Consumer staples, healthcare and communications infrastructure companies can have more resilient demand and revenue during periods of market volatility. Six stocks identified as defensive candidates—Procter & Gamble, Merck, Bristol Myers Squibb, American Tower, General Mills and McDonald’s—each have a beta of 0.50 or less relative to the SPDR S&P 500 ETF (SPY). But beta reflects historical volatility; it does not mean a share price cannot fall.
Share prices and business profiles
The listed prices were $159.35 for Procter & Gamble (NYSE: PG), unchanged; $145.26 for Merck (NYSE: MRK), down 0.48%; and $60.19 for Bristol Myers Squibb (NYSE: BMY), up 0.73%. American Tower (NYSE: AMT) was at $185, down 0.15%; General Mills (NYSE: GIS) at $33.11, down 0.06%; and McDonald’s (NYSE: MCD) at $242.50, down 0.19%.
Procter & Gamble, with a market capitalization of about $330 billion, sells products across beauty, grooming, healthcare, fabric and home care, and baby, feminine and family care. Its products reach consumers through major retailers, e-commerce, grocery and membership stores, pharmacies, and specialist beauty outlets. That broad distribution network is central to its consumer-products business.
Merck operates across pharmaceuticals and animal health. Its human medicines target areas including oncology, immunology, neuroscience, virology, cardiovascular disease and diabetes. The animal-health business includes veterinary medicines, vaccines, and health-management services such as animal identification and tracking. Merck also works with other healthcare companies to develop and commercialize medicines, including products related to HIV treatment.
Bristol Myers Squibb researches, licenses, manufactures and sells medicines. Its portfolio includes cancer therapies for conditions such as lymphoma, multiple myeloma and leukemia. Customers include wholesalers, pharmacies, hospitals, clinics and government agencies.
Communications infrastructure and everyday consumer demand
American Tower is a North America-based real estate investment trust (REIT) that owns about 219,000 cellular communications sites and earns revenue by leasing them. Major tenants include AT&T and T-Mobile. The company’s shares fell sharply during the dot-com bust in 2000, while demand for communications infrastructure has benefited in recent years from 5G deployment.
Founded in 1928 as a flour miller, General Mills has grown into a major supplier of cereals and packaged foods. Its brands include Fruit Gushers, Cinnamon Toast Crunch, Cocoa Puffs, Nature Valley, Pillsbury, Yoplait, Wheaties and Cheerios. Products are sold through grocery stores, large retailers, e-commerce, convenience stores and discount channels.
General Mills had a monthly beta of 0.32 over the past five years, about one-third of the market’s volatility level. Under the historical calculation cited here, its annualized return with dividends reinvested was 9.81% from 1993, slightly above SPY’s 9.72%.
McDonald’s was founded in 1940 and is headquartered in Chicago, Illinois. It operates and franchises restaurants in the U.S. and internationally. Its menu includes burgers, chicken sandwiches and nuggets, fries, salads, milkshakes, frozen desserts, baked goods, soft drinks and coffee, as well as breakfast items such as muffins, sausage, oatmeal, hash browns and pancakes. Broad-based dining demand may lend some resilience through economic cycles, but the company remains exposed to costs, competition and shifts in consumer demand.
What low beta can—and cannot—tell investors
Beta measures a stock’s historical sensitivity to movements in a market benchmark. With the S&P 500 or SPY as the reference, a market beta of 1 is the baseline. A beta above 1 generally indicates larger price swings; a reading between 0 and 1 typically indicates movement in the same direction as the market, but with smaller swings. A figure near zero signals a weaker historical relationship, while a negative beta indicates a tendency to move in the opposite direction. Beta is based on past data and cannot guarantee future performance.
Assets with low correlations can help diversify a portfolio. Modern portfolio theory holds that combining assets with positive expected returns and relatively low correlations may improve risk-adjusted returns while controlling risk. Investors also use the Sharpe ratio to assess performance relative to risk. Diversification, however, cannot prevent every loss, and company-specific conditions can change.
Defensive stocks are often found in healthcare and consumer staples, where demand for products tends to be steadier. These sectors may lag cyclical industries when interest rates are low and markets are broadly rising. Their more resilient demand may matter more when inflation or interest rates rise and markets come under pressure.
During the market decline through September 2022, Procter & Gamble, Merck, Bristol Myers Squibb and General Mills posted positive returns; American Tower did not. During the sharp sell-off triggered by the COVID-19 outbreak in 2020, most of the stocks listed here fell less than the broader market, but still underperformed safe-haven assets such as U.S. Treasuries.
Dividends and company-specific risks remain
Mature blue-chip companies sometimes return part of their cash to shareholders through quarterly dividends, and reinvesting those payments can affect long-term total returns. Dividend levels, yields and tax treatment vary by company and investor, so a defensive label alone does not imply a higher yield than SPY.
Low-beta stocks are not risk-free. Even companies with historically lower volatility and resilient operations can fall sharply during a broad market sell-off. Management changes, weak sales or corporate scandals can also weigh on an individual share price. Defensive characteristics describe a company’s business and historical market behavior, not a guarantee of future prices or returns.