This question pops up frequently. Some people ask it more often, others less so. The ongoing bull market started in 2009 and was only briefly interrupted a few times. Every dip gets bought, and on we go. We haven’t seen a recession with an enduring and nasty bear market. Many investors nowadays do not even know what that is – the last one is simply too far away. This Weekly is not about market timing, but about bringing some thoughts in order, cleaning up with a few misbeliefs, and challenging the composition of one’s stock portfolio.

Summary and key takeaways from today’s Weekly
– Many defensive stocks have massively disappointed investors.
– I have been writing for long to be cautious and not greedy, as many developments could have been anticipated well in advance.
– Below, I present one idea my Premium PLUS members have received, and I explain why it makes more sense to own such ideas.

Last week (see here), I wrote my Weekly about having closed my two gold mining stock ideas I had published for my members. This was less a move to time the market, but a result of my analysis, paired with my gut feeling (and my nose smelling something).

The gold (and silver) price came down rather hard over the last two weeks. Mining stocks got slapped brutally, with even the biggest names having entered or are close to entering bear market territory (losses of at least 20%).

In such a brief period – euphoria got kicked in the stomach.

Some people are questioning, respectively almost waiting for the broader market indices to follow suit. We haven’t had a real bear market since the Great Financial Crisis. Does it make sense to prepare now or is it wasting time and sacrificing returns?

I have no clue whether and when the next shakeout will come. But this is not even my attention to find an answer to. More generally speaking, with today’s Weekly I intend to answer the question if it makes sense to rotate a stock portfolio now into more defensive names, irrespective of what the indices will be doing.

A post on Seeking Alpha (see here) inspired me to make a Weekly out of this.

As usual, in my way and with my unfiltered thoughts this certainly will not be to everyone’s taste.

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^{both as per 29 October 2025 market close – since August 2022}

Defensive is not defensive, but what is defensive?

Without losing to many words, when thinking about defensive stocks, the majority of investors will with a high likelihood name at least one of the following sectors:

• tobacco
• food
• beverages
• telecom
• supermarkets
• pharma
• household and cleaning

There are likely more, but I just quickly wrote down what came to my mind without thinking too much. Just instinctively.

What all these sectors share is that their underlying businesses are barely cyclical or not at all. Their sales, profits, and cash flows are only marginally hit, if at all during a weaker economy, including a harsh recession.

This fundamental stability (paired with usually predictable dividends) historically has made such stocks the first choice to take the foot of the gas and to shield one’s portfolio from bigger drawdowns. The logic is simple, lose less than the market during tough times and switch back when the night is the darkest.

This strategy has worked well in the past, even though of course not for all stocks.

However, I am not convinced this will necessarily be the case again.

My longer time readers know I have been a harsh critic of blindly investing into what worked in the past, extrapolating trends in one direction, pretending there are no cycles anymore (only gains), ignoring shifting consumer trends, and having a blind eye on balance sheets as well as valuations.

Accordingly, it is not surprising for Financial Engineering readers that many stocks from the sectors motioned above have not only underperformed, but made their investors going through hell.

Tobacco after a brief slump did very well. If you bought Walmart stock (ISIN: US9311421039, Ticker: WMT), a typical defensive name, you have done well either.

But, who’d have thought that for example food or alcohol stocks could drop by 40-50% from their highs during a roaring bull market?

Impossible? That’s the reality.

Just ask investors of General Mills (ISIN: US3703341046, Ticker: GIS), Nestlé (ISIN: CH0038863350, Ticker: NESN), Diageo (ISIN: GB0002374006, Ticker: DGE), Brown-Forman (ISIN: US1156372096, Ticker: BF.B), Pfizer (ISIN: US7170811035, Ticker: PFE), Charter Communications (ISIN: US16119P1084, Ticker: CHTR), or Kenvue (ISIN: US49177J1025, Ticker: KVUE).

Just for fun and spontaneously, I created a chart including all these names, showing their stock price performances over the last five years (without dividends).

The best pick would have been Nestlé with only –13.9%. The rest is down between 22% and 61%. All in USD. Four of these seven names, more than half, has lost more than a third, and three of seven or 42% have lost more than 40%. This is not what I’d have expected to protect and stabilize my portfolio, if I owned any of these…

These names are not cherry-picked. I wrote down what came to my mind spontaneously. You can check other, similar names from the same “defensive” sectors.

By nature and only looking half-awake at them, one would have assumed to have created a perfectly defensive lineup to weather a stock market storm.

Not really…

I hope no one has such a portfolio composition. The brutal reality is these have all been extreme losers over the last years. There is not one single reason to explain that. One could think it is due to people having turned greedy, shifting everything into the big tech stocks, ignoring the hidden values inside these “proven” companies.

But this is simply not the case.

There are enough examples of stocks that have been performing well. Inside these sectors, but also from other sectors outside of tech.

My members know that.

I have been telling all my readers for long to never ignore valuations.

As I have analyzed and explained in multiple Weeklies in the past, these formerly defensive names have turned into money graveyards for a variety of reasons. And yes, I am very hesitant to “buy the dip”.

Many, respectively most, share over-levered balance sheets, i.e. too much debt. But also changing consumer trends (alcohol, healthier food), the loss of brand values, patent expirations (Pfizer), diminishing growth, margin pressure, and finally too high expectations in the form of too steep valuation multiples.

If many of them came together all at once, then goodnight…

Seriously, investing in stocks is more than to press the buy button on something your neighbor or barber (or any Youtuber who’s primarily targeting clicks) has told you.

Investing in single stocks is a serious business, requiring profound analysis, and at the very minimum an understanding of a few base fundamentals. There’s the saying that people spend significantly more time analyzing the functions of their next washing machine than they do before they buy a stock.

The sad truth is, this is not wrong.

Else, people would not be surprised to have picked underperformers, sitting now on losses from pretend defensive stocks that not seldom have been praised to be “must-own” tickers. If you cannot say what a business (stocks are pieces of businesses) is doing, what the drivers are, and how high expectations are, it’s often better not to be engaged in order not to burn the fingers (and the portfolio).

This does not mean one has to hide like the companion below.

My investing style and my ideas I present to my members are not for everyone.

And it is not my goal to appease anyone, as the result would be that no one is happy. I like setups that occasionally are a bit more spicy and / or contrarian, under the radar for most mainstream observers. This shall be no secret.

But it does not mean that I do not care about risks. I care a lot about risks.

There’s a reason I am talking frequently about risk and reward. My primary focus is not on reward, but indeed on risk. That’s why I put aside so many stocks. I am seeking risk factors and red flags. That’s why I have so much material to write about.

If there are too many risks and pitfalls, I simply do not care about the upside potential. This is important to understand.

On the other hand, if risks are low, manageable, or the optionality extremely high (e.g. potential 5- to 10-bagger under !realistic! assumptions and circumstances), I have nothing against such a case.

While on the surface, the potential outcome seems to be binary, i.e. either the drug gets approved or not, some setups have better probabilities compared to a coin flip.

The drug is approved in multiple European countries, among others in Germany, Austria, and Poland, and it has been in use for exactly this use case for more than half a century. It is well known, the side-effect profile is advantageous, unlike is the case with the other available therapies.

In other words, there is multi-generational real-world evidence.

My pick did a painful equity raise a few months ago, sending the stock down 40% overnight. I told my Premium PLUS members to stay on board. I had anticipated such a raise already in my initial report, despite the slightly surprising timing. Anyway, fast forward to today, the company has now a stronger balance sheet and its stock had temporarily more than tripled from its low after the capital raise.

While the approval is not guaranteed, the odds are fairly good.

Not only due to evidence based real-world use, but also after strong clinical trials, proving higher efficacy to placebo and on-market therapies (more people quit smoking successfully under less and less severe side effects), but also thanks to its superior safety profile. An inferior safety and side effects profile is the main reason many people quit existing legacy therapies prematurely.

Some binary bets tend to be more like 80/20 or so.

Here is the timeline of my idea. So far, this pick is up 47% as of writing, with the big dilution from the capital raise already stomached.

My strategy is simple: finding ideas that

• are barely covered; most mainstream investors have never heard of them
• a credible and strong story with realistic catalysts to move the business, and thus the stock
• strong financials
• a proper valuation, not assuming full success and even beyond that

This is just an example of what I present to my members, in this case a spicier Premium PLUS idea. But with strong odds for a possible outcome and the realistic chance of a buyout (the drug is a potential blockbuster), I see owning a few of such ideas as a far superior approach compared to owning a bunch of losers that have their heydays behind them.

Maybe the pretend defensive stocks return one day. But not now.

With such a stock like discussed above, respectively multiple of them, I do not have to care much what broader markets do, respectively what pretend defensive stocks do.

So far, I have closed four of my Premium PLUS and 20 of my Premium ideas. That’s a substantial enough mass to judge whether my approach works. I think it does, even though my active ideas have immense potential to drive these numbers noticeably higher – with very strong and credible risk and reward setups.

If you are sick and tired of owning loser stocks like many others, turn the corner, and join my Premium or Premium PLUS membership.

My members receive 8 (Premium), respectively 12 (Premium PLUS, Premium included) exclusive reports with my best stock ideas. In addition, I am sending out frequent updates, so that you’re not left alone down the road.

Join my growing movement of independent thinkers.

Conclusion

Many defensive stocks have massively disappointed investors.

I have been writing for long to be cautious and not greedy, as many developments could have been anticipated well in advance.

Below, I present one idea my Premium PLUS members have received, and I explain why it makes more sense to own such ideas.

By becoming a Premium or Premium PLUS Member, you get instant access to all my already published research reports as well as several updates.

Likewise, you qualify for eight, respectively four more exclusive reports with my best investment ideas plus updates on the featured businesses over the next twelve months.