” a handful of disappointing economic reports are worrying investors.

“We got some terrible jobs numbers today, so we could easily give back what we got from earnings season, which was a move from 1,300 to 1,370 [on the S&P],” he said. “So I see us getting back to 1,300, but I don’t see a real significant decline, unless there’s a big change monetary policy and that doesn’t appear to be the case right now.”

Spika’s Pharma/Utility Picks:

Abbott Labs

Pfizer

Dominion Resources

American Electric Power

Massocca’s Pharma/UtilityPicks:

Bristol-Myers

AstraZeneca

Telefonica

Windstream

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Scorecard—What He Said:

  • Massocca's Previous Appearance on CNBC (Apr. 25, 2011)
  • Spika's Previous Appearance on CNBC (Mar. 2, 2011)

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More Market Intelligence:

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CNBC Data Pages:

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CNBC Slideshows—FYI:

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Disclosures:

Massocca owns shares of BMY, AZN, TEF and WIN through his fund.

Spika owns shares of ABT, PFE, D and AEP through his fund.

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Disclaimer

  Price   Change %Change
ABT
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AEP
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AZN
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BMY
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D
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PFE
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TEF
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WIN
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