10 Best Defensive Stocks to Buy According to Ray Dalio

Published September 21, 2022 at 2:13 pm EDT Updated August 19, 2026 at 8:33 am EDT

In this article, we will look at the 10 best defensive stocks to buy according to Ray Dalio.

Ray Dalio is a billionaire investor and hedge fund manager of Bridgewater Associates, one of the world’s largest hedge funds. Mr. Dalio founded Bridgewater Associates in 1975 and has since grown it into a billion-dollar hedge fund. The fund has roughly $140 billion in assets under management. As of June 30, Mr. Dalio manages more than $23.5 billion in 13F securities through his hedge fund. Forbes estimates Mr. Dalio’s real-time net worth sits at $19.1 billion as of September 21, 2022.

“It Starts With Inflation”

Mr. Dalio is a credible figure in the finance industry and is renowned for his analyses of the markets. Mr. Dalio is a notable columnist and author. On September 14, Ray Dalio published an article titled “It Starts With Inflation”, in which the stock market veteran explained how inflation and interest rates are related to the stock market and the overall economy.

According to Mr. Dalio, inflation occurs when living standards rise and the economy expands. However, too much inflation creates “undesirable effects” and causes central banks to raise interest rates and slow down the economy, bringing the inflation rate down to their target. When central banks tighten to curtail inflation and make borrowing money expensive, it causes equity prices to tank and the economy to slow down.

Ray Dalio’s ‘Guesstimates’

While analysts and market experts view the long-term inflation rate to be 2.6%, Ray Dalio estimates that in the long-term inflation in the United States is expected to be between 4.5% and 5% due to “barring shocks” and geopolitical turmoil. According to Mr. Dalio, long-term and short-term interest rates are expected to fall between 4.5% and 6%. Mr. Dalio sees U.S. interest rates pointing to the “higher end” of his 4.5% and 6% range if the Fed is to restore price stability and the supply-demand imbalance. Finally, Mr. Dalio calculated that if the Fed raises its target range for the federal fund’s rate to 4.5% from 2.5% then it would cause equities to fall by 20%.

Bridgewater Associates’ Stock Portfolio

In the second quarter of 2022, Bridgewater Associates increased its position in 116 companies, reduced its exposure to 256 companies, discarded 99 of its positions, and added 116 new positions to its portfolio. The fund has a top ten holdings concentration of 29.4% and has investments concentrated in the consumer staples, healthcare, and financial services sectors. Over the past 8 quarters, from Q2 2020 to Q2 2022, Bridgewater Associates has generated an average quarter-on-quarter return of 2.55%.

The Fed is expected to maintain its hawkish attitude until it brings down inflation to 2%. As interest rates rise, investors are pulling away from high-growth stocks that tend to underperform in a slowdown and are focusing on defensive plays that can recession-proof their portfolios and sustain their performance. Some of the best defensive stocks that are part of Ray Dalio’s 13F portfolio include The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), and Johnson & Johnson (NYSE:JNJ). These stocks among others are discussed below.

Our Methodology

To determine the 10 best defensive stocks to buy according to Ray Dalio, we reviewed Bridgewater Associates’ 13F filings at the close of the second quarter of 2022. We narrowed down our selection to companies operating in consumer defensive sectors such as healthcare and consumer staples. We ranked these stocks in increasing order of Bridgewater Associates’ stake in them.

Best Defensive Stocks to Buy According to Ray Dalio

10. Starbucks Corporation (NASDAQ:SBUX)

Bridgewater Associates’ Stake Value: $247,711,000

Percentage of Bridgewater Associates’ 13F Portfolio: 1.04%

Number of Hedge Fund Holders: 55

Wall Street analysts see upside to Starbucks Corporation (NASDAQ:SBUX). On September 15, Deutsche Bank analyst Brian Mullan raised his price target on Starbucks Corporation to $101 from $93 and reiterated a Buy rating on the shares. This September, Morgan Stanley analyst John Glass raised his price target on Starbucks Corporation to $96 from $88 and maintained an Equal Weight rating on the shares.

On September 15 Richard Allison, one of the directors of Starbucks Corporation, disclosed that he has acquired 10,000 shares of the company’s common stock at roughly $92.5 per share. On the same day another director, Mellody Hobson, filed for acquiring 54,750 Starbucks shares at roughly $92.5 per share.

As of September 21, Starbucks Corporation has gained 4.5% over the past six months and is offering a forward dividend yield of 2.16%, which the company backs with free cash flows of $3 billion.

At the close of Q2 2022, 55 hedge funds were long Starbucks Corporation. The total stakes of these hedge funds amounted to $1.43 billion. As of June 30, Bridgewater Associates owns 3.2 million shares of the company, which amounts to a stake of $247.7 million.

Here is what Wedgewood Partners had to say about Starbucks Corporation in its second-quarter 2022 investor letter:

“We exited our position in Starbucks during the second quarter. We do not mind admitting that there was a heated internal debate over this position, as there were several conflicting issues to weigh in our decision. Before the pandemic, we had been quite happy with the Company’s execution and the stock’s performance, and we were likewise happy with strategic decisions made during and immediately after the initial pandemic-related lockdowns in 2020, as we have written previously.

Despite our appreciation for the Company’s execution during this period, it was dealing with some concerning issues. First, as a business reliant upon stores being open, the Company faced continuing risks from rolling pandemic-related lockdowns, particularly in China, which is the Company’s second largest and fastest-growing market. A second and related issue was employee illness; even as stores were open, various pandemic waves (Omicron, for example) caused many employees to miss shifts, making it very difficult and expensive for Starbucks to keep its stores staffed properly.

The Company’s stock, like most of the U.S. stock market, enjoyed a healthy recovery from the pandemic beginning near the end of 2020 and into 2021; at times, we believed that recoveries in many portions of the stock market happened well ahead of recoveries in fundamentals, or that individual stocks often didn’t reflect still existing pandemic-related risks. Starbucks fit into this category for us at one point, and we would remind our investors that we earlier reduced our position in the stock for exactly that reason…” (Click here to see the full text)

9. CVS Health Corporation (NYSE:CVS)

Bridgewater Associates’ Stake Value: $291,530,000

Percentage of Bridgewater Associates’ 13F Portfolio: 1.23%

Number of Hedge Fund Holders: 65

CVS Health Corporation (NYSE:CVS) is a leading provider of health care services in the United States. Insider Monkey found 65 hedge funds long CVS Health Corporation at the close of Q2 2022. The total stakes of these hedge funds amounted to $2.03 billion, up from $1.56 billion a quarter ago with 72 positions.

On August 3, CVS Health Corporation announced earnings for the second quarter of fiscal 2022. The company reported earnings per share of $2.40 and outperformed estimates by $0.22. The company generated a revenue of $80.6 billion, up 11% year over year, and beat expectations by $4.26 billion.

CVS Health Corporation is rising and is also offering a strong dividend payout. Shares of CVS Health Corporation have appreciated by 20.7% over the past twelve months, as of September 21, and the company is offering a forward dividend yield of 2.17% which it supports with free cash flows of $15.8 billion.

On September 7, Evercore ISI analyst Elizabeth Anderson raised her price target on CVS Health Corporation to $125 from $120 and reiterated a buy-side Outperform rating on the shares.

As of June 30, Bridgewater Associates’ stake in CVS Health Corporation sits at $291.5 million. The investment covers 1.23% of Ray Dalio’s 13F portfolio.

In the second quarter of 2022, Ray Dalio piled into defensive stocks like CVS Health Corporation to recession-proof his hedge fund’s portfolio. Bridgewater Associates’ top five 13F holdings include ultimate defensive plays such as The Procter & Gamble Company, The Coca-Cola Company, and Johnson & Johnson.

8. Abbott Laboratories (NYSE:ABT)

Bridgewater Associates’ Stake Value: $304,211,000

Percentage of Bridgewater Associates’ 13F Portfolio: 1.28%

Number of Hedge Fund Holders: 61

Abbot Laboratories (NYSE:ABT) operates as a medical devices company in the healthcare industry. As of June 30, Bridgewater Associates’ stakes in Abbot Laboratories are valued at $304.2 million. The investment covers 1.28% of Ray Dalio’s 13F portfolio.

On July 20, Abbot Laboratories announced market-beating earnings for the second quarter of fiscal 2022. The company generated a revenue of $11.26 billion, up 10.1% year over year, and beat expectations by $856.5 million. The company reported earnings per share of $1.43 and outperformed consensus by $0.29. Abbot Laboratories also raised its fiscal 2022 EPS guidance and announced that it now sees adjusted EPS for fiscal 2022 to amount to at least $4.90, up from $4.70, and above Wall Street consensus of $4.88.

Shortly after the company’s earnings release, Citi analyst Joanne Wuensch revised her price target on Abbott Laboratories to $123 from $125 and reiterated a Buy rating on the shares.

At the end of the second quarter of 2022. 61 hedge funds held stakes in Abbot Laboratories. The total value of these stakes amounted to $3.60 billion.

Here is what Diamond Hill Capital had to say about Abbot Laboratories in its first-quarter 2022 investor letter:

“Abbott Labs announced a recall of its infant formula brand Similac^® in the US. Though the recall will impact near-term revenues, we are not concerned about any long-term impacts. We remain optimistic about the company’s prospects over the long run because, in our view, it is one of the highest quality names in health care with a talented management team that makes smart capital allocation decisions. Abbott also has leading health care and consumer franchises with a particularly strong competitive position in the medical device business. Abbott continues to launch innovative products in key strategic areas (such as diabetes, structural heart and diagnostics), which should help drive not only revenue growth but margin expansion.”

7. McDonald’s Corporation (NYSE:MCD)

Bridgewater Associates’ Stake Value: $511,433,000

Percentage of Bridgewater Associates’ 13F Portfolio: 2.16%

Number of Hedge Fund Holders: 50

McDonald’s Corporation released its earnings for the fiscal second quarter of 2022 on July 26. The company reported earnings per share of $2.55 and beat EPS estimates by $0.08. The company generated a revenue of $5.72 billion. As of September 21, McDonald’s Corporation has returned 8.5% to investors over the past six months, and the stock is offering a forward dividend yield of 2.16% which the company supports with free cash flows of $6 billion.

Wall Street analysts see upside to McDonald’s Corporation. On August 30, Tigress Financial analyst Ivan Feinseth raised his price target on McDonald’s Corporation to $320 from $314 and reiterated a Buy rating on the shares. Feinseth noted that McDonald’s Corporation has a robust business model which will help it to drive outperformance in all economic cycles. On September 7, Piper Sandler analyst Nicole Miller Regan raised her price target on McDonald’s Corporation to $270 from $263 and remained Overweight on the stock.

At the close of Q2 2022, 50 hedge funds disclosed ownership of stakes in McDonald’s Corporation. These funds held collective stakes of $2.30 billion in the company. As of June 30, Bridgewater Associates owns over 2 million shares of McDonald’s Corporation. The investment covers 2.16% of Ray Dalio’s 13F portfolio.

Like The Procter & Gamble Company, The Coca-Cola Company, and Johnson & Johnson, McDonald’s Corporation is a dividend aristocrat and has a track record of over 30 years of consecutive dividend increases.

6. Walmart Inc. (NYSE:WMT)

Bridgewater Associates’ Stake Value: $571,146,000

Percentage of Bridgewater Associates’ 13F Portfolio: 2.42%

Number of Hedge Fund Holders: 67

Wall Street analysts are bullish on Walmart Inc. (NYSE:WMT). On August 18, Morgan Stanley analyst Simeon Gutman raised his price target on Walmart Inc. to $150 from $145 and reiterated a buy-side Overweight rating on the shares. On September 14, KeyBanc analyst Bradley Thomas initiated coverage of Walmart Inc. with an Overweight rating and a $155 price target.

The big-box retailer reported earnings for the fiscal second quarter of 2023 on August 16. Walmart Inc. reported sales of $151 billion, up 8% year over year, and ahead of Wall Street consensus by $1.40 billion. The company reported earnings per share of $1.77 and beat estimates by $0.17.

Walmart Inc. has been growing its dividends for over 4 decades now. As of September 21, the stock is offering a forward dividend yield of 1.68% and has free cash flows of $5.4 billion.

Insider Monkey spotted Walmart Inc. on 67 investment portfolios at the close of Q2 2022. The total stakes of these hedge funds amounted to $3.78 billion. As of June 30, Bridgewater Associates’ stake in Walmart Inc. sits at $571 million. The investment covers 2.42% of Ray Dalio’s 13F portfolio.

5. Costco Wholesale Corporation (NASDAQ:COST)

Bridgewater Associates’ Stake Value: $580,455,000

Percentage of Bridgewater Associates’ 13F Portfolio: 2.45%

Number of Hedge Fund Holders: 64

On August 31, Costco Wholesale Corporation (NASDAQ:COST) reported that its sales for August grew 11.4% year over year and amounted to $17.55 billion. As of September 21, the stock has soared 11.75% over the past twelve months and the company has trailing twelve-month free cash flows of $4.1 billion.

Wall Street analysts are bullish on Costco Wholesale Corporation ahead of the company’s earnings release as they expect it to post a strong quarter. On September 12, UBS analyst Michael Lasser maintained his $595 price target and Buy rating on Costco Wholesale Corporation, noting that the company is expected to deliver strong earnings. On September 21, Deutsche Bank analyst Krisztina Katai raised her price target on Costco Wholesale Corporation to $581 from $579 and reiterated a Buy rating on the shares.

At the end of Q2 2022, 64 hedge funds disclosed ownership of stakes in Costco Wholesale Corporation. The total value of these stakes amounted to $4.76 billion. Of those, $580 million were of Bridgewater Associates. The investment covers 2.45% of Ray Dalio’s 13F portfolio.

4. PepsiCo, Inc. (NYSE:PEP)

Bridgewater Associates’ Stake Value: $634,801,000

Percentage of Bridgewater Associates’ 13F Portfolio: 2.69%

Number of Hedge Fund Holders: 65

PepsiCo, Inc. (NYSE:PEP) has a 49-year track record of growing its dividends. On July 21, the company announced that its board of directors has increased its annualized cash dividend to $4.60 per share, up from $4.30 per share. The dividend is payable on September 30 to investors of record on September 2. As of September 21, PepsiCo, Inc. has gained 11.2% over the past twelve months and is offering a forward dividend yield of 2.72%, which the company backs with free cash flows of $6.3 billion.

On July 6, JPMorgan analyst Andrea Teixeira revised her price target on PepsiCo, Inc. to $185 from $186 and reiterated a buy-side Overweight rating on the shares. On July 7, Deutsche Bank analyst Steve Powers raised his price target on PepsiCo, Inc. to $178 from $175 and maintained a Hold rating on the shares.

Insider Monkey found 65 hedge funds long PepsiCo, Inc. at the end of Q2 2022. These funds held collective stakes of $5.28 billion in the company, up from $4.86 billion a quarter ago with 62 positions. The hedge fund sentiment for the stock is positive.

As of June 30, Bridgewater Associates owns more than 3.8 million shares of PepsiCo, Inc. which amounts to a stake of $634.8 million. The investment covers 2.69% of Ray Dalio’s 13F portfolio.

Here is what ClearBridge Investments had to say about PepsiCo, Inc. in its second-quarter 2022 investor letter:

“Also in the stable and predictable cash flow camp, though with a very different business model, global food and beverage company PepsiCo (NYSE:PEP) reported very strong organic growth in the first quarter, driven by healthy price/mix, and raised revenue guidance, while holding EPS guidance. Notably, its beverage business showed expanding margins.”

3. The Coca-Cola Company (NYSE:KO)

Bridgewater Associates’ Stake Value: $680,734,000

Percentage of Bridgewater Associates’ 13F Portfolio: 2.88%

Number of Hedge Fund Holders: 60

On July 26, The Coca-Cola Company announced earnings for the second quarter of fiscal 2022. The company reported sales of $11.3 billion, up 11.6% year over year, and outperformed Wall Street estimates by $737 million. The company reported earnings per share of $0.70 and beat expectations by $0.03. Shares of The Coca-Cola Company have appreciated by 12% over the past 12 months, as of September 21.

Wall Street analysts are bullish on The Coca-Cola Company. On July 27, Deutsche Bank analyst Steve Powers maintained a Hold rating on the stock and raised his price target to $65 from $64. On September 6, HSBC analyst Carlos Laboy raised his price target on The Coca-Cola Company to $76 from $72 and maintained a Buy rating on the shares.

At the end of the second quarter of 2022, 60 hedge funds were eager on The Coca-Cola Company and held stakes worth $28.3 billion in the company. As of June 30, Bridgewater Associates’ stake in The Coca-Cola Company is valued at $680.7 million. The investment covers 2.88% of Ray Dalio’s 13F portfolio.

2. Johnson & Johnson (NYSE:JNJ)

Bridgewater Associates’ Stake Value: $769,086,000

Percentage of Bridgewater Associates’ 13F Portfolio: 3.25%

Number of Hedge Fund Holders: 83

Insider Monkey spotted Johnson & Johnson on 83 hedge fund portfolios. The total stakes of these hedge funds amounted to $6.76 billion. Of those, $769 million were of Bridgewater Associates. The investment covers 3.25% of Ray Dalio’s 13F portfolio.

Johnson & Johnson is a dividend king. The company has been growing its dividends for roughly 60 years. As of September 21, the stock is offering a forward dividend yield of 2.74% which the company supports with free cash flows of $19.95 billion. On September 14, Johnson & Johnson announced a share repurchase program of up to $5 billion.

On July 20, SVB Securities analyst David Risinger revised his price target on Johnson & Johnson to $194 from $200 and reiterated a buy-side Outperform rating on the shares. On July 21, UBS analyst Kevin Caliendo adjusted his price target on the stock to $180 from $185 and maintained a Neutral rating on the shares.

Here is what Mayar Capital had to say about Johnson & Johnson in its second-quarter 2022 investor letter:

“J&J is currently our largest position and a long-standing holding. The majority of the group’s sales comes from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands.

Here’s how JNJ make and spend a dollar of revenues: As of 2021, about 55 cents of that dollar comes from its pharmaceutical sales – sales of drugs to pharmacies and distributors – while 30 cents come from the sale of medical devices, such as surgery equipment and orthopaedics. The rest of that dollar in sales comes from sales of JNJ’s consumer brands such as Listerine mouthwash, Nicorette nicotine tablets and Neutrogena cosmetics.

To make that dollar, however, JNJ typically spends about 25 cents to make the products themselves and another 27 cents on marketing and general administrative functions. This leaves JNJ with about 48 cents on the dollar in profit…” (Click here to see the full text)

1. The Procter & Gamble Company (NYSE:PG)

Bridgewater Associates’ Stake Value: $970,175,000

Percentage of Bridgewater Associates’ 13F Portfolio: 4.11%

Number of Hedge Fund Holders: 71

On July 29, The Procter & Gamble Company announced earnings for the fourth quarter of fiscal 2022. The reported earnings per share of $1.21 and generated a revenue of $19.5 billion, up 3% year over year, and ahead of Wall Street expectations by $104 million.

Wall Street is bullish on The Procter & Gamble Company. This July, Wells Fargo analyst Chris Carey adjusted his price target on The Procter & Gamble Company to $160 from $170 and maintained a buy-side Overweight rating on the shares. On August 2, Barclays analyst Lauren Lieberman revised her price target on The Procter & Gamble Company to $154 from $157 and reiterated an Overweight rating on the shares.

As of September 21, The Procter & Gamble Company is offering a forward dividend yield of 2.65% and has free cash flows of $13.56 billion. The company has been consistent with growing its dividends for the past 65 years and has a 5-year dividend CAGR of 5.58%.

At the close of Q2 2022, 71 hedge funds held stakes in The Procter & Gamble Company. The total value of these stakes amounted to $5.53 billion. As of June 30, Bridgewater Associates owns more than 6.7 million shares of The Procter & Gamble Company, which amounts to a stake of $970 million.

You can also take a look at 10 Best Dividend Stocks to Buy According to Billionaire Ray Dalio and 10 Best Defensive Stocks to Buy Today According to Billionaire Ken Fisher.

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