Michael Farr's Top 10 Defensive Stocks for 2024

Over the past 16 Decembers, I have personally invested in 10 of the stocks we track with the intention of holding them for only one year.

I hold an equal dollar amount in each of the positions for the following year, and then I reinvest in the companies that I find especially attractive in light of their valuations or potential to benefit from economic developments.

The current year's list has a greater emphasis on earnings growth and includes more medical device companies compared to previous years.

In some years, results have been satisfactory, while in others, they have not been as successful. On Friday, I will sell my 2023 names and purchase new ones that same afternoon.

I will sell my 2023 Top Ten List at year-end and purchase the 2024 Top Ten on Jan. 2 to be sold at the beginning of trading in 2025. Here is my 2024 Top Ten List, listed in random order:

Since its establishment in 1915, Donaldson has been a leading global manufacturer of filtration systems and replacement parts for engines, industrial plants, power generation, and various life sciences applications. The company holds a dominant market position in many of its businesses, which are geographically and end-market diverse and have strong long-term secular growth potential.

Valmont Industries is a small company with a $4.7 billion market cap that produces engineered poles, towers, and other structures for various uses, including road safety, utility, telecommunications, and construction site access.

The company is an investment in infrastructure development that will benefit from long-term global trends such as population growth, urbanization, and water scarcity.

The company's primary business operations include debt and equity underwriting, M&A advisory, asset management, trading, lending, and proprietary investing. However, the stock has experienced significant volatility in recent years, mainly because of a misguided strategy to intensify the consumer lending market.

While the rationale behind the decision was sound, the management's timing was poor, and the execution was not up to par.

Since the separation of its Environmental and Applied Solutions businesses on Sept. 30, Danaher has become a pure-play biotechnology, life sciences, and diagnostics company. The company's evolution to its current state was achieved through a series of acquisitions and divestitures aimed at generating shareholder value by applying its proprietary set of operating processes and tools, known as the Danaher Business System, or "DBS."

Cloud computing, e-commerce, and digital advertising are three areas where Amazon excels, with each business having a significant economic moat.

Since CEO Ramon Laguarta took over in 2018, PepsiCo has experienced a notable improvement in operational execution. Laguarta has transformed the company into a "faster, stronger, and better" enterprise through several strategic initiatives, including: 1) investing in the company's brands through innovation and marketing; 2) addressing gaps in the portfolio in fast-growing categories where Pepsi had been underpenetrated; and 3) improving the supply chain by increasing manufacturing capacity and introducing efficiencies through technological investments.

Disney, a renowned brand worldwide, has transformed from a small animation studio to a multifaceted media and entertainment conglomerate over the past century. Despite recent obstacles, such as a flawed succession, a surge in cord-cutting, and a sluggish box office recovery, Disney's Parks & Resorts business has remained resilient and highly profitable. This success can be attributed to the pent-up demand that has emerged from the pandemic.

Abbott Laboratories is a leading medical device company with a diverse portfolio of products across four segments: Medical Devices, Diagnostics, Nutrition, and Established Pharmaceuticals. The company's existing products are generating strong growth, while its upcoming product launches will support future growth.

JNJ is a multinational healthcare corporation with a diverse portfolio. After the Kenvue spinoff, its revenue base is now split 65% pharmaceuticals and 35% MedTech. The company will likely benefit from an aging global population and increasing standards of living in emerging markets.

Microsoft is a leading technology company in the world, having successfully shifted from a Windows PC-centric approach to cloud computing and generative AI. As a strategic partner in enterprise digital transformations, Microsoft offers cloud, app, infrastructure, and AI solutions.

Please note that the following information is not a recommendation to buy or sell securities. It is important to understand that there is a risk of losing principal, and past performance is not a guarantee of future results. If you are interested in any of these names, please consult with your financial advisor before making any investment decisions.