If You Think The Market Is Topping, Buy These 3 Stocks Now (WMT, JNJ, MCD)

If you believe the market is topping, at least in the short term around the 10,000 mark, there is one strategy that should work out well for your portfolio. Playing a little blue chip defense.

The following 3 companies are great defensive plays for a down market and should soundly outperform the general market in corrections. The proof is in the pudding, look at how these companies performed over the past 2 years.

Wal-Mart (NYSE: WMT) - The world's largest retailer is priced very reasonably, has no debt, and ample cash. More importantly investors flock to it in market downturns.

In the past 2 years the S&P 500 is down about 28%, while Wal-Mart is up close to 15%(excluding dividends).

Johnson & Johnson (NYSE: JNJ) - One of the largest consumer staple/health care companies in the world offers some of the same down market protection.

Over the past 2 years JNJ is down only 5% (excluding dividends) while the S&P 500 is down 28%.

McDonalds (NYSE: MCD) – The fast food chain absorbs additional consumers in downturns as many look for the cheapest meals available. And we all know McDonalds offers calorie rich meals at very low prices.

Since October 2007 McDonalds is up 5% (excluding dividends).

To drive home the point how important holding some defensive stocks in your portfolio is look at these 2 examples:

$100,000 original investment in the S&P 500 on October 23 2007 would be worth about $75,000 (assuming reinvesting dividend income) today.

That same $100,000 investment made in equal parts in JNJ, MCD, and WMT on October 23, 2007 would be worth about $111,000 (assuming reinvested dividend income) today.

So yeah, sometimes a good defense is your best offense.