In this article, we will look at the 12 Undervalued Defensive Stocks for 2025.
Overview of Consumer Defensive Stocks
The consumer defensive sector covers products that everyone needs almost every day. These stocks are able to sustain any economic environment, even economic slowdowns, as they are not highly dependent on the economic cycle. This differentiates them from cyclical stocks, as consumer defensive stocks can produce stable profits through the various stages of an economic cycle. These stocks can thus protect your portfolio in times of economic instability, as they generally produce reliable income from dividends. While consumer defensive stocks tend not to be susceptible to market instability, they also experience less growth during positive market cycles as compared to cyclical or higher-risk stocks. Some of the most common and pure-play industry groups considered defensive include healthcare, consumer staples, infrastructure, utilities, and others.
We recently published an article on the 10 Best Soaps and Cleaning Materials Stocks to Invest In and discussed what the consumer staples sector might look like in 2025. Here is an excerpt from the article:
On December 10, Ben Shuleva, Fidelity Sector Portfolio Manager, published a report on Fidelity Investments to discuss the outlook and expected nature of consumer staples in 2025. The consumer staples sector had a positive year in 2024. Shuleva is of the view that with sector dynamics returning to normal, 2025 is also expected to have a positive outlook for the sector. Solid consumer balance sheets, a strong economy, and support from the Fed may help the sector perform better than the broader market. Opportunities thus exist in consumer staples in 2025. Stable consumer demand, steady real wage growth, and healthy employment are further expected to support these opportunities.
However, Shuleva warned that some uncertainties may affect the sector. These include trade policy changes that may arise due to Trump’s incoming presidential administration, the effects of tariffs, and the potential consequences of the dollar’s strength or weakness. He further highlighted that since most consumer staple products are manufactured in the United States, the direct effects of tariffs are expected to be limited. However, products like Mexican alcohol and Chinese items sold by consumer staples retailers may experience price increases.
Shuleva also presented a bright side to the sector, reasoning that since consumer staple businesses have experienced volatility from changing tariff policies in recent years, they are likely to be well-prepared for them. Like other sectors, the consumer staples sector’s ultimate performance depends upon the broader economy’s performance. It is a defensive sector, and defensive sectors are historically likely to perform well in economic weaknesses.
On January 6, Kevin Mahn, President and CIO at Hennion & Walsh Asset Management, appeared on CNBC to discuss the current market momentum and shed light on his view about the consumer staples sector. He corroborated Shuleva’s claim that consumer staples as a sector didn’t have a positive 2024 and lagged behind in the market. The technology space, in contrast, had much bigger gains.
However, he believed that the staples space is a very defensive sector, and it has opportunities in 2025. Viewing historical trends, the consumer staple sector has, over the past 10-15 years, traded at 1 to ½ turns over the S&P 500 multiple. Now, it is trading essentially over one standard deviation below its historical average. Therefore, some stocks in the sector have the potential to outperform.
Could Tariffs Be a Cause of Concern in 2025?
However, tariffs are expected to be a significant concern for retailers in 2025. On January 17, Yahoo! Finance’s Senior Reporter Brooke DiPalma appeared on Catalysts to discuss the impact of tariffs on retailers. She said that while several retailers are adopting a “wait and see” approach, experts have warned that consumer prices could hike within three to six months if tariffs take effect. These price increases are likely to affect discount chain retailers the most, which are usually a part of the consumer defensive sector. This is primarily due to their strategizing with production shifts and price mitigation efforts.
With these sector trends in view, let’s look at the 12 undervalued defensive stocks for 2025.
A shopper browsing through a discount retailers merchandise aisle filled with a wide variety of items.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 40 undervalued defensive stocks with forward P/E ratios less than 15 as of January 17, 2025. We then selected the top 12 stocks most popular among elite hedge funds. We sourced hedge fund data from Insider Monkey’s database. The stocks are sorted in ascending order of the number of hedge fund holders that have stakes in them as of fiscal Q3 2024.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Undervalued Defensive Stocks for 2025
12. Bunge Global SA (NYSE:BG)
Forward P/E: 8.5
Number of Hedge Fund Holders: 33
Bunge Global SA (NYSE:BG) is a global agribusiness and food company. Its product offerings include canned and frozen vegetables, spices, vegetable oils, wine vinegar, fruit spreads, canned meats and beans, and other items. It sells its products through the brands Mrs. Dash, Ortega, Back to Nature, Bear Creek, Green Giant, and Cream of Wheat.
Year to date, the company generated around $1.3 billion of adjusted funds from operations. After allocating $295 million to sustaining capex, which includes maintenance and environmental health and safety, it had around $988 million of discretionary cash flow available. Bunge Global SA (NYSE:BG) used this money to pay dividends and invest in its growth and productivity-related capex, most of which relate to its significant multi-year greenfield investments. It also repurchased around $600 million of Bunge shares.
Bunge Global SA (NYSE:BG) thus has a strong operating model and is spending significant capital to improve its facilities and operations across its global footprint. The company recently announced the wrapping of its deal to acquire Viterra, which would develop the company into an agribusiness giant. Apart from progressing on this transaction, it also completed other strategic priorities in fiscal Q3 2024, such as closing the sale of interest in its non-core sugar and bio-energy joint venture in Brazil to its partner, BP.
11. Archer-Daniels-Midland Company (NYSE:ADM)
Forward P/E: 10.84
Number of Hedge Fund Holders: 34
Archer-Daniels-Midland Company (NYSE:ADM) is a human and animal nutrition company that serves as an agricultural processor and supply chain manager. It operates through the Carbohydrate Solutions, Nutrition, and Ag Services and Oilseeds segments. The company is focusing on enhancing its operating efficiency, especially in its fertilizer business. It is investing in digitization and automation initiatives to boost its production, enhance product quality, and slash costs.
In addition, it is increasing throughput and reducing downtime at its fertilizer manufacturing facilities by implementing advanced technologies such as process control systems and predictive maintenance. These investments are expected to boost Archer-Daniels-Midland Company’s (NYSE:ADM) competitive position and streamline its operations, setting it up for long-term success.
The company is also focusing on strategic acquisitions and partnerships to further bolster and expand its fertilizer business. This will allow it to increase its market share by tapping into new markets. Its research and development teams are also developing sustainable products, such as bio-based fertilizers, to boost the company’s operations. Archer-Daniels-Midland Company (NYSE:ADM) ranks 11th on our list of the 12 undervalued defensive stocks for 2025.
Horizon Kinetics stated the following regarding Archer-Daniels-Midland Company (NYSE:ADM) in its fourth quarter 2023 investor letter:
“There are the securities exchanges in our strategies, of course, which we’ve adequately covered. Also, ‘2nd tier’ varieties of asset-light businesses, like car dealerships (AutoNation and Penske Auto Group) and shipping brokers (Clarkson PLC and Braemar PLC). Less well reviewed have been a few companies that are asset intensive, but have particular inflation-beneficiary attributes.
One such is Archer-Daniels-Midland Company (NYSE:ADM), one of the largest agricultural commodities processors. They turn grains and legumes into flour, protein meals, oils, starches, syrups, cellulose pulp, what have you. Almost everything on a dinner plate came through, in some fashion, ADM’s hands. Yes, they have machinery, terminals, ships, railroad cars. And as an intermediary, theirs is a low-margin business. But it is a constant-spread business that earns a pretty stable margin on a very large sales base. When pricing rises for a period of time, that percentage spread is on a higher dollar amount, hence more dollars of income—so income can rise nicely when agricultural commodities do. And there is the opportunity to expand their margins somewhat…” (Click here to read the full text)
10. Molson Coors Beverage Company (NYSE:TAP)
Forward P/E: 9.54
Number of Hedge Fund Holders: 34
Molson Coors Beverage Company (NYSE:TAP) is a holding company that produces and sells beer. It operates around 11 primary breweries, six craft breweries, and one cidery. The company’s geographical segments of operation include the Americas, EMEA, and APAC.
Its consolidated net sales revenue in fiscal Q3 2024 was down 7.8%, primarily due to the end of its brewing contract with Pabst, unfavorable shipment timings, and lower US brand volumes. However, excluding the impact of its contract brewing revenue decline, the company’s annual top-line projected growth is expected to be positive. Its improved cost outlook is in line with its long-term growth algorithm.
This trend is supported by Molson Coors Beverage Company’s (NYSE:TAP) share repurchase program, which it has executed at an accelerated pace for the past quarters. This reflects the company’s continued conviction in its long-term business outlook. It is also making considerable progress across its strategic priorities. Its core power brands are healthy, generating $856 million in underlying free cash flow for the year’s first nine months.
Molson Coors Beverage Company (NYSE:TAP) is also investing in its business and returned $717 million in cash to shareholders through dividends and our share repurchase program. The company plans to continue building on these successes with premiumization in the US and has taken steps to allow more focus on scalable opportunities, such as divesting underperforming craft breweries. Its focused growth plans and long-term opportunities in an expanding premium portfolio of brands in both beer and beyond beer make it one of the best undervalued defensive stocks for 2025.
9. Constellation Brands, Inc. (NYSE:STZ)
Forward P/E: 13.64
Number of Hedge Fund Holders: 36
Constellation Brands, Inc. (NYSE:STZ) produces, markets, and distributes wine, beer, and spirits. It operates through the Beer, Wine, Spirits, Corporate Operations and Other, and Canopy segments. Despite softer consumer demand due to macroeconomic headwinds, growth in consumer demand for its beer portfolio sequentially expanded in fiscal Q3 2024. At the company level, it once again attained dollar sales growth, outpacing the total consumer packaged goods (CPG) industry, making its mark as a CPG growth leader for nearly 12 years.
The company is presently focusing on premiumization and meeting changing consumer demands by aligning its portfolio with high-margin brands. Its beer segment is growing, and to sustain this growth, the company is expanding its production capacity in Mexico and maintaining a competitive market position in the US high-end beer market.
Constellation Brands, Inc. (NYSE:STZ) projects annual operating cash flow between $2.9 and $3.1 billion, which reflects a solid cash generation outlook. The company is supporting this outlook by focusing on strategic investments, especially in high-demand premium spirits and beer operations. It ranks ninth on our list.
8. GSK plc (NYSE:GSK)
Forward P/E: 8.65
Number of Hedge Fund Holders: 38
Formerly known as GlaxoSmithKline, GSK plc (NYSE:GSK) is a British global pharmaceutical and healthcare company that develops and markets a wide range of medicines, vaccines, and consumer health products. The company is a leader in immunology, respiratory treatments, and vaccines, with its portfolio comprising over 20 vaccines. In addition to other medications, it also develops cancer medicines for endometrial cancer, ovarian cancer, and multiple myeloma.
Fiscal Q3 2024 marked a positive quarter for GSK plc (NYSE:GSK), delivering a 9% sales growth and a 19% profit growth year-to-date. This growth was supported by the company’s accelerated momentum in Specialty Medicines and resilience in its overall portfolio. Its Specialty Medicine sector sales grew by 19%, with double-digital growth in oncology, HIV, and respiratory immunology. This reflects its continued confidence in its outlook for 2026 and beyond.
GSK plc (NYSE:GSK) is advancing several promising assets in oncology and respiratory, including B7-H3 and B7-H4 antibody-drug conjugates for difficult-to-treat cancers and Camlipixant for refractory chronic cough. It is also expanding its antibiotics and vaccines portfolio. Some of its significant products include Gepotidacin, the first completely new antibiotic for uncomplicated urinary tract infections in over 20 years, and the 5-in-1 MenABCWY vaccine for meningococcal diseases.
Ariel Global Fund made the following comment about GSK plc (NYSE:GSK) in its Q3 2023 investor letter:
“Global pharmaceutical and healthcare company, GSK plc (NYSE:GSK), also advanced in the period following a top- and bottom-line earnings beat and subsequent raise in full-year guidance. Shares were also aided by a successful US and European launch of Arexvy, a respiratory syncytial virus (RSV) vaccine for older adults. Although risks around the Zantac litigation remain a concern, we believe GSK should generate sustainable growth and margin expansion as the company transitions its Pharma pipeline towards specialty medicines and vaccines. Furthermore, the company’s robust balance sheet provides the scope for bolt-ons, which has the potential to drive additional growth.”
7. The Kraft Heinz Company (NASDAQ:KHC)
Forward P/E: 9.74
Number of Hedge Fund Holders: 38
The Kraft Heinz Company (NASDAQ:KHC) manufactures and distributes food and beverages worldwide. Its offerings include cheese and dairy products, meals, tomato products, condiments, meats, sauces, refreshment beverages, and more. Its geographical segments of operation include North America and International Developed Markets.
One of the primary reasons analysts are bullish on The Kraft Heinz Company (NASDAQ:KHC) is its solid 5.3% dividend yield. This rate is well above its industry group average of around 4%. This positions the company as an attractive opportunity.
Despite a rise in budget-conscious consumers, The Kraft Heinz Company (NASDAQ:KHC) is generating financial efficiencies to support profitability margins. Its fiscal Q3 2024 adjusted earnings per share (EPS) grew by 4.2%, reflecting stability. Furthermore, the changing consumer spending dynamics due to a robust economy and interest rate cuts by the Fed are expected to positively affect the company’s operations. It is supporting these trends by focusing on executing its strategic pillars to generate strong cash flow and drive profitable growth.
In addition, Warren Buffett, through Berkshire Hathaway, is the largest shareholder of The Kraft Heinz Company (NASDAQ:KHC), holding 326 million shares. This translates to around 27% of the entire company and reflects confidence in its long-term outlook.
Mairs & Power Growth Fund stated the following regarding The Kraft Heinz Company (NASDAQ:KHC) in its Q3 2024 investor letter:
“We added The Kraft Heinz Company (NASDAQ:KHC) to the Fund in the quarter. Kraft Heinz is a leading global food company that possesses a portfolio of iconic brands, including its eponymous ketchup brand. The company has undergone an operational transformation focused on driving efficiency gains in supply chain, manufacturing and distribution. These efficiency gains have fueled increased investments in technology, automation, innovation and marketing, which should ultimately drive more consistent organic revenue growth and high single digit earnings per share growth. We expect above-average long-term returns, buoyed by consistent free cash flow generation, opportunistic share repurchases and an attractive 4-5% dividend yield. A modest current valuation affords an ample margin of safety.”
6. The Kroger Co. (NYSE:KR)
Forward P/E: 13.14
Number of Hedge Fund Holders: 39
The Kroger Co. (NYSE:KR) is a food and drug retailer that operates supermarkets, fulfillment centers, and multi-department stores. Its brand portfolio includes Smart Way, Big K, Heritage Farm, Simple Truth Organic, and Simple Truth. The company operates approximately 2,722 supermarkets, 2,257 pharmacies, and 1,665 fuel centers in 35 US states and the District of Columbia.
Over nearly a decade, The Kroger Co. (NYSE:KR) has made substantial investments in its digital capabilities, investing in automation, creating distribution channels in delivery and pickup, building out its own properties, and enhancing personalization. This has resulted in an established digital business for the company that is positively impacting its financial results and improving its profitability. The company’s digital sales increased by 11% in the fiscal Q3 2024, affirming a new avenue for growth. Delivery sales were up by 18%, driven by customer fulfillment centers. The fact that digital sales account for just 10% of total sales also underlines the massive opportunity for growth amid the digital revolution.
Moving forward, The Kroger Co. (NYSE:KR) is focusing on utilizing automation, growing volumes, and introducing new technology to create efficiency gains. It is also focused on enhancing customer loyalty, expanding its digital footprint, and, most importantly, engaging in competitive pricing to drive sales and strengthen profit margins. The company’s performance reflects that it can continue to be profitable under various market circumstances, ranking it sixth on our list of the 12 undervalued defensive stocks from 2025.
5. Dollar Tree (NASDAQ:DLTR)
Forward P/E: 13.3
Number of Hedge Fund Holders: 40
Dollar Tree, Inc. (NASDAQ:DLTR) operates discount department stores and offers a wide range of merchandise under the brand names Dollar Tree and Dollar Tree Canada. Family Dollar stores offer home products, consumable merchandise, accessories and apparel, electronics, and seasonal merchandise.
The company saw positive results and sales in fiscal Q3 2024 due to its merchandising efforts for Dollar Tree and Family Dollar. Revenue for fiscal Q3 2024 was $7.56 billion, exceeding the forecast of $7.446 billion. Its net sales also grew significantly, primarily due to its non-comparable stores. The positive results for fiscal Q3 2024 reflect the company’s strong management of its strategic shifts. Despite macroeconomic challenges, Dollar Tree, Inc. (NASDAQ:DLTR) is maintaining strong operational results.
The company is focusing on boosting the growth of its Dollar Tree brand and is converting stores to its in-line multi-price 3.0 format. It is opening new stores and improving the in-store experience for its customers through customer service enhancements and renovations. Dollar Tree’s non-comparable sales contributed over three times more revenue in 2024, reflecting the increased rate of Dollar Tree openings.
In fiscal Q3 2024, the company converted another 720 stores to the 3.0 format, bringing the total number of converted Dollar Tree stores to around 2,300. These stores produced around 30% of the company’s total net sales in fiscal Q3 2024. Dollar Tree, Inc. (NASDAQ:DLTR) plans to convert an additional 300 to 400 stores to the 3.0 format by the end of 2024, further boosting profitability.
4. Zimmer Biomet Holdings, Inc. (NYSE:ZBH)
Forward P/E: 13.73
Number of Hedge Fund Holders: 43
Zimmer Biomet Holdings, Inc. (NYSE:ZBH) designs, manufactures, and markets orthopedic reconstructive products. It also offers biologics, extremities, sports medicine, dental implants, trauma products, and related surgical products. Fiscal Q3 2024 marked the 11th consecutive quarter of mid-single-digit or better constant currency revenue growth for Zimmer Biomet Holdings, Inc. (NYSE:ZBH).
The company holds a competitive market position. It is a dominant player in the orthopedic sector, leading the market with a 36% share in knee implants and a 23% share in hip implants. Its regulatory expertise gives it considerable strength, as the development of medical implants requires a lengthy FDA approval process, creating a natural barrier to entry and limiting competition.
Zimmer Biomet Holdings, Inc.’s (NYSE:ZBH) innovative product offerings are also a source of strength for the company. For instance, it is the only orthopedic company that offers a CT scanless robotic system in ROSA, Robotic Surgical Assistant. Additionally, Zimmer Biomet Holdings, Inc. (NYSE:ZBH) has built a specialized distribution network, partnering with over 3,500 healthcare providers worldwide, ensuring its products are a preferred choice in hospitals. Its dominant market share, strong brand recognition, and regulatory expertise make it a key undervalued defensive stock for 2025.
3. Dollar General Corporation (NYSE:DG)
Forward P/E: 11.92
Number of Hedge Fund Holders: 45
Dollar General (NYSE:DG) operates merchandise stores. Its various merchandise offerings include home products, consumables, seasonal items, apparel, and more. Its merchandise collection includes its own private brands and brands from manufacturers. Dollar General (NYSE:DG) is the biggest retailer in the US, with more than 20,000 stores nationwide.
Even though the company’s business has experienced pressure, its net sales grew by 5% to $10.2 billion in fiscal Q3 2024. The company grew its market share in dollars and units in highly consumable and non-consumable products sales during the quarter. Dollar General’s (NYSE:DG) same-store sales also rose by 1.3%, and this growth was attributed to 1.1% growth in the average transaction amount, including the average unit retail price per item and the increase in average items per basket. The company is focusing on its “Back to Basics” strategy to boost growth, which entails improved inventory management, reduced theft and shrink, enhanced in-stock levels, and a better customer and checkout experience.
The company is also focusing on maintaining a mix and balance in its inventory to boost sales and improve stock levels. Through fiscal Q3 2024, the business generated cash flows of $2.2 billion from operations, an increase of 52% due to improvements in Dollar General’s (NYSE:DG) working capital position, mainly through inventory management. It ranks third on our list of the 12 undervalued defensive stocks for 2025.
2. Albertsons Companies, Inc. (NYSE:ACI)
Forward P/E: 8.53
Number of Hedge Fund Holders: 58
Albertsons Companies, Inc. (NYSE:ACI) is a US-based food and drug retailer. It has over 2,269 stores across 34 states and the District of Columbia under 20 banners, including Star Market, Shaw’s, Albertsons, Kings Food Markets, United Supermarkets, Haggen, Kings Food Markets, Acme, Carrs, and more.
The company is focusing on key strategies to drive growth. It is investing in its e-commerce business, which it runs out of its stores so its inventory is close to its customers. Because of this, the company offers full access to its merchandise assortment. Its ecommerce investments have driven sales penetration to over 7% of grocery revenue. This growth has been supported by new developments in the company’s mobile app and improvements in quality, speed, and convenience of DriveUp & Go and in-home delivery. Furthermore, Albertsons Companies, Inc.’s (NYSE:ACI) loyalty program is a key engagement tool for its business.
Albertsons Companies, Inc. (NYSE:ACI) is also investing in pharmacy and health, which has driven sales penetration to over 11% of total annual revenue. The company plans to continue investing to deliver consistent omni-execution for brand campaigns across its digital and physical assets. It also expects to build new partnerships to add digital inventory and capabilities to its platform.
1. Pfizer Inc. (NYSE:PFE)
Forward P/E: 8.98
Number of Hedge Fund Holders: 80
Pfizer Inc. (NYSE:PFE) is a global biopharmaceutical company that develops, manufactures, markets, and sells biopharmaceutical products worldwide. The company works to advance prevention, wellness, treatments, and cures in emerging and developed markets. Pfizer Inc.’s (NYSE:PFE) goal is to become a world-class oncology leader. The company is already the third-largest biopharma company in oncology in the United States. Thus, it plans to continue its progress in oncology for the rest of the decade.
Using its pandemic profits, the company acquired Seagen in late 2023 for $43 billion to further bolster its oncology pipeline. The company is expected to continue looking for opportunities to acquire promising pharmaceutical companies to augment its pipeline further. This strategy is working well for Pfizer Inc., (NYSE:PFE) as management estimates earnings growth between 10% and 18% for 2025. Analysts also estimate the company’s earnings to grow by around 14% annually over the next 3-5 years.
Pfizer Inc. (NYSE:PFE) has an attractive dividend yield of 6.3%, higher than most blue-chip stocks. Its management has reiterated plans to support this dividend and raise it periodically, recently announcing a 2.4% increase in early December.
Overall, PFE ranks first among the 12 undervalued defensive stocks for 2025. While we acknowledge the potential of undervalued defensive stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PFE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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