Defensive stocks are those that remain stable despite difficult conditions - other examples being food and oil - because demand does not decrease as dramatically as in other sectors.
While at times lacking growth, they generally offer strong cashflows and, subsequently, reliable dividend payouts.
The utilities sector in 2009 had a lacklustre showing, but in 2010 they shone despite the recession, as investors who would normally put cash in banks were forced to look further afield for a satisfactory return in the face of the low interest rates.
"A lot of investors who would historically have placed their money in banks to live on [the proceeds] would have found that a struggle last year," Mr McIntyre said.
After the global equity markets bottomed out in March 2009, investors left the relatively conservative utilities stocks, seeking gains in riskier stocks, such as the resource sector which was rebounding at the time.
But they returned to utilities in 2010 as the global financial crisis worsened and interest rates globally were cut by central banks in efforts to stimulate their economies.
Overall, in 2010 the utilities sector performed well, especially considering it was the second year of fallout from the recession, Mr McIntyre said.
"Many of the utilities stocks maintained consistent cashflows, in spite of the effects of the global [financial] crisis," he said.
However, the year was difficult for some, with Telecom's net return down 3.7% and Contact Energy's bottom line "severely affected" by its inability to store gas last year.
"Telecom was particularly battered by regulatory concerns last year," Mr McIntyre said.
However, during the past quarter, Telecom's net return was 12% and, while the proposed break-up of the company was yet to be finalised, the market was now used to the idea, he said.
Telecom could be a rising stock in 2011, based on its potential stake in the Government's rollout of ultra-fast broadband and its increased competitiveness in the cellphone and broadband sectors.
"It appears the worst of the bad news for Telecom is finally behind it," Mr McIntyre said.
Contact's problems over gas storage had been resolved and it was a stock with promise in 2011 and worthy of scrutiny by investors, he said.
New Zealand investors were generally staying "close to home" and not eyeing the larger, more diversified Australian utilities sector, which was likely to be "aggressively seeking" acquisitions this year, he said.
With low interest rates forecast in New Zealand in 2011, the utilities sector was "again looking very positive" for investors.
"We're expecting to have good dividends during the year, primarily on yield basis, not on [share-price] growth," he said.
Auckland International Airport was another pick for Craigs, as it had targeted capital expenditure during the past two to three years in Australia and Asia.
Its performance would be further boosted by the Rugby World Cup, which would see plenty of growth for the national gateway during 2011.
2010 RETURNS
2010 net return; based on share price and dividends.
• Contact Energy 5.7%
• Vector 21%
• TrustPower 6%
• Horizon Energy 24%
• Ports of Tauranga 9.9%
• Infratil 25.7%
• Ak International Airport 13.3%
• Telecom -3.7%
