"During volatile and uncertain markets, a good defensive stock can provide much better protection and profits than moving into money markets or Treasuries," explains Louis Basenese.

The contributing analyst to The Oxford Club explains, "My favorite defensive pick right now is Philip Morris (NYSE: PM) – the world's second-largest cigarette manufacturer." Here's his bullish outlook.

"Despite fears that the economic recovery is on shaky ground, I would caution you against adopting a bunker mentality.

"First, we get paid more than Treasuries to own shares. Thanks to a recent dividend hike, Philip Morris now yields 4.8%, almost one full percentage point better than the 30-year bond. And a steady stream of income goes a long way to help smooth out any market volatility.

"To be fair, the dividend isn't backed by the full faith and credit of the U.S. government. But we don't need any such insurance. Demand for tobacco products is forever steady. In fact, Citi Investment Research proved the last two recessions 'had no material effect on cigarette demand.' 

"The latest quarterly results indicate this recession will be no different. Philip Morris sold exactly the same amount of cigarettes (223.1 million) in the second quarter of 2009 as it did in the second quarter of 2008.

"And such predictable demand provides more than enough cash ($7.41 billion) to fund the annual dividend ($4.5 billion). Throw in high barriers to entry, reasonable debt levels and no risk of domestic litigation and the dividend is just as safe and reliable as Uncle Sam's.

"Of course, the reasons to own Philip Morris extend beyond the security of an income stream. The stock also provides a hedge against a declining dollar.

"Recall, 100% of sales come from overseas. Even better, it offers strong prospects for appreciation thanks to its exposure to emerging markets, which generates more than 60% of the company's sales.

"Tobacco sales in emerging markets are increasing modestly compared to declining volumes in developed markets. And Philip Morris is uniquely positioned to capture the lion's share of this growth. It owns seven of the leading 15 international brands, including the hands down leader, Marlboro.

"The fact that management recently raised guidance only underscores the growth opportunities. And as we know, when a company consistently increases earnings, share prices tend to come along for the ride.

"Philip Morris is no exception. After last quarter's better than expected results, shares jumped almost 8% in two days.We expect a similar reaction when the company reports results on October 22.

"The stock is up nicely, about 40%, since our recommendation in February. But that doesn't preclude it from running higher still.

"Not when shares trade so cheaply, at roughly a 20% discount to the average stock in the S&P 500. I'm convinced this defensive pick will prove to be the perfect offense during these uncertain times."