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.
Benjamin Graham
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.
8. Watsco, Inc. (NSYE:WSO)
Number of Hedge Fund Holders: 33
Watsco, Inc. (NYSE:WSO) is North America’s largest HVAC/R (air conditioning, heating, and refrigeration) distributor, operating 690 locations across the US, Canada, Mexico, and Puerto Rico. Serving over 130,000 contractors, it grew revenues from $64.1 million in 1989 to $7.6 billion in 2024 through acquisitions and product expansion. The HVAC/R industry is large and fragmented, driven by a growing replacement market and demand for energy-efficient systems. Watsco, Inc. (NYSE:WSO) also distributes parts for commercial refrigeration and partners with leading manufacturers in both sectors.
Watsco, Inc. (NYSE:WSO) delivered solid Q1 2025 results, highlighted by a 10% increase in HVAC replacement sales and improved gross margins due to favorable product mix and pricing. Watsco increased its annual dividend by 11% to $12 per share, suggesting the company’s confidence in navigating a potential recession. While international sales remain a minor portion, Watsco continues to navigate tariff uncertainty with agility, leveraging scale and partnerships for long-term growth. The company is transitioning to A2L refrigerant systems, which will impact over half of its sales, supported by $1 billion in inventory conversion and customer training. The company noted Q1 softness was due in part to the A2L refrigerant transition and weak commercial and international sales. However, 454B adoption is accelerating, now over 60% of new sales. Inventory shortages of A2L refrigerant are limited to container issues, not product availability.
7. West Pharmaceutical Services, Inc. (NSYE:WST)
Number of Hedge Fund Holders: 35
West Pharmaceutical Services, Inc. (NYSE:WST) is a global leader in advanced containment and delivery systems for injectable drugs, offering proprietary packaging, drug delivery devices, and contract manufacturing. Its two segments are Proprietary Products—featuring elastomers, syringes, vials, and self-injection devices—and Contract-Manufactured Products, which designs and assembles complex devices for pharmaceutical and medical clients.
West Pharmaceutical Services, Inc. (NYSE:WST) reported Q1 2025 net sales of $698 million, with a 2.1% organic sales increase. The gross profit margin stood 33.2%. Adjusted operating profit margin increased by 20 basis points to 17.9%, while adjusted diluted EPS declined by 7.1%, though it improved by 1.4% excluding certain adjustments. The proprietary products segment, particularly in GLP-1s, showed growth, though biologics and delivery devices faced challenges. Contract manufacturing saw low single-digit growth, primarily from self-injection devices. The company has increased its full-year 2025 revenue guidance to $2.945 billion–$2.975 billion, reflecting foreign currency exchange impacts. The company expects organic sales growth of 2%–3%, unchanged from previous guidance.
West Pharmaceutical Services is addressing several key issues impacting its high-value product (HVP) outlook. While demand remains strong, a short-term constraint has occurred at one of their facilities due to a customer switching product types. This is causing delays, but the company expects a boost in HVP components in the second half of the year. Additionally, pricing has been slightly lower than anticipated, although the impact is minimal. On the geopolitical front, while tariffs and macroeconomic factors are a concern, the company has mitigated risks through strategies like passing costs to customers and regional manufacturing. They are not seeing significant changes in customer behavior or demand despite government spending cuts or healthcare concerns. The company also sees a positive growth outlook with continued demand and projects potential for future growth in AnnexOne, a high-margin initiative.
6. SEI Investments Company (NASDAQ:SEIC)
Number of Hedge Fund Holders: 35
SEI Investments Company (NASDAQ:SEIC) provides financial technology, operations, and asset management services globally. SEI tailors solutions to help clients optimize their capital for growth. In 2024, 55% of revenue came from technology and operations outsourcing, and 40% from asset management fees. The company serves clients in four business segments, including major US banks and global investment managers, managing approximately $1.6 trillion in assets. Its core capabilities span investment processing, operations, and management.
SEI Investments Company (NASDAQ:SEIC) reported Q1 2025 EPS of $1.17, up 18% year-over-year, driven by strong performance across all business units and expanded margins. Operating profit margin rose to 28.5%, the highest in three years. The firm achieved record net sales of $47 million, with $37 million recurring. SEI hosted its first global client symposium, enhancing brand perception and client engagement. The company announced the sale of its family office services business and emphasized its enterprise mindset, global diversification, and fortress balance sheet as key strengths amid market uncertainty.
SEI’s assets under management (AUM) and assets under administration (AUA) rose sequentially in the first quarter of 2025, despite a broader decline in the U.S. equity markets. This growth was broad-based and not concentrated in any single client, segment, or region. A significant driver was the conversion of previously signed deals and continued onboarding of new clients and advisers, particularly in the institutional and adviser channels. Inflows reflected backlog conversions, strong adviser engagement, global distribution partner wins, and activity across institutional and adviser channels. No single client or event drove inflows—growth came from broad strategies, new adviser onboarding, and international expansion. Positive net flows in both advisory and institutional segments offset market headwinds. The company’s diversified footprint, especially in private credit and alternatives, alongside improved positioning and elevated client engagement, helped maintain momentum despite macroeconomic volatility.
5. Fastenal Company (NASDAQ:FAST)
Number of Hedge Fund Holders: 35
Fastenal Company (NASDAQ:FAST), founded in 1967, began by supplying threaded fasteners through local branches. Over time, it expanded into a global business-to-business distributor of industrial and construction supplies, offering nine major product lines. As of 2024, Fastenal operated 3,628 in-market locations across 25 countries, supported by 15 distribution centers and 23,702 employees. Its customer engagement is driven by branches, Onsite locations, vending and bin stock technologies, and eBusiness, with a focus on reducing customers’ procurement costs.
In the first quarter of 2025, Fastenal Company (NASDAQ:FAST) reported a 3.5% year-over-year increase in net sales. This growth was attributed primarily to internal execution improvements, new customer acquisition, and expanding existing relationships, rather than broader market demand, which remains sluggish. Safety product sales rose nearly 10%, supported by strong performance in Fastenal Managed Inventory (FMI) and vending programs. Digital sales accounted for 61% of total revenue, up from 59% a year ago, with a target of 66–68% by October 2025. Fastenal raised its quarterly dividend from $0.43 to $0.44 per share, aiming to surpass $1 billion in dividend payouts for the year. Larger customer sites, particularly those spending over $10,000 monthly, grew by 7%, driven by high-performing Onsite locations. However, the company acknowledged ongoing underperformance in small customer segments, especially those spending under $2,000 per month, citing weaknesses in its e-commerce platform. Addressing these gaps remains the company’s key focus moving forward.
Fastenal Company (NASDAQ:FAST) recognizes the need to improve its e-commerce strategy, especially to capture more of the random MRO (maintenance, repair, and operations) spend that can slip through even in strong customer relationships. Some departments within client organizations may still find it easier to purchase from other vendors online. Strengthening its e-commerce platform would allow Fastenal to better serve these segments and consolidate spending under its offerings. A robust digital presence is also seen as critical to enhancing performance across all customer types, including smaller accounts where Fastenal currently underperforms.
4. Brown Forman Corporation (NYSE:BF-B)
Number of Hedge Fund Holders: 38
Brown-Forman Corporation (NYSE:BF-B) is the largest American-owned spirits and wine company with a global presence. The company produces and markets over 30 alcoholic beverage brands, with Jack Daniel’s Tennessee Whiskey as its flagship product—the top-selling American whiskey globally. Other notable brands include Finlandia vodka, Southern Comfort liqueur, Canadian Mist whisky, and el Jimador tequila.
Brown-Forman’s Q2 Fy 2025 net sales declined 5% reported, but were flat organically after adjusting for divestitures and FX. Strong growth came from Woodford Reserve, Diplomatico, and Old Forester, while tequila brands el Jimador and Herradura faced headwinds in the US and Mexico. Jack Daniel’s showed improving trends, bolstered by RTD innovation and global expansion. Brown-Forman Corporation (NYSE:BF-B) expects organic net sales and operating income growth of 2% to 4% in fiscal 2025, driven by strength in international markets, normalizing inventory trends, and a shift toward premiumization in its portfolio.
Growth in Brazil, along with innovation in Mexico, is helping to offset declines in the travel retail channel and developed markets. The company anticipates gains from brands like Gin Mare and Diplomatico, as well as improvements in price/mix and the divestiture of lower-margin brands. However, this outlook is tempered by macroeconomic volatility, higher input costs, and uncertainty around consumer demand. While inventory-related headwinds are easing, inflation and higher interest rates may still impact trade. Brown-Forman plans to remain disciplined with SG&A and capital expenditures to manage margin pressures while maintaining a long-term focus on growth.
3. Acuity Inc. (NYSE:AYI)
Number of Hedge Fund Holders: 47
Acuity Inc. (NYSE: AYI) is a market-leading industrial technology company that designs and manufactures lighting and building management solutions. Through its two segments, Acuity Brands Lighting and Lighting Controls (ABL) and Intelligent Spaces Group (ISG), the company focuses on innovative products like energy-efficient LED lighting, building management systems, and location-aware applications. ABL offers a range of lighting products and controls, while ISG enhances building efficiency with integrated solutions for HVAC, lighting, and security. Acuity serves various industries across North America and select international markets.
In Q1 of Fiscal 2025, Acuity Inc. (NYSE: AYI) reported $952 million in net sales, up 2% from the prior year. Adjusted operating profit increased by 3% to $159 million, with a margin of 16.7%. Adjusted diluted earnings per share grew 7% to $3.97. ABL saw growth from lighting solutions, while ISG benefited from strong sales in building management systems. The acquisition of QSC strengthens the Intelligent Spaces division. The company’s financial outlook for FY2025 includes net sales between $4.3 billion and $4.5 billion and adjusted earnings per share between $16.50 and $18. Acuity is optimistic about 2025, expecting better market conditions than 2024, driven by solid execution in its Lighting business and growing momentum in its Intelligent Spaces Group. Product segmentation strategies like Contractor Select and Design Select are gaining traction. Meanwhile, the acquisition of QSC strengthens the Intelligent Spaces division, and particularly its end-to-end control of smart spaces, with revenue synergies expected over time. While corporate and retail channels varied, strong performance in the independent sales network suggests continued growth.
2. W.W. Grainger, Inc. (NYSE:GWW)
Number of Hedge Fund Holders: 49
W.W. Grainger, Inc. (NYSE:GWW) is a leading distributor of MRO products and services, operating mainly in North America, Japan, and the UK. Its strategic framework, “The Grainger Edge,” guides the company’s purpose—We Keep the World Working®—and outlines expected behaviors. Grainger operates through two segments: High-Touch Solutions N.A., offering expert, value-added service for complex needs; and Endless Assortment, an online platform through Zoro and MonotaRO. It also includes other smaller businesses like Cromwell in the UK and a captive insurance unit.
In Q1 2025, W.W. Grainger, Inc. (NYSE:GWW) reported a sales increase of 4.4% year-over-year to $4.31 billion, while operating margins remained strong at 15.6%, and EPS reached $9.86. High-Touch Solutions saw modest growth despite early softness due to weather and government delays, while Endless Assortment grew over 15%, led by strong results at Zoro and MonotaRO. April daily sales rose approximately 5.5%, showing improved momentum. Government demand, particularly in sectors affected by DOGE, was somewhat soft, though the company is primarily exposed to military and state-level agencies, limiting broader impact. The company’s manufacturing segments, notably aerospace, continue to see strong performance. The company confirmed that private label goods are more heavily exposed to China, although total reliance on Chinese manufacturing has decreased slightly over the years due to shifts to countries like Vietnam and Mexico.
1. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 73
NIKE, Inc. (NYSE:NKE) is the world’s largest seller of athletic footwear and apparel. It designs, develops, markets, and sells footwear, apparel, equipment, and accessories globally. Products are sold through NIKE Direct (stores and digital platforms), wholesale channels, and licensees. Most manufacturing is outsourced, primarily outside the US. Key brands include NIKE, Jordan, and Converse. NIKE emphasizes innovation, quality, and consumer-focused product design, offering both performance and casual products, along with digital services and interactive experiences to enhance customer engagement.
NIKE, Inc. (NYSE:NKE) made significant progress this quarter through its “Win Now” strategic priorities. It reignited its brand by leading with sport, telling compelling athlete stories, and delivering weekly product innovation. The company focused on five key fields of play and invested in key markets—US, China, and the UK—and cities like New York, London, and Shanghai. Product highlights included the launch of the Pegasus Premium and Vomero 18, while new categories like NIKESKIMS expanded Nike’s apparel portfolio. NIKE, Inc. (NYSE:NKE) also emphasized restoring wholesale relationships, improving digital experiences, and reducing promotions. The brand dominated cultural moments at the Super Bowl and NBA All-Star Weekend, reinforcing its presence on the ground and across digital platforms. These actions aim to strengthen performance, culture, and consumer connection.
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