In this article, we will look at the 10 Best Defensive Stocks to Buy in a Volatile Market.
Investor positioning in defensive stock is at its lowest level it has ever been since 2000. The decline is in stark contrast to the trade policy turmoil and economic uncertainty triggered by the US tariff war. Amid the disparity, Bank of America strategists, led by Michael Hartnett, insist it is high time for investors to become defensive.
Sharing similar sentiments is Trivariate Research founder Adam Parker, who insists investors should look to play defense with equity markets at all-time highs amid heightened volatility. According to Parker, investors should consider purchasing certain dividend stocks to generate passive income.
“We think companies with consistent dividend growth are likely to provide strong defense if there’s a growth scare. We think companies with consistent dividend growth are likely to provide strong defense if there’s a growth scare,” Parker wrote,” Parker wrote.
While the prospects of a bear market are still low, KGI securities warn that there could be a significant earnings decrease in the third quarter. Consequently the research firm insists investors should focus on defensive and high-quality stocks that are less sensitive to economic fluctuations. Consumer defensive stocks stand out because they provide goods and services that consumers cannot live without regardless of the prevailing economic situation.
With that in mind, let’s look at the 10 Best Defensive Stocks to Buy in a Volatile Market.
A portfolio manager analyzing a stock chart, seeking to find the right investments.
Our Methodology
To create our list of the 10 Best Defensive Stocks to Buy in a Volatile Market, we began by screening U.S.-listed companies with market capitalizations exceeding $2 billion, focusing on key defensive sectors such as consumer staples, healthcare, utilities, telecom, real estate, and pharmaceuticals. We then applied three key filters: a beta below 1, consistent EPS growth over the past three years and projected next year, and a dividend yield above 1%. Finally, we identified the most favored stocks among elite hedge funds and ranked them by the number of funds holding positions.
Why are we interested in 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. Diageo plc (NYSE:DEO)
Beta as of July 8: 0.28
Dividend Yield as of July 8: 4.10%
Number of Hedge Fund Holders: 39
Diageo PLC (NYSE:DEO) is one of the 10 best defensive stocks to buy in a volatile market. On June 30, the company’s Casamigos brand unveiled its first-ever ready-to-drink (RTD) margarita variety pack. Casamigos Margaritas is the new non-carbonated cocktail made with tequila, natural flavors, and real juice.
Casamigos Margaritas paves the way for Diageo to expand its footprint into the high-growth RTD tequila market. The RTD segment is experiencing double-digit growth as tequila-based options remain in strong demand.
The new brand will expand the company’s premium portfolio, enabling it to capitalize on several converging trends.
“Tequila-based ready-to-drink cocktails are driving the next wave of growth in the category, and consumers are looking for trusted brands that deliver both quality and convenience,” said Jamie Young, VP of Ready to Drink and Ready to Serve at Diageo. “With Casamigos Margaritas, we’re bringing a premium experience into the can—backed by the cultural credibility that set this brand apart.”
Diageo PLC (NYSE:DEO) engages in the production, marketing, and sale of alcoholic beverages. It offers scotch, gin, vodka, rum, raki, liqueur, wine, tequila, and Chinese white spirits, among others.
9. The Hershey Company (NYSE:HSY)
Beta as of July 8: 0.28
Dividend Yield as of July 8: 3.30%
Number of Hedge Fund Holders: 40
The Hershey Company (NYSE:HSY) is one of the 10 best defensive stocks to buy in a volatile market. On June 30, the company confirmed it will remove synthetic dyes from all its snacks by the end of 2027. The decision will allow the company to align with directives by US health authorities.
US Health Secretary Robert F. Kennedy Jr. and FDA Commissioner Marty Makary have already rolled out directives requiring companies to remove synthetic food dyes from the food supply chain. The directive is part of the ministry’s push to address health conditions such as ADHD, obesity, and diabetes.
Some of Hershey’s brands that will be affected by the directive include Dot’s Homestyle Pretzels, SKINNYPOP popcorn, and FULFIL protein bars. Other companies, including Tyson Foods and Conagra Brands, have also started reformulating their brands by removing artificial colors.
The Hershey Company (NYSE:HSY) engages in the manufacture and sale of confectionery products and pantry items.
8. American Electric Power Company, Inc. (NASDAQ:AEP)
Beta as of July 8: 0.41
Dividend Yield as of July 8: 3.59%
Number of Hedge Fund Holders: 55
American Electric Power Company Inc. (NASDAQ:AEP) is one of the 10 best defensive stocks to buy in a volatile market. On June 17, the company named a new general counsel and technology chief, expected to support its long-term strategy.
Rob Berntsen will become executive vice president and general counsel, effective July 14. Berntsen joins American Electric Power Company from Xcel, where he served as executive vice president and chief legal and compliance officer.
On the other hand, Johannes Eckert takes over as the executive vice president and chief information and technology officer, effective July 21. Eckert joins the company, having served as senior vice president and chief information officer at Cox Communications.
The appointment comes as American Electric Power Company Inc. (NASDAQ:AEP) operates the nation’s largest electric transmission system, serving 5.6 million customers. As one of the best defensive stocks, the company generates, transmits, and distributes electricity. It also produces power using various sources, including coal, lignite, natural gas, wind, solar, nuclear, and hydroelectric sources.
7. Duke Energy Corporation (NYSE:DUK)
Beta as of July 8: 0.36
Dividend Yield as of July 8: 3.54%
Number of Hedge Fund Holders: 56
Duke Energy Corporation (NYSE:DUK) is one of the 10 best defensive stocks to buy in a volatile market. On July 1, the company’s subsidiary, Duke Energy Carolinas, filed a request for a 7.7% rate increase in South Carolina. If approved, the new power rates will come into effect early next year.
The proposed rate increase will result in a monthly bill increase of up to $10.38 for residential customers using 1,000 kilowatt-hours of electricity. Commercial customers are to experience a 5.4% average bill increase, while industrial customers will face an average increase of about 5.2%.
The proposed rate increase will increase Duke Energy’s annual revenue in South Carolina by up to $150.5 million. The increase is in response to the investments the company has made in the power grid, improved reliability, and storm resilience.
6. AstraZeneca PLC (NASDAQ:AZN)
Beta as of July 8: 0.17
Dividend Yield as of July 8: 2.22%
Number of Hedge Fund Holders: 56
AstraZeneca PLC (NASDAQ:AZN) is one of the 10 best defensive stocks to buy in a volatile market. On July 4, the company entered into a multi-year agreement with Modella AI. The two are joining forces to accelerate AI-driven clinical development in oncology.
As part of the strategic partnership, AstraZeneca is to gain access to Modella AI’s multi-modal foundation models. The models feature rich data extraction from various types of data to accelerate the clinical development of the oncology portfolio.
“Through the use of foundation models, combined with our unique datasets and AI expertise, we are confident in our strategy to accelerate development and increase the probabilities of success in our oncology clinical trials,” AstraZeneca oncology research and development (R&D) chief AI and data scientist Jorge Reis-Filho stated.
AstraZeneca plans to leverage AI models for cancer research and development capabilities to enhance discovery and clinical development.
AstraZeneca PLC (NASDAQ:AZN) is a science-led biopharmaceutical company that focuses on the research, development, and commercialization of prescription medicines. It develops medicines for diseases in the areas of oncology, cardiovascular, renal, metabolism, respiratory, immunology, and rare diseases.
5. Novo Nordisk A/S (NYSE:NVO)
Beta as of July 8: 0.22
Dividend Yield as of July 8: 2.34%
Number of Hedge Fund Holders: 60
Novo Nordisk A/S (NYSE:NVO) is one of the 10 best defensive stocks to buy in a volatile market. On July 7, the company received a significant boost in its proposed $2.34 billion investment in a factory in Rome, Italy.
Italian authorities have already appointed Francesco Rocca as president of the Lazio region, which includes Rome. He is responsible for accelerating projects related to the Novo Nordisk facility. The Lazio region has already approved upgrades for road links worth more than €2.9 million.
The proposed facility is designed to produce weight loss and diabetes medications, with production scheduled to commence in late 2026 or early 2027. The Italian government has already given Novo Nordisk the green light to upgrade the capacity of its Anagni site.
4. Abbott Laboratories (NYSE:ABT)
Beta as of July 8: 0.74
Dividend Yield as of July 8: 1.74%
Number of Hedge Fund Holders: 70
Abbott Laboratories (NYSE:ABT) is one of the top 10 defensive stocks to consider in a volatile market. On July 3, analysts at Oppenheimer reiterated an ‘Outperform’ rating on the stock and a $14 price target. The bullish stance follows the Centers for Medicare & Medicaid Services (CMS) final decision on transcatheter edge-to-edge repair for the tricuspid valve (T-TEER).
The latest decision includes the elimination of the requirement for an electrophysiologist and multi-modality imaging specialists. Additionally, it eliminates the need for patient consultation with all team members. The reduction in the requirement is a significant boost for tricuspid valve (T-TEER) as it shares similarities with Edwards Lifesciences’ transcatheter tricuspid valve replacement (TTVR).
Despite conflicting stakeholder opinions regarding volume standards, CMS chose not to enforce volume or resource requirements. Instead, it retained flexible definitions of optimal medical therapy in line with FDA labeling without specifying the requirements for tricuspid regurgitation severity.
Abbott Laboratories (NYSE:ABT) is a healthcare company that discovers, develops, manufactures, and sells a range of healthcare products. It is one of the best defensive stocks, as it provides generic pharmaceuticals, laboratory, and transfusion medicine systems.
3. T-Mobile US Inc. (NASDAQ:TMUS)
Beta as of July 8: 0.63
Dividend Yield as of July 8: 1.48
Number of Hedge Fund Holders: 75
T-Mobile US Inc. (NASDAQ:TMUS) is one of the 10 best defensive stocks to buy in a volatile market. On July 7, BofA securities reinstated coverage of the stock with a ‘Neutral’ rating and a $255 price target. The Neutral stance comes amid concerns about the stock’s premium valuation as it trades at a price-to-earnings multiple of 23.
In addition, BofA remains wary about the company’s high institutional ownership and record-high growth forecasts, which hint at limited upside potential. Nevertheless, the research firm has affirmed T-Mobile’s industry leadership in postpaid phone net ads amid revenue and EBITDA growth.
The communication services company is also in a solid financial position with $31.6 billion in EBITDA and 5.3% revenue growth over the last 12 months. BofA believes T Mobile is in a position to follow other cable companies with more competitive pricing and promotional offers to strengthen its edge in the industry.
2. Comcast Corporation (NASDAQ:CMCSA)
Beta as of July 8: 0.95
Dividend Yield as of July 8: 3.70%
Number of Hedge Fund Holders: 81
Comcast Corporation (NASDAQ:CMCSA) is one of the 10 best defensive stocks to buy in a volatile market. On July 7, Citi analysts said U.S. tax reforms—including full bonus depreciation and expanded interest expense deductions—are set to boost cash flows for North American telecom operators. These changes, part of a new fiscal bill signed by President Trump, are expected to lift industry-wide free cash flow by 10% in 2025 and improve long-term profitability.
Citi reiterated its “Buy” rating on Comcast, citing improved cash flow prospects and potential for accelerated buybacks. Alongside Verizon and AT&T, Comcast is expected to be a key beneficiary of the legislation, which also includes new spectrum access initiatives for the telecom sector.
1. Merck & Co., Inc. (NYSE:MRK)
Beta as of July 8: 0.40
Dividend Yield as of July 8: 4.09%
Number of Hedge Fund Holders: 93
Merck & Co., Inc. (NYSE:MRK) is one of the 10 best defensive stocks to buy in a volatile market. On July 2, UBS reiterated a ‘Buy’ rating on the stock and a $105 price target. According to analyst Trung Huynh, the company’s human papillomavirus (HPV) vaccine, Gardasil, is a key driver of growth.
Huynh insists investors have only shown limited near-term interest in the stock ahead of key inflection points. For starters, the return of Gardasil shipments to China is expected to bolster the company’s revenue base. According to the investment firm Gardasil, inventory levels in China remain elevated owing to expanded promotional efforts spanning five regions.
Following $200 million in shipments into China, UBS does not expect additional shipments. However, it expects Merck to generate up to $5.8 billion in Gardasil sales. Additionally, Huynh is optimistic about the full Phase 3 oral PCSK9 CORALreef Lipids readout in hypercholesterolemia.
Merck & Co., Inc. (NYSE:MRK) develops and provides solutions in areas like biopharmaceutical therapies, scientific research tools, and materials for electronics, including smartphones and televisions.
While we acknowledge the potential of MRK to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than MRK and that has 100x upside potential, check out our report about this cheapest AI stock.
READ NEXT: Top 10 Materials Stocks to Buy According to Analysts and 10 Best Organic Food and Farming Stocks to Buy Now.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email below.
