With the Singapore stock market no longer inexpensive at 15x forward P/E, investors should consider building up a larger-than-usual holding of defensive shares and accumulating growth stocks to get better returns, says CLSA.

“Examining risk-adjusted returns reveals that defensives outperform beta stocks on a short-term horizon (by 13%) while seeking growth results in significant outperformance on a three- to 10-year investment horizon,” says the research house.

CLSA adds defensive plays have typically generated the highest risk-adjusted monthly returns over a one-year period, with investors generally preferring stocks with yields over 7%.

Notes stocks of growth companies also outperform over a 10-year period on a risk-adjusted basis, generating an annualised 15.6% excess return vs defensive plays and 11.9% more than the STI.

Cites ST Engineering (S63.SG) and SPH (T39.SG) as its favourite defensive names, and Noble (N21.SG), Cosco (F83.SG), Genting Singapore (G13.SG), Ezra (5DN.SG) and Tiger Airways (J7X.SG) as top growth stocks.