In my blog post of March 2, 2007, "Will the real safe havens please stand up," I succumbed to some journalistic hyperbole in saying the early March correction in world stock markets exposed a few frauds (bad choice of words) among investments widely viewed as defensive, including the Claymore Sabrient Defender Index (NYSEARCA:DEF).
I am actually intrigued by the potential of this ETF, which tracks a basket of stocks that held up well on down days during the previous quarter. Indeed, as I pointed out in a column written two week ago for the March 16 edition of the Investors’ Digest of Canada, back testing shows (as reported on the Claymore Web site) that DEF would have turned $10,000 (U.S.) into $34,708 (U.S.) over the five years to 2006, versus $12,400 for S&P 500 (before fees).
The DEF may not have provided a positive return during the sell-off, but if back-tested results are any guide, the returns over the longer run should be quite noticeably ahead of the market.
DEF 3-mo. chart: