In this article, we discuss 11 best defensive stocks for an upcoming crash.

The Federal Reserve recently raised interest rates in the United States by three quarters of a percentage point, continuing on an aggressive policy that began in March this year and marked the most aggressive tightening since the central bank started using the overnight funds rate as a principal policy tool in 1990. Senior Fed officials also signaled the intention of continuing to hike until the funds level hits a terminal rate or end point of 4.6% in 2023. This means that there will be another quarter-point rate hike next year. 

The stock market has been in a meltdown since the decision was announced. Investors have been dumping growth names in favor of defensive plays like Berkshire Hathaway Inc. (NYSE:BRK-B), Merck & Co., Inc. (NYSE:MRK), and Exxon Mobil Corporation (NYSE:XOM). Amid criticism over a looming failure to negotiate a soft landing, Federal Reserve Chair Jerome Powell has said that “no one knows whether this process will lead to a recession or, if so, how significant that recession would be”. 

The hike led to another downturn in the Dow Jones Industrial Average, that sank below 30,000 for the first time since June and wiped out everything investors had gained since November 2020. As the economic growth slows amid supply chain pressures, soaring global food and fuel prices, the Russian invasion of Ukraine, and rolling factory shutdowns in China, investors are scrambling to shield their portfolios, which had grown tech-heavy due to the economic boom of the past decade. 

Our Methodology

Stocks that operate in defensive sectors like energy, pharma, and consumer goods were preferred for the list. The analyst ratings and business fundamentals of the firms are also discussed to provide readers with some additional context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the second quarter of 2022.

Best Defensive Stocks For An Upcoming Crash

11. OGE Energy Corp. (NYSE:OGE)

Number of Hedge Fund Holders: 13     

OGE Energy Corp. (NYSE:OGE) operates as an energy and energy services provider that offers physical delivery and related services for electricity, natural gas, crude oil, and natural gas liquids. The firm posted earnings for the second quarter of 2022 on August 4, reporting earnings per share of $0.36, missing market estimates by $0.06. The revenue over the period was $803 million, up more than 39% compared to the revenue over the same period last year and beating analyst expectations by $196 million. 

On September 9, Mizuho analyst Anthony Crowdell maintained a Neutral rating on OGE Energy Corp. (NYSE:OGE) stock and raised the price target to $42 from $39, noting the largest regulatory overhang this year on the firm had been removed. 

At the end of the second quarter of 2022, 13 hedge funds in the database of Insider Monkey held stakes worth $213 million in OGE Energy Corp. (NYSE:OGE), compared to 20 the preceding quarter worth $228.8 million.

Just like Berkshire Hathaway Inc. (NYSE:BRK-B), Merck & Co., Inc. (NYSE:MRK), and Exxon Mobil Corporation (NYSE:XOM), OGE Energy Corp. (NYSE:OGE) is one of the best defensive stocks to buy according to hedge funds. 

10. DTE Energy Company (NYSE:DTE)

Number of Hedge Fund Holders: 29 

DTE Energy Company (NYSE:DTE) engages in utility operations such as generation, purchasing, distribution, and selling of electricity. The company is one of the most prominent defensive stocks to invest in. On August 10, DTE Energy Company (NYSE:DTE) announced that it had signed an agreement with carmaker Ford to add 650MW of new solar energy in Michigan to power Ford facilities, which will increase the total amount of installed solar in the state by nearly 70% and allow for Ford manufacturers in the state to be assembled using renewable energy sources.

On July 18, Barclays analyst Eric Beaumont maintained an Equal Weight rating on DTE Energy Company (NYSE:DTE) stock and lowered the price target to $131 from $141, noting there were expectations of a lower group multiple than previously used in the power sector. 

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in DTE Energy Company (NYSE:DTE), with 987,487 shares worth more than $125 million. 

9. Dominion Energy, Inc. (NYSE:D)

Number of Hedge Fund Holders: 30    

Dominion Energy, Inc. (NYSE:D) produces and distributes energy in the United States. The firm is among the best defensive stocks to invest in. The company has an impressive dividend profile. It has consistently paid a dividend to shareholders for the past 21 years. On August 3, the firm declared a quarterly dividend of $0.6675 per share, in line with previous. The forward yield was a solid 3.43%. The dividend is payable to shareholders by late September and early October. 

On July 18, Barclays analyst Eric Beaumont maintained an Equal Weight rating on Dominion Energy, Inc. (NYSE:D) stock and lowered the price target to $86 from $93, noting that general market issues were a near-term headwind for the power sector. 

At the end of the second quarter of 2022, 30 hedge funds in the database of Insider Monkey held stakes worth $573 million in Dominion Energy, Inc. (NYSE:D), compared to 34 in the previous quarter worth $696 million.

8. Emerson Electric Co. (NYSE:EMR)

Number of Hedge Fund Holders: 47

Emerson Electric Co. (NYSE:EMR) is a technology and engineering company providing various solutions for customers in industrial, commercial, and residential markets. The firm is among the best defensive stocks to invest in. On August 31, the company announced that the corporate venture capital arm of the firm had made a strategic investment in the communications firm Spearix Technologies. Under the deal, the former will support the technology and early stage growth of the latter while expanding upon the Industrial Internet of Things capabilities.

On August 16, Bernstein analyst Brendan Luecke assumed coverage of Emerson Electric Co. (NYSE:EMR) stock with a Market Perform rating and lowered the price target to $100 from $105, noting the firm delivered mixed second quarter results. 

Among the hedge funds being tracked by Insider Monkey, Chicago-based firm Citadel Investment Group is a leading shareholder in Emerson Electric Co. (NYSE:EMR), with 2.9 million shares worth more than $233 million.

7. Colgate-Palmolive Company (NYSE:CL)

Number of Hedge Fund Holders: 55   

Colgate-Palmolive Company (NYSE:CL) manufactures and sells consumer products worldwide. It is one of the elite defensive stocks to invest in. The company has an impressive dividend profile. It has consistently paid a dividend to shareholders for the past 58 years. These payouts have also registered consistent growth in these five decades. On September 9, the firm declared a quarterly dividend of $0.47 per share, in line with previous. The forward yield was a solid 2.41%. 

On August 2, Barclays analyst Lauren Lieberman maintained an Equal Weight rating on Colgate-Palmolive Company (NYSE:CL) stock and raised the price target to $74 from $71, noting the firm had reported better-than-expected organic sales growth in the second quarter.

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in Colgate-Palmolive Company (NYSE:CL), with 11 million shares worth more than $899.8 million. 

In its Q2 2022 investor letter, First Eagle Investments, an asset management firm, highlighted a few stocks and Colgate-Palmolive Company (NYSE:CL) was one of them. Here is what the fund said:

“Shares of consumer staples giant Colgate-Palmolive Company (NYSE:CL) have performed well as investors rotated into more recessionary-resilient defensive stocks amid the broader selloff during the second quarter. The company raised revenue guidance for 2022 but lowered its margin outlook because of higher costs for raw materials, packaging and logistics; we believe that the company’s size and market share provide it with options to mitigate the inflation challenges it faces. We continue to like Colgate- Palmolive’s dividend and previously announced $5 billion stock buyback program.”

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

Number of Hedge Fund Holders: 60  

The Coca-Cola Company (NYSE:KO) is a beverage company that manufactures, markets, and sells various non-alcoholic beverages worldwide. It is one of the elite defensive stocks to invest in. On September 12, media reports indicated that the Japan unit of the firm had signed a new collaboration with Kirin Holdings Company to develop a health drink that contains live bacteria to help boost immunity. Kirin is the first food and beverage company in Japan to be granted special approval for immunity related advertising. 

On September 6, HSBC analyst Carlos Laboy maintained a Buy rating on The Coca-Cola Company (NYSE:KO) stock and increased the price target to $76 from $72, noting the firm had new revenue drivers in Latin America. 

At the end of the second quarter of 2022, 60 hedge funds in the database of Insider Monkey held stakes worth $28 billion in The Coca-Cola Company (NYSE:KO), compared to 64 in the preceding quarter worth $29 billion. 

Along with Berkshire Hathaway Inc. (NYSE:BRK-B), Merck & Co., Inc. (NYSE:MRK), and Exxon Mobil Corporation (NYSE:XOM), The Coca-Cola Company (NYSE:KO) is one of the best defensive stocks to buy according to hedge funds.

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Coca-Cola Company (NYSE:KO) was one of them. Here is what the fund said:

“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (The Coca-Cola Company (NYSE:KO)). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”

5. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 64

Costco Wholesale Corporation (NASDAQ:COST) engages in the operation of membership warehouses. It is one of the top defensive stocks to invest in. The firm posted earnings for the fourth fiscal quarter on September 22, reporting earnings per share of $4.20, roughly in line with market estimates. The revenue over the period was $72 billion, up more than 15% compared to the revenue over the same period last year and beating analyst expectations by $90 million. 

On September 12, UBS analyst Michael Lasser maintained a Buy rating on Costco Wholesale Corporation (NASDAQ:COST) stock with a price target of $595, noting the firm was expected to post a healthy upside for the fourth quarter of 2022. 

Among the hedge funds being tracked by Insider Monkey, Washington-based Fisher Asset Management is a leading shareholder in Costco Wholesale Corporation (NASDAQ:COST), with 4.3 million shares worth more than $2.1 billion. 

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ:COST) was one of them. Here is what the fund said:

“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco Wholesale Corporation (NASDAQ:COST), which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”

4. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 67   

Walmart Inc. (NYSE:WMT) engages in the operation of retail, wholesale, and other units worldwide. The firm is among the best defensive stocks to invest in. On September 21, the company announced that it was planning to hire around 40,000 mostly seasonal workers for the upcoming holiday season. Last year, amid the pandemic recovery boom, the firm had announced plans to hire around 150,000 permanent employees to work over the holidays and beyond. 

On September 14, KeyBanc analyst Bradley Thomas initiated coverage of Walmart Inc. (NYSE:WMT) stock with an Overweight rating and a price target of $155, noting that the rating was underpinned by an outlook for defensive growth. 

Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Walmart Inc. (NYSE:WMT), with 9.8 million shares worth more than $1.2 billion. 

In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Walmart Inc. (NYSE:WMT) was one of them. Here is what the fund said:

“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart Inc. (NYSE:WMT) and Costco has been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In September 2020 Walmart raised wages for 165,000 employees, including a number of entry positions to $15 an hour. It followed this in February with a raise for 425,000 workers that moved its average pay above $15 an hour.”

3. The Proctor and Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 71  

The Proctor and Gamble Company (NYSE:PG) provides branded consumer packaged goods worldwide. The company is one of the most prominent defensive stocks to invest in. The Proctor and Gamble Company (NYSE:PG) has an impressive dividend profile. It has consistently paid a dividend to shareholders for the past sixty-five years. These payouts have also registered consistent growth in these six decades. On July 12, the firm declared a quarterly dividend of $0.9133 per share, in line with previous. The forward yield was a solid 2.52%. 

On August 2, Barclays analyst Lauren Lieberman maintained an Overweight rating on The Procter & Gamble Company (NYSE:PG) stock and lowered the price target to $154 from $157, noting that the firm needed to prove its business model was defensive in this economic cycle. 

At the end of the second quarter of 2022, 71 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in The Proctor and Gamble Company (NYSE:PG), compared to 72 in the preceding quarter worth $6.1 billion. 

2. AbbVie Inc. (NYSE:ABBV)

Number of Hedge Fund Holders: 71     

AbbVie Inc. (NYSE:ABBV) discovers, develops, manufactures, and sells pharmaceuticals. The firm features on the list of best defensive stocks to invest in. On September 6, the company announced that a drug named Linzess had met the main and secondary goals of a phase 3 trial in pediatric patients aged six years to 17 years with functional constipation. Linzess is approved in the US to treat adults with irritable bowel syndrome with constipation or chronic idiopathic constipation but not approved for use in patients less than 18 years of age. 

On September 21, JPMorgan analyst Chris Schott maintained an Overweight rating on AbbVie Inc. (NYSE:ABBV) stock with a price target of $180, noting the firm was among the best large cap ideas in the business.

Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in AbbVie Inc. (NYSE:ABBV), with 4.3 million shares worth more than $645 million.  

In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and AbbVie Inc. (NYSE:ABBV) was one of them. Here is what the fund said:

“We added to our health care exposure in the quarter with the purchases of Straumann Holding (OTCPK:SAUHF), a Swiss manufacturer of medical instruments, implants and related supplies for dental procedures, in the secular bucket and U.S. pharmaceutical maker AbbVie Inc. (NYSE:ABBV) in the structural bucket. Straumann is the global market leader in dental implants with 29% overall share, a meaningful position within premium implants and smaller share in value implants. The company is also involved in clear aligners through a series of acquisitions as well as peripheral capital equipment around those businesses.

Growth will come from increasing share in both value implants and clear aligners through expansion in emerging markets on top of market growth in its premium implant business. AbbVie is undergoing a transition in anticipation of loss of exclusivity for its blockbuster Humira in the next several years with several commercial therapeutics, led by Skyrizi for psoriasis and Rinvoq for rheumatoid arthritis.”

1. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 83

Johnson & Johnson (NYSE:JNJ) researches and develops, manufactures, and sells various products in the healthcare field. The firm features on the list of best defensive stocks to invest in. On September 14, the company announced that the board of the firm had authorized to buy back up to $5 billion worth of common stock.

On July 21, UBS analyst Kevin Caliendo maintained a Neutral rating on Johnson & Johnson (NYSE:JNJ) stock and lowered the price target to $180 from $185, noting that the second quarter earnings of the firm confirmed the macro undercurrents. 

Among the hedge funds being tracked by Insider Monkey, Fort Lauderdale, Florida-based firm GQG Partners is a leading shareholder in Johnson & Johnson (NYSE:JNJ), with 6.6 million shares worth more than $1.2 billion. 

In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks and Johnson & Johnson (NYSE:JNJ) was one of them. Here is what the fund said:

“Johnson & Johnson (NYSE:JNJ) 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 (…read more)

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Disclosure. None. 11 Best Defensive Stocks For An Upcoming Crash is originally published on Insider Monkey.