When fear reigns and markets fluctuate, some companies seem to act as defensive stocks. But behind the apparent calm lies a more complex logic.
Fear reigns supreme, and many wonder whether there are truly "defensive" stocks in this environment. When volatility rises, interest rates remain high, and liquidity leaves the market, stock picking becomes difficult.
However, there are some companies whose business model, capital structure, and cash generation capabilities display characteristics of defensive assets. They aren’t immune to corrections, but they often become a destination for patient capital.
Today, we’re analyzing three emblematic cases. Three companies that, despite operating in different sectors, have one thing in common: solidity.
1) Berkshire Hathaway
Berkshire Hathaway (BRK.A / BRK.B) isn’t just a company; it’s an ecosystem of holdings. The so-called "Buffett premium" represents the market’s confidence in the rational and conservative management of capital by Warren Buffett and his team.
This confidence translates into an effect that stems not only from financial results, but also from its risk management philosophy. Berkshire is, in effect, a diversified conglomerate: it fully controls insurance (GEICO, Berkshire Reinsurance), utilities (BHE), and railroads (BNSF), as well as stakes in giants like Apple, American Express, and Coca-Cola.
But the real defensive signal, in this phase of complex cyclical analysis, comes from liquidity.
Today, Berkshire holds a record of over $180 billion in cash and Treasuries. This figure does not reflect a lack of deployment, but rather strategic prudence.
In Buffett’s parlance, accumulating liquidity means one thing: waiting. Waiting for the market to offer value opportunities. And for investors, this sends a strong message: when even the "king of value investing" goes on the defensive, perhaps it’s time to better assess market risk.
In other words, Berkshire isn’t just defensive because of its diversification, but because of its approach. Liquidity becomes a form of "natural hedge" against market excesses. Even without a mathematical inverse anchor, it represents a way to protect against downturns.
2) PepsiCo
In the consumer staples sector, PepsiCo (PEP) is one of the stocks that is widely considered a long-term defensive stock.
The group is not just about beverages: over 50% of its revenue comes from snacks and packaged foods, through brands like Frito-Lay and Quaker. This diversification makes the business less sensitive to volume fluctuations and more stable in terms of margins.
Furthermore, Pepsi is part of the exclusive club of Dividend Aristocrats, having increased its dividend for over 50 consecutive years. This is not only a sign of solidity, but also of cash-flow predictability. The payout ratio remains sustainable, thanks to steady free cash flow (FCF) that is well-balanced with debt.
Another supportive factor for its defensive profile is its growth strategy through targeted acquisitions. In recent years, Pepsi has focused on "health-oriented" segments, such as low-sugar beverages and plant-based foods, quickly adapting to new consumption habits.
Finally, PepsiCo’s competitive moat is one of the strongest in the industry: its global distribution network and established relationships with retailers create enormous barriers to entry. Anyone wishing to enter this market today would face prohibitively high logistics and marketing costs.
3) Exxon Mobil
In the energy sector, Exxon Mobil (XOM) represents a well-established defensive play within a cyclical sector. When the market fears recession or stagflation, energy becomes a paradox: penalized by reduced demand, but protected from rising commodity prices.
Exxon is the giant with a strong asset-based moat: global operating scale, privileged access to resources, and vertical control of the entire supply chain (upstream, refining, chemicals). This integration allows it to stabilize margins even in downcycles, offsetting crude oil volatility with refining profits.
Cash generation is colossal: during positive commodity cycles, Exxon generates tens of billions in free cash flow, reinvested in buybacks and dividends. And the dividend is a cornerstone of its strategy: over 40 years of growing distributions, with a stable yield above 3%.
But what makes Exxon truly defensive is its financial discipline. Leverage is minimal (debt/equity less than 0.25), and capital is allocated extremely carefully. The company does not speculate on oil prices: it invests with a multi-year horizon and maintains a resilient balance sheet even during periods of energy shocks.
Being defensive isn’t the same as being immune
In times of market tension, it’s easy to take refuge in companies considered “safe.” But the truth is that no stock truly is. Berkshire Hathaway, PepsiCo, and Exxon Mobil aren’t guarantees against losses; they’re instruments of relative stability.
The concept of “defensiveness” needs to be reinterpreted.
It’s not about avoiding volatility, but understanding what generates it and which business models are best able to adapt. In this sense, defensiveness isn’t a passive strategy, but an active management of prudence.
Original article published on Money.it Italy 2025-11-14 13:54:08. Original title: 3 titoli azionari perfetti in tempi difficili come questo
