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Finance GlossaryDefensive Stock
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Defensive Stock

Definition of Defensive Stock

A defensive stock refers to the shares of iconic companies that generate stable and consistent returns and dividends, regardless of the market conditions.

Defensive stocks are rare because companies that have defense against every market condition are rare.

While defensive stocks may not generate high returns, they are known to add stability and defense against declining economic conditions. In India, stock of ITC Limited is an example of a defensive stock.

Related Terms

Block Trade

A block trade is a substantially large buy or sell order for a stock, commodity, or other security. Block trades are typically done by institutional investors like hedge funds, mutual funds, and others to mask the true size of the transaction.

Shares change hands between companies after the price of the security is privately negotiated. Most block trades are routed through investment banks and executed outside the conventional market.

Ichimoku Cloud

Ichimoku Cloud is a group of technical indicators that’s used to understand trends, momentum, support, and resistance by calculating averages. Furthermore, the Ichimoku Cloud indicator is made up of two components:


  • TenkanSen: The short-term indicator
  • KijunSen: The long-term indicator

There’s a cloud that’s formed as a result of plotting the averages and using the components on a chart. One glance at this cloud can tell you multiple things like:


  • Uptrend: If the price is above the cloud
  • Downtrend: If the price is below the cloud
  • Neutral: If the price is in the cloud

Moreover, if the cloud and the price are moving in the same direction, there’s much more confidence in the trend that’s forming. In fact, it’s a trading signal.

Consolidated Financial Statements

A consolidated financial statement is a record of all the assets, liabilities, income, expenses, and other financial data of a company and its subsidiaries.

High Volatility Stocks

High volatility stocks are shares that fluctuate based on market conditions, typically more than others. The volatility could be a result of inherent fundamentals or other factors like the industry or domain. Identifying high volatility stocks is possible through indicators like Average True Range and Bollinger Bands.

Flipping

Flipping is the act of buying and selling an asset quickly to make a profit. The term is commonly used in real estate where an investor buys a property and sells it within a short span of time, say days or weeks, to make a quick buck.

The real estate investor may flip the property after making small improvements to it, thereby increasing the chance of making potentially lucrative returns. Flipping is also a term used to describe an investor’s actions during an IPO.

For example, let’s assume Mr. Apple invests in the IPO of Juice & Co. and intends to sell the shares days or weeks after the company’s stock is available on the secondary market.

The stock soars on the first day of listing, right at the opening bell, and Mr. Apple sells. In such a case, Mr. Apple will have earned potential profits by flipping IPO shares.

Floating Interest Rate

The rate of interest that changes across the tenure of a loan, generally every quarter, due to the government’s interest rate, market conditions, and other factors is known as a floating interest rate.

Personal loans and home loans are typical examples of borrowing that carry a floating interest rate. A point to note here: the floating interest rate is added on top of a base interest rate that is charged by lenders.



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