Goldman’s “Defensive Quality” List: The 23 Stocks Wall Street Is Hiding In While Tech Burns

 

Goldman’s “Defensive Quality” List: The 23 Stocks Wall Street Is Hiding In While Tech Burns

**By [Your Name] | October 19, 2026 | 11-Minute Read**

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## The Short Version (For the Busy American)

Goldman Sachs just told its clients something that should make every American investor pay attention: **the AI trade is wobbling, and it’s time to look elsewhere**.

In a note late Friday, strategist **Ben Snider** and his team identified **23 stocks** in the Russell 1000—all in healthcare and consumer staples—that combine **low share-price volatility** with **high free-cash-flow yields** compared to their peers . These aren’t sexy names. You won’t see them trending on social media. But they’re the kind of stocks that hold up when growth fears spike and tech sells off.

The timing matters. The S&P 500 just had its worst week since June. AI-related debt is under stress. And Goldman’s own forecast sees S&P 500 earnings growth **slowing from 36% in 2026 to just 11% in 2027**—with AI capex contributing about half of that growth, a tailwind that’s expected to fade .

**The punchline:** Goldman isn’t saying the AI boom is over. It’s saying the easy money has been made, and the smart money is rotating into companies that make things people need—food, medicine, healthcare—regardless of what happens with chips and data centers.

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## The 23 Stocks on Goldman’s List

Here’s the full screen, ranked by trailing four-quarter free-cash-flow yield :

| Company (Ticker) | Sector | FCF Yield |

|------------------|--------|-----------|

| **Tyson Foods (TSN)** | Consumer Staples | 11% |

| **Royalty Pharma (RPRX)** | Healthcare | 9% |

| **CVS Health (CVS)** | Healthcare | 9% |

| **J.M. Smucker (SJM)** | Consumer Staples | 9% |

| **Kroger (KR)** | Consumer Staples | 8% |

| **Cardinal Health (CAH)** | Healthcare | 8% |

| **HCA Healthcare (HCA)** | Healthcare | 7% |

| **Hormel Foods (HRL)** | Consumer Staples | 7% |

| **Performance Food Group (PFGC)** | Consumer Staples | 6% |

| **Sysco (SYY)** | Consumer Staples | 6% |

| **Kenvue (KVUE)** | Consumer Staples | 6% |

| **Hershey (HSY)** | Consumer Staples | 6% |

| **US Foods (USFD)** | Consumer Staples | 5% |

| **Merck (MRK)** | Healthcare | 5% |

| **ResMed (RMD)** | Healthcare | 5% |

| **Quest Diagnostics (DGX)** | Healthcare | 5% |

| **Chemed (CHE)** | Healthcare | 5% |

| **Abbott Laboratories (ABT)** | Healthcare | 5% |

| **Mondelez (MDLZ)** | Consumer Staples | 4% |

| **McKesson (MCK)** | Healthcare | 4% |

| **Church & Dwight (CHD)** | Consumer Staples | 4% |

| **AbbVie (ABBV)** | Healthcare | 4% |

| **Colgate-Palmolive (CL)** | Consumer Staples | 4% |

The screen required **2027 EPS growth consensus of at least 5%**—so these aren’t value traps. They’re companies that are still expected to grow, just not at the breakneck pace of AI darlings .

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## Why Goldman Is Doing This Now

Let me be direct: **Goldman isn’t bearish on America. It’s bearish on the concentration of the American market**.

### The Narrow Breadth Problem

The S&P 500’s gains have been driven by a handful of AI giants. When those stocks wobble—as they did last week—the entire index feels it. Goldman’s screen is a way to **diversify away from that concentration** without abandoning equities entirely.

As Snider’s team put it: in an environment of “positive but decelerating growth,” **low-volatility and defensive quality stocks are more stable** .

### The 2027 Earnings Cliff

Goldman expects S&P 500 EPS growth to fall from **36% in 2026 to 11% in 2027** . That’s not a recession call. It’s a **deceleration call**. And when growth slows, investors tend to rotate out of high-multiple growth stocks and into cheaper, steadier names.

### The Consumer Catch-Up Trade

Here’s the nuance that makes Goldman’s view interesting: **it’s not just defensive**. The firm also believes that **lower-income consumers will see real income growth accelerate in 2027** as inflation slows and cost-of-living adjustments boost transfer payments .

That’s why the list includes names like **Tyson Foods and Kroger**—companies that benefit when budget-conscious Americans have a little more money in their pockets.

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## The Human Touch: What This Means for Real Americans

Let me put this in terms that actually connect to your life.

### If You’re Retired or Close to It

This is your list. These stocks are chosen for **low volatility**—meaning they don’t swing wildly when the market panics—and **high free-cash-flow yields**, which means they generate real cash that can fund dividends and buybacks.

If you’re drawing income from your portfolio, a 11% FCF yield from Tyson or a 9% yield from CVS is meaningful. It’s money the company can return to shareholders even if the economy slows.

### If You’re a Long-Term Investor

Goldman isn’t saying “sell your tech stocks.” It’s saying **diversify**. The AI trade has been the greatest wealth-creation story of the decade. But every trade matures. Adding some defensive quality exposure doesn’t mean abandoning growth—it means acknowledging that the market’s leadership may be broadening.

### If You Work in Healthcare or Food

These are the sectors Goldman is betting on. If you work at a hospital, a food distributor, or a consumer staples company, this screen is a signal that **your industry is being viewed as a safe harbor** in a turbulent market. That doesn’t guarantee job security, but it’s a vote of confidence from the smartest money on Wall Street.

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## Frequently Asked Questions

### What exactly is Goldman’s “defensive quality” screen?

It’s a list of **23 Russell 1000 stocks** in the healthcare and consumer staples sectors that combine **relatively low realized share-price volatility** with **high free-cash-flow yields** versus their sector peers. The screen also required **2027 EPS growth consensus of at least 5%** .

### Why is Goldman recommending defensive stocks now?

Because **growth is decelerating and market breadth is narrow**. The S&P 500 is dominated by a handful of AI giants, and when those stocks wobble, the whole index suffers. Goldman believes defensive quality stocks will outperform if the market continues to pare back growth expectations .

### What is free-cash-flow yield and why does it matter?

Free-cash-flow yield is **free cash flow divided by market capitalization**. It measures how much cash a company generates relative to its stock price. A high FCF yield means the company is generating a lot of cash relative to what investors are paying for it—a sign of value and financial health.

### Why are Tyson Foods and CVS at the top of the list?

**Tyson Foods** has the highest FCF yield on the screen at **11%**. It’s a food company with steady demand regardless of the economic cycle. **CVS Health** has a **9% FCF yield** and benefits from both pharmacy and insurance revenue streams. Both are classic defensive names .

### Is Goldman bearish on AI?

**No.** Goldman still sees AI as a powerful force. But it expects **AI capex growth to slow in 2027**, which will weigh on the companies that have benefited most from the boom. The defensive screen is a hedge against that deceleration, not a bet against AI .

### What is the “consumer catch-up trade” Goldman mentioned?

Goldman’s economists expect **real income growth for lower-income Americans to accelerate in 2027** as inflation slows and cost-of-living adjustments boost transfer payments. That could support consumer-facing stocks that have lagged, particularly in consumer discretionary and staples .

### Should I sell my tech stocks and buy these 23?

I can’t give personalized investment advice. What I can tell you is that **diversification is generally prudent**, especially when a single sector dominates market returns. Goldman’s screen is a tool for investors who want defensive exposure—not a directive to abandon growth entirely.

### What’s the biggest risk to this trade?

The biggest risk is that **growth reaccelerates**. If the AI boom continues unabated and the economy strengthens, defensive stocks will lag. Goldman’s screen is designed for a **decelerating growth environment**. If that forecast is wrong, the trade underperforms.

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## The Path Forward: What to Watch

### The 2027 Earnings Season

Goldman’s forecast of 11% EPS growth in 2027 is the key assumption behind this screen. If earnings come in stronger, the defensive rotation may be premature. If they come in weaker, the rotation could accelerate.

### The Consumer

Watch **real income growth for lower-income Americans**. If it accelerates as Goldman expects, consumer staples and food distributors could benefit. If it doesn’t, the “catch-up trade” won’t materialize.

### The AI Trade

The defensive screen is a hedge against AI deceleration. If AI stocks stabilize and resume their climb, money may flow back out of defensives and into growth. Watch the semiconductor index and CoreWeave’s bonds as leading indicators.

### The Fed

Goldman’s screen assumes a **decelerating growth environment**. If the Fed hikes rates further and tips the economy into recession, defensive stocks will be even more attractive. If the Fed pauses and growth holds up, the case for defensives weakens.

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## Conclusion: The Smart Money Is Getting Defensive

Here’s what I want you to take away from Goldman’s screen.

The AI boom made a lot of people rich. It also made the stock market **dangerously concentrated**. When a handful of companies drive the entire index, a wobble in those names becomes a wobble for everyone.

Goldman’s 23 defensive quality stocks are a **hedge against that concentration**. They’re not exciting. They won’t double in a year. But they generate real cash, they hold up when growth fears spike, and they give investors a place to hide while the AI trade figures out what it wants to be when it grows up.

For American investors, the message is clear: **the easy money in AI has been made**. The next phase will require more nuance, more diversification, and more attention to the boring companies that make the things people actually need.

Tyson Foods and CVS aren’t going to change the world. But they might just protect your portfolio while the world changes around them.

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## Disclaimer

This article is for informational purposes only and does not constitute financial advice, investment advice, or a recommendation to buy or sell any securities. The author is not a licensed financial advisor. All investments involve risk, including the potential loss of principal. Past performance does not guarantee future results. Readers should conduct their own research and consult with a qualified financial professional before making any investment decisions. Data and figures cited are accurate as of the date of publication but may change. The author holds no position in any securities mentioned.

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