From Hershey to AbbVie: Goldman Names 23 Defensive Stocks Amid a Tech Sector Sell-off

Goldman Sachs strategists advised market participants to focus on buying stocks from sectors that had previously underperformed, given the volatile performance of tech stocks, according to MarketWatch. The S&P 500 index, which is dominated by large technology companies, posted its worst weekly return since late June last week, the publication notes.

In this regard, Goldman Sachs strategist Ben Snyder has identified 23 stocks from the Russell 1000 (an index of the 1,000 largest U.S. public companies) in the healthcare and consumer staples sectors that, in his view, investors should pay attention to right now. According to the analyst, these stocks combine relatively low actual price volatility with high free cash flow yields compared to their sector peers, Seeking Alpha reports. Snyder also highlighted companies in the so-called “consumer experience” sector (firms that sell travel and entertainment services or operate hotels and restaurants), noting their relatively low valuations and potential for long-term structural growth.

According to Snyder, energy prices and interest rates will fall next year, which will accelerate the growth of real household income. ““In particular, our economists expect that in 2027, income growth for the bottom 20% of Americans will accelerate significantly amid slowing inflation, and the January cost-of-living adjustment will increase the amount of social benefits,” the analyst explained. Goldman Sachs strategists, led by Snyder, also noted that the share of companies in the discretionary consumption sector—that is, producers of non-essential goods and services—in Wall Street hedge fund portfolios is at a multi-year low. At the same time, funds are reducing their investments in stocks related to artificial intelligence, according to MarketWatch.

Against this backdrop, Snyder and his team suggested focusing on stocks from defensive sectors that exhibit “quality” characteristics. A basket of stocks compiled by Goldman—comprising companies in the non-essential goods sector that target low-income consumers—has risen 7% since the beginning of October.

— Shares of food manufacturer Tyson Foods (the average rating for the company's stock among Wall Street analysts is neutral—8 out of 16 analysts recommend holding);

— shares of Royalty Pharma, a biopharmaceutical royalty buyer (8 out of 10 analysts recommend buying the stock);

— shares of the pharmacy chain and health insurer CVS Health Corporation (25 out of 27 analysts recommend buying these shares);

— food manufacturer J.M. Smucker Company (10 out of 19 analysts recommend buying the stock);

— the Kroger grocery supermarket chain (14 out of 26 analysts recommend buying the stock);

— Cardinal Health, a distributor of medical products (16 out of 21 recommend buying from them);

— HCA Healthcare, a hospital network operator (15 out of 29 recommend buying);

— Hormel Foods Corporation, a meat products manufacturer (7 out of 10 analysts recommend holding the stock in a portfolio);

— Performance Food Group, a food supplier (13 out of 16 analysts recommend buying);

— Sysco Corporation, a food distributor (7 out of 14 analysts recommend buying);

— Kenvue, a manufacturer of health products (12 out of 14 analysts recommend holding the stock);

— the confectionery giant Hershey Company (14 out of 23 analysts recommend holding the stock);

— US Foods Holding, a food distributor (13 out of 18 analysts recommend buying);

— the pharmaceutical company Merck & Co (21 out of 31 analysts recommend buying);

— ResMed, a medical device manufacturer (18 out of 30 analysts recommend buying);

— Quest Diagnostics Incorporated, a medical laboratory services provider (9 out of 17 analysts recommend buying);

— Chemed Corporation, a provider of home healthcare services (on Wall Street, the average recommendation for these stocks is “hold”);

— Abbott Laboratories, a medical equipment manufacturer (analysts generally recommend buying it—it has an “Overweight” rating);

— Mondelez International, a snack manufacturer (which also has an “Overweight” rating);

— McKesson Corporation, a pharmaceutical distributor (Wall Street, in general, also views the company’s outlook positively—Overweight);

— Church & Dwight, a manufacturer of household cleaning products (average rating: Overweight);

— the biopharmaceutical company AbbVie (Overweight);

— Colgate-Palmolive, a manufacturer of hygiene products (Overweight).

The S&P 500 Index, which is dominated by large technology companies, posted its worst weekly return since late June, according to MarketWatch. The index’s performance has been diverging increasingly from that of most other stocks for several months, but this gap began to widen rapidly in September. Growing concerns about the cost and availability of debt financing for AI-related companies have prompted investors to reduce their holdings in these firms’ stocks and price in a slowdown in earnings growth, Goldman noted.

That said, Goldman strategists still expect robust earnings per share growth in 2027. According to their base-case forecast, this metric for S&P 500 companies will grow by 36% in 2026, but growth will slow to 11% in 2027. The strategists estimate that capital expenditures on artificial intelligence currently account for about half of earnings per share growth. However, this factor will weaken in 2027: capital expenditure growth is expected to slow, while depreciation expenses will increase.

“In addition to pressure from interest rates and energy prices, support from investments in AI—which are growing at a slower pace—will also weaken,” the strategists noted, adding that the initial results of the third-quarter earnings season confirm this view.

Over the past four quarters, 64% of companies in the S&P 500 index have exceeded consensus estimates for earnings per share, but in the third-quarter earnings season that has just begun, only 53% of issuers have managed to do so, Goldman added.

This article was AI-translated and verified by a human editor