Markets in early 2025 are a bit like a moody spring—75 degrees one day, stormy the next. After a strong run in 2023 and 2024, the S&P 500 dropped over 5% year-to-date as investors digested a mix of policy uncertainties, uncertainty around interest rate cuts, and pockets of corporate underperformance. Many stocks are being re-priced as investors grow more selective, and earnings outlooks weaken. At the same time, the bond market is quietly signaling a shift. Treasury yields are still elevated, but there’s a growing sense that the Fed may be near the end of its hiking cycle. That has made Treasury and investment-grade bonds more attractive, especially compared to volatile equities. The market is in transition. Investors are moving from chasing momentum to seeking quality. Caution, realism, and discipline are back in style, and so are value stocks.

Preparing for a potential recession is less about panic and more about applying timeless principles—many of which were championed by Benjamin Graham, the father of value investing. Graham taught that the key to long-term investment success lies in discipline, patience, and a deep understanding of value. In uncertain economic times, those lessons are more relevant than ever. Graham said in his book The Intelligent Investor:

“The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

Rather than trying to time the market, investors should focus on building a portfolio grounded in quality and resilience. Graham favored companies with strong fundamentals, conservative balance sheets, and consistent earnings power—attributes that tend to shine when the economy slows. Dividend-paying stocks with a history of reliability also fit neatly into Graham’s framework, offering both income and a margin of safety. Graham said in The Intelligent Investor:

“The essence of investment management is the management of risks, not the management of returns.”

Diversification, another core tenet of Graham’s philosophy, helps investors avoid overexposure to any one sector or asset class. Holding a variety of investments—equities, bonds, and even cash—can smooth returns and provide flexibility. Graham often emphasized the importance of keeping a cash reserve, not just for protection, but as a source of opportunity when market prices become irrationally low.

Graham said, “The investor’s chief problem—and even his worst enemy—is likely to be himself.” Emotional discipline, especially during turbulent markets, is essential. By remaining rational, reassessing risk exposure, and maintaining a long-term mindset, investors can navigate recessionary periods with the confidence that volatility, like all market conditions, is temporary—and often presents some of the best chances to buy quality assets at a discount.

Our Methodology

We used the Classic Benjamin Graham Stock Screener by Graham Value to compile a list of the 10 Benjamin Graham stocks for defensive investors. We considered the top 20 stocks on our screen and picked the ones with the highest number of hedge fund investors, as of Q4 2024. The stocks are sorted in ascending order of hedge fund sentiment.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

10 Benjamin Graham Stocks for Defensive Investors

10. Graco Inc. (NYSE:GGG)

Number of Hedge Fund Holders: 26

Graco Inc. (NYSE:GGG) is a global manufacturer specializing in fluid and coating management systems and serving industries such as manufacturing, construction, and maintenance. Graco designs and markets equipment for moving, mixing, and spraying complex materials. The company targets niche markets with differentiated, high-quality products that improve efficiency and sustainability. Graco invests heavily in innovation, expands through strategic acquisitions and global distribution, and leverages specialized third-party partners. Recent acquisitions in 2024 broadened its offerings and capabilities. Strong engineering, manufacturing, and customer service underpin its premium customer experience.

Graco Inc. (NYSE:GGG) reported strong first-quarter results for 2025, with sales up 7% to $528 million, driven by a 6% contribution from acquisitions and 3% organic growth. Net earnings rose 2% to $124 million, and adjusted earnings increased 8% to $120 million. Despite gross margin declines from acquisitions and lower factory volume, operating earnings grew 8%. All business segments, except Contractor EMEA, showed growth. Graco Inc. (NYSE:GGG) maintained its low single-digit growth guidance for 2025, supported by stable demand, acquisition performance, and recovering markets, while factoring in modest tariff-related headwinds and planned mitigation strategies.

9. Snap-on Incorporated (NYSE:SNA)

Number of Hedge Fund Holders: 32

Snap-on Incorporated (NYSE:SNA) is a global leader in manufacturing and marketing tools, diagnostics, and repair solutions for professionals in industries like automotive, aerospace, military, and manufacturing. It pioneered mobile tool distribution and now operates in over 130 countries, with the US as its largest market. Snap-on’s “coherent growth” strategy targets core and adjacent markets, while its “Value Creation Processes” and Rapid Continuous Improvement (RCI) initiatives drive safety, innovation, customer connection, and operational efficiency across its global business.

Snap-on Incorporated (NYSE:SNA) reported a 6.8% organic sales decline in Q1 2025, driven largely by weakness in tool storage. The RS&I segment grew organically by approximately 4%, with strong software-driven performance and improved profitability. Tool originations dropped 11.7%. However, gross margin rose 20 basis points to 50.7%, showing pricing discipline. Despite weaker tool storage demand and regional kickoff challenges, Snap-on maintained healthy margins without aggressive discounting and expanded capacity to reduce backlogs, positioning itself well for future demand. The company’s pivot to lower-priced and entry-level big-ticket items like tool carts and diagnostics like Solus showed some success, but broader market turbulence limited gains. Military procurement delays affected critical industries.

Baird lowered Snap-On’s price target from $349 to $320, maintaining a Neutral rating. The revision followed results that showed positive trends but highlighted short-term uncertainties. Despite strong long-term prospects, visibility challenges and market conditions prompted the cautious outlook.

However, Snap-on’s broad business model generates strong and consistent cash flow, enabling the company to maintain stability across economic cycles while also delivering returns to shareholders. The company’s dividend yield exceeds the industry average and contributes meaningfully to investor value.