Since this seems to be the season for defensive stocks, you may be looking for companies with a limited downside. Now's The Time for the Stout-Hearted. This is certainly a time for equity investors to hang tough, and the Babson managers say that software firms are particularly appealing in a bear market. That is the job of software. I share their interest in software companies, and not just because they may be good defensive stocks.
Software is the world's great intellectual property industry.
It means that these companies deliver genuine innovations and are paid accordingly. It means gathering a bunch of really smart people together to create something new and special, receiving a copyright or a patent and then selling untold numbers of copies of the invention at a marginal cost that approaches zero. In a competitive world, a copyright is a legal monopoly. Software firms can make particularly good use of this advantage, because the manufacturing and distribution costs are so low. Software is like the computer chip industry except you don't have to build a factory.