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Defensives come back

Defensive stocks did very well in 2019. This is not as surprising as it seems
Defensives come back

Last year was a great one for equities: the FTSE 350 rose by over 14 per cent. You’d imagine, therefore, that high-beta stocks would have done especially well and that safer stocks would have underperformed.

But you’d be wrong. My high-beta portfolio actually fell last year, while my low-risk portfolio rose by 28 per cent, thanks in part to a great final quarter that saw huge gains in Dart (DTG), Kainos (KNOS) and Pets at Home (PETS), among others.

In truth, the poor performance of high-beta stocks is nothing new. My portfolio of them has fallen over the past 10 years even though the market has risen a lot. Nor is this confined to UK equities. Economists at AQR Capital Management have shown that high-beta equities in the US – and indeed high-beta assets generally – tend to underperform over the longer run.

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