Making Defensive Adjustments

Dale Bryant's defensive picks helped to shield against market volatility

If investors were shell-shocked last year when Dale Bryant, founder and portfolio manager of The Bryant Group, a money management firm in New York City, offered up defensive stock picks to fend off market volatility, they might be feeling a bit better if they followed his strategy. Although Bryant’s slate of five stocks produced a loss of 7.78% over the 52-week period from May 16, 2001, to May 17, 2002, it slowed the bleeding caused by a turbulent market. By contrast the S&P 500 tumbled 13.8% and the Dow lost 7.69%.

“Four out of my five stock picks did reasonably well,” says Bryant. (If you had not factored his technology pick, his selections produced a 6.32% gain.)
Bryant says the defensive posture he took held up well, but he did sell two of his picks: one to reduce losses, and the other to lock in profits. As for what to do now, he says, “Don’t be fooled into thinking that a recovery is around the corner. Look at real estate investment trusts, preferred stocks, and corporate bonds to park your money until things become more clear.”

As far as his stock picks are concerned, Bryant was surprised by the sluggish performance of Fannie Mae (NYSE: FNM). The stock was up only 1.07%, going from $79.50 a share to $80.35. He says that although the mortgage lender benefited from the housing boom, “they got a lot of negative press for using derivatives to offset market risk. It hurt them.”
An unseasonably warm winter and the effects of Sept. 11 on the economy hurt Devon Energy (AMEX: DVN).

“Those two things contributed to lower demand from natural gas and oil, so prices fell,” says Bryant. Although the stock fell 18.54%, going from $61.00 to $49.69, Bryant feels this oil and natural gas producer is its still a solid play.

Johnson & Johnson (NYSE: JNJ) was Bryant’s big winner. A 2-for-1 stock split in June 2001 and a diversified product line helped the stock enjoy a 25.24% rise from a split adjusted $49.08 to $61.47 a share. “I think J&J is a core holding for any portfolio,” says Bryant.

Although Astoria Financial’s (NYSE: AF) stock also enjoyed a gain of 17.52%, rising from a stock split-adjusted $28.09 to $33.01, Bryant decided to sell his holdings and take profits because “a lot of their earnings came from housing mortgages, and there is risk that the housing boom may be slowing.”

Bryant also sold Selectron (NYSE: SLR) to reduce taxes on capital gains as the stock plummeted from $24.28 to $8.70 a share. The 64.17% plunge was due to the continued slump in the tech sector, which prevented Selectron from getting additional manufacturing contracts from firms like Cisco Systems and Lucent Technologies.

Leave a Reply

Your email address will not be published. Required fields are marked *