Want to “Get Defensive” in 2026? Buy These 3 Stocks David Beren Wed, October 7, 2026 at 12:54 PM EDT 5 min read NVDA -1.00% AAPL +1.06% ^GSPC -0.22% MCD -0.18% MSFT +0.18% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
The 10-year Treasury yield is near 5.3%, and old defensive names like McDonald's have lost about a quarter of their value this year.
Josh Brown says investors who want to get defensive now buy Apple, Microsoft, and Nvidia, and the numbers support him.
Apple has made more than $90 billion of free cash flow every year since fiscal 2021, and Nvidia trades at 19.8x forward earnings, well below its three-year average of 30.5x.
The main risk is concentration: the three make up over 21% of the S&P 500, and all three depend on the same AI spending cycle.
The 10-year Treasury yield hovered around 5.30% on Monday, after recently climbing to its highest level since 2002.
That's bad news for the stocks investors usually hide in when they get nervous.
So where does nervous money go now? On Tuesday's episode of The Compound and Friends, Ritholtz Wealth Management CEO Josh Brown answered his own question:
"What are people doing who want to get defensive in the modern market of 2026? I think they're buying Apple, Microsoft, and NVIDIA."
That means Apple (AAPL:NASDAQ), Microsoft (MSFT:NASDAQ), and Nvidia (NVDA:NASDAQ), three companies worth a combined $14.6 trillion, bought as defense. Fundstrat's Tom Lee went further on X on Monday: "Mag7 is store of value now."
It sounds backward until you look at what's happened to the old defensive stocks.
Defensive used to mean steady consumer names with big dividends. A 5.3% Treasury changes that math.
As Jim Cramer put it on the Oct. 1 episode of Mad Money: "With 10-year Treasuries yielding 5.24% risk-free, McDonald's non-risk-free 3.3% dividend yield becomes much less of a draw."
McDonald's (MCD:NYSE) is down about 24% this year. On Monday, it fell below $230 for the first time in more than four years.
Coca-Cola (KO:NYSE), the classic consumer staple, has had a problem for much longer. As Egerton Capital co-founder John Armitage told Nicolai Tangen on In Good Company: "Coca-Cola is a great company, and there isn't a substitute for Coke. But the fact is, it's probably underperformed the market in the last 25 years."
And Coke's 2.46% dividend yield is less than half of what the 10-year pays right now.
Here's the thing: A defensive stock is supposed to deliver its earnings whatever the economy does, and Apple has done just that. Its free cash flow nearly doubled over the decade, from $53.5 billion in fiscal 2016 to $98.8 billion in fiscal 2025, and it has topped $90 billion every year since fiscal 2021…
Microsoft's revenue is just as dependable. In its fiscal fourth quarter, Azure passed $100 billion in annual revenue, and commercial signed backlog rose 84% to $678 billion. That's a lot of revenue already under contract. Investors also aren't paying a peak price for it: Microsoft trades at 26.8x forward earnings, below its five-year average of 29.5x and well off the 37.0x peak it hit in July 2024…
(It was as low as 19.1x in June, so some of that rerating has already happened.)
Nvidia is the most surprising name on Brown's list, and it's cheaper than Microsoft. Its fiscal second-quarter revenue rose 106% to $96.2 billion, and it guided the third quarter to $108 billion. Even so, its forward P/E is 19.8x, against a three-year average of 30.5x and a peak of 46.7x in June 2024…
The stock is at a record high, so earnings have grown even faster than the share price.
Nvidia is putting its cash behind that multiple, too. Last month it announced a new $150 billion buyback, which brings its total authorization to $235 billion. Brown summed up the company's attitude toward sellers: "You want to sell my stock at 21 times?" Nvidia's answer is to buy the shares itself.
A defensive stock is supposed to hold up in a drawdown. These three now make up over 21% of the S&P 500, according to Creative Planning data, a bigger share than any three stocks have ever held, topping the previous record of 13.4% from the mid-1980s. TIKR has also covered Morgan Stanley's warning that five megacaps are carrying the index.
If the AI trade breaks, they'd fall the hardest. Nvidia's five-year beta of 2.22 is about seven times Coca-Cola's 0.32. Someone at Brown's table pushed back right away: "The MAG7, they're not defensive. Just stop."
That's a fair point. But McDonald's, with a beta of 0.45, still lost about a quarter of its value this year. With a 5.3% Treasury on offer, the defense that works is earnings that keep arriving. Net margins of 55.6% at Nvidia, 40.3% at Microsoft and 26.9% at Apple show these three have them.
All three do depend on the same AI spending cycle. Nvidia sells the hardware, Microsoft has guided fiscal 2027 capex near $175 billion, and Apple competes for the same memory. Apple's management has called memory pricing a "100-year flood" for its hardware costs.
I think Brown has it right. If you want to get defensive in 2026, Apple, Microsoft and Nvidia make more sense than the consumer names that higher rates keep hitting. Their cash is steadier, and both Microsoft and Nvidia trade below their own average multiples.
Of course, all three will move together if AI spending slows, so watch Nvidia's next report against its $108 billion guidance.
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR's valuation model and see what Nvidia could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It's free to use.
