Defensive Company


DEFINITION of 'Defensive Company'

A corporation whose sales and earnings remain relatively stable during both economic upturns and downturns. Defensive companies may lag behind other companies during periods of economic expansion due to the relative stability of the demand for its products and services. While the demand for some goods and services tends to decrease dramatically during periods of economic instability or turmoil, the demand for the goods and services provided by defensive companies tends to remain stable.

BREAKING DOWN 'Defensive Company'

Companies within the utilities industry, such as water and electricity corporations, are examples of defensive companies because the demand for these goods and services does not soften along with a declining economy. Other companies include those involved in the manufacturing or distribution of food, tobacco and oil.

  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in ...
  4. Cyclical Industry

    A type of an industry that is sensitive to the business cycle, ...
  5. Elasticity

    A measure of a variable's sensitivity to a change in another ...
  6. Earnings

    The amount of profit that a company produces during a specific ...
Related Articles
  1. Investing

    The Ups And Downs Of Investing In Cyclical Stocks

    This strategy can be profitable but only if you know when to dump these stocks.
  2. Trading Strategies

    5 Popular Portfolio Types

    Learning how to build these portfolios will increase your investing confidence and give you financial control.
  3. Active Trading

    Guard Your Portfolio With Defensive Stocks

    Find out how these securities can protect you from a market bust.
  4. Fundamental Analysis

    4 Characteristics Of Recession-Proof Companies

    Investors can find profitable companies - even in a recession. It's all about knowing where to look.
  5. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  6. Investing Basics

    What Does In Specie Mean?

    In specie describes the distribution of an asset in its physical form instead of cash.
  7. Economics

    Understanding Production Efficiency

    Production efficiency is the point at which an economy cannot increase output of a good or service without lowering the production of another product.
  8. Economics

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
  9. Economics

    Explaining Synergy

    Synergy is the concept of combining two or more entities to create something greater than either entity on its own.
  10. Economics

    What Does Short Run Mean?

    Short run is the concept that for a business, at least one factor of production is fixed while others are variable.
  1. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  2. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  3. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  4. When is it useful to look at a company's fixed asset turnover ratio?

    It is useful to look at a company's fixed asset turnover ratio when an outside observer, such as an investor, wants to know ... Read Full Answer >>
  5. What is the difference between perfect and imperfect competition?

    Perfect competition is a microeconomics concept that describes a market structure controlled entirely by market forces. In ... Read Full Answer >>
  6. How difficult is it to understand business analytics?

    In the abstract, business analytics is the study of financial, economic, consumer and production data through statistical ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!