What are five stocks that are best for capital preservation, assuming we are heading into a prolonged period of high long-term interest rates?

Research note · September 26, 2026 · US-listed equities · Three-to-five-year horizon

Which stocks can protect capital if long-term interest rates stay high for years? Our preferred five are Chubb (CB), Berkshire Hathaway (BRK.B), Procter & Gamble (PG), Automatic Data Processing (ADP), and CME Group (CME), in that order of conviction.

The organizing principle is straightforward: buy companies that can finance themselves through difficult conditions, at prices that leave room for disappointment. Profitable underwriting, ample liquidity and recurring demand help a business endure. The purchase valuation determines how much of that resilience reaches the shareholder.

That distinction carries the answer. Our flat-earnings valuation stresses produce approximately 10%–30% share-price declines across these five companies. We prefer them for relative equity resilience, with entry-price discipline essential. Investors who require a known nominal sum on a particular date are better served by maturity-matched Treasuries. The equity case is about reducing permanent impairment and retaining the capacity to recover. [1][2][3][4][5][6]

High long rates reward financial flexibility—and punish expensive shares

There are two channels to consider. Higher financing costs can squeeze a company's cash flows as debt matures. Higher required investment returns can also reduce its share price, even when the business continues to perform. A company may pass the first test and fail the second.

The Treasury observations available for September 23 put the ten-year nominal yield at 5.11%, the thirty-year at 5.40%, and the ten-year real yield at 2.76%. That is a demanding backdrop for stocks whose valuations depend on cash flows far into the future. [7][8]

The cause of persistent high yields also matters. Inflation may lift selling prices while increasing wages and claims costs. Higher real yields or a larger fiscal term premium can depress valuations without improving operating earnings. And long yields can remain elevated while short rates fall—a particularly awkward combination for businesses earning interest on cash.

We therefore favor several sources of resilience rather than one large wager on interest income. Even so, these five share exposures: Chubb and Berkshire both underwrite insurance, while Berkshire, ADP and CME have income sensitive to short rates. The list should be read as a set of preferred holdings, rather than an optimized equal-weight portfolio. [2][9][3][10]

1. Chubb earns its protection before collecting bond coupons

Chubb is our strongest direct fit because underwriting profitability provides the first layer of defense. An insurer collects premiums, pays claims and operating expenses, and invests the funds it holds along the way. Higher investment yields are most valuable when the insurance operation is already earning money.

Chubb's second-quarter 2026 property-and-casualty combined ratio was 83.8%, down from 85.6% a year earlier. In plain terms, claims and underwriting expenses consumed 83.8 cents of each applicable premium dollar, leaving 16.2 cents before investment results. Chairman and chief executive Evan Greenberg called it “a standout result.” Consolidated net premiums written rose 3.6% to $14.7 billion. [3]

The investment portfolio added a second source of earnings: quarterly pretax net investment income increased 12.3% to $1.76 billion. At the research price reference near $333, Chubb traded at about 1.71 times June book value and 11.85 times first-half core earnings multiplied by two. That interim earnings multiple gives useful context, although unusually favorable underwriting conditions can flatter it. [1][3]

The bond portfolio is also the principal counterargument. Chubb held $125.5 billion of available-for-sale fixed maturities at June, already $3.51 billion below amortized cost. Using an assumed three-to-five-year duration, another one-percentage-point parallel increase in bond yields would reduce their value by approximately $3.77–$6.28 billion before tax, calculated as portfolio value multiplied by duration and the yield change. Liability offsets and taxes would alter the shareholder effect. [11]

The better coupons arrive much more slowly. Under an even-replacement assumption over those same horizons, the annual incremental coupon run-rate after the first year's reinvestment would be roughly $250–$420 million. That timing gap explains our preference: Chubb belongs here because underwriting quality and a tolerable valuation help absorb adversity. Rising yields alone offer little protection against claims inflation or reserve mistakes. [11]

Progressive illustrates why we would avoid filling the list with insurers. Its August combined ratio deteriorated from 83.1% to 89.3%, even as written premiums increased 6% and policies increased 7%. Business growth can coexist with a shrinking underwriting cushion. We prefer Chubb's diversified insurance exposure for this mandate. [12]

2. Berkshire can wait—and has the resources to act

Berkshire's attraction is financial flexibility. Its insurance-and-other-businesses cash, equivalents and Treasury bills totaled approximately $359 billion at June. That balance gives it capacity to withstand stress and buy assets when financing becomes scarce. Its approximately $178 billion of insurance float also funds investments, accompanied by the obligation to settle claims. [9][6]

We value that flexibility, but the interest-rate mechanism requires care. Berkshire's first-half insurance investment income fell from $6.26 billion in 2025 to $5.74 billion in 2026, an 8.3% decline. The filing attributed declining pretax investment income primarily to lower short-term rates. A large cash balance can therefore earn less while the long end of the yield curve remains uncomfortable for everyone else. [9][6]

A one-percentage-point fall in short yields applied to the broad $359 billion balance implies approximately $3.59 billion less annual pretax income once it resets. This mechanical sensitivity holds the balance and investment mix constant. The protection lies in liquidity and freedom of action; the income stream remains exposed to policy rates. [9]

At roughly $505 per B share, the research valuation was about 1.45 times June book value and approximately 22 times annualized first-half operating earnings. We see a quality premium, with limited room to call the shares a bargain. Berkshire also held approximately $324 billion of equity securities, while its railway and energy operations require capital and borrowing. Its energy subsidiaries issued $4.6 billion of term debt in the first half at a weighted average rate of 5.8%. [9][13][6]

An operating-earnings valuation captures only part of Berkshire's economics. It leaves out some retained earnings at investee companies and the potential value of deploying cash. We use that approach to stress the purchase price, while giving substantial weight to the balance sheet and investment flexibility. Those qualities justify inclusion; they do not justify an unlimited premium.

3. P&G offers more dividend headroom than its cheaper rival

For the consumer-staples position, our preference is Procter & Gamble. The deciding evidence is cash left after maintaining the business. In fiscal 2026, operating cash flow of $19.56 billion less reported capital expenditure of $4.41 billion left $15.15 billion, against $10.23 billion of dividends. That is 1.48 times dividend coverage, with roughly one-third of the cash remaining after the payout. [14]

That cushion matters because dependable consumer demand can still produce disappointing growth. P&G's fiscal-year organic sales increased just 1%, with higher pricing providing the increase. Management's fiscal 2027 core EPS outlook of $6.89–$7.11 implies limited immediate earnings growth. Chief executive Shailesh Jejurikar described the completed year as “a year of foundation building.” [5]

Our preference over PepsiCo is deliberate. PepsiCo offers a lower earnings multiple, but its historical cash after capex barely covered dividends, while second-quarter food and beverage volume measures each declined approximately 2%. Organic revenue still increased 2.4%, showing the contribution from pricing. For capital preservation, we put more weight on existing payout headroom than on a recovery in volumes and cash conversion. [1][15]

The strongest case for PepsiCo is that a cheaper starting valuation and substantial distributions could outperform P&G if that recovery arrives. We give the argument moderate weight. A future shift in preference would require evidence that the dividend has a durable cash cushion.

P&G's own entry price remains the weakness. Around $146, the shares cost 21.2 times fiscal 2026 core earnings of $6.89. Cash of approximately $9.9 billion sat against about $34.1 billion of current and longer-term debt. We regard the dividend as better supported than PepsiCo's; we still require compensation for slow growth and refinancing exposure. [1][14][5]

4. ADP combines recurring service demand with a visible reinvestment benefit

ADP supplies payroll administration that employers must keep running through changing economic conditions. Fiscal 2026 revenue reached $21.9 billion, up 7% reported and 6% organically at constant currency. Adjusted diluted EPS increased 11% to $11.12, alongside GAAP diluted EPS of $10.94. Operating cash less reported capex covered dividends approximately twice. [2]

Its rate exposure is unusually tangible. ADP holds client funds between collection and disbursement and earns income on the invested balances. Average client funds were $40.4 billion in fiscal 2026, generating $1.355 billion of interest revenue. Those funds support client obligations; their economic value to shareholders is the income ADP earns while administering them. [2]

Management projected fiscal 2027 client-funds interest revenue of $1.540–$1.560 billion, implying growth of 13.7%–15.1% from the completed year. Portfolio reinvestment and balance growth support that outlook. This is a specific channel through which sustained yields can improve earnings, rather than a general assertion that a cash-handling business benefits from high rates. [2]

We favor ADP ahead of more leveraged essential-service companies because recurring operations and dividend coverage provide multiple supports. At approximately $264, however, its 23.7 times adjusted earnings valuation leaves it exposed to a higher required return. Employment contraction can reduce payroll activity, and lower short rates can eventually pressure interest revenue. A lower purchase price would materially strengthen its capital-preservation case. [1][2]

5. CME earns from risk transfer, while most collateral interest goes elsewhere

CME adds a different source of earnings: customers trading and managing risk. Its second-quarter revenue was $1.706 billion, including approximately $1.4 billion in clearing and transaction fees and $238 million in market data. Average daily volume reached 29.8 million contracts. Dividing $1.107 billion of GAAP operating income by revenue gives an operating margin of 64.9%. [4]

The financial structure also supports its place. June cash of approximately $2.3 billion, including a clearing-related deposit, compared with $3.424 billion of long-term debt. ICE, the nearest exchange alternative in our investigation, reported $19.8 billion of debt against $1.1 billion of unrestricted cash. For prolonged high real yields, we prefer CME's cleaner financing profile. [10][4][16]

The surprising detail is where collateral interest goes. Clearing members supply cash to secure trading obligations. CME earned $1.389 billion on these balances during the quarter and distributed $1.266 billion to clearing firms, leaving $123 million before associated costs. Subtracting the distribution from gross earnings gives a retention rate of just 8.9%. [10]

Source: CME Q2 2026 Form 10-Q. Retained income equals gross collateral earnings less distributions to clearing firms, before associated costs. [10]

Our investment case therefore rests chiefly on the trading and data franchise. Interest-rate uncertainty can create demand for hedging, but a persistently high level of rates can also become familiar and uneventful. CME needs customer activity, rather than merely an elevated Treasury yield.

At approximately $264, CME traded at 22.1 times second-quarter adjusted EPS of $2.99 multiplied by four. Chief executive Terry Duffy called the first half “the strongest in CME Group's history.” We take that strength seriously while allowing for less favorable activity and collateral income. Its annual variable dividend also makes distributions responsive to circumstances. [1][4][17]

The greatest shared vulnerability is still the purchase price

These operating defenses do not remove valuation risk. To make that visible, we hold starting earnings flat and apply lower earnings multiples. The resulting declines show how much shareholders can lose through repricing alone, before any deterioration in the business.

Sources: company earnings releases and research price references. Changes equal stressed EPS × exit multiple ÷ reference price − 1; dividends are excluded. [1][2][3][4][5][6]

Note: These are analyst-selected flat-earnings stresses. CB's $24.79 EPS assumes about a 12% reduction from annualized first-half core earnings; CME's $11.20 assumes about a 6% reduction from annualized second-quarter adjusted earnings. Berkshire annualizes first-half operating earnings. PG and ADP use reported full-year core and adjusted EPS. Reference prices are September 25 vendor observations; Berkshire uses a Class A-derived B-equivalent estimate. Exact official closing prints were not independently reconciled. [1][2][3][4][5][6]

The chosen multiples express a lower valuation investors might accept in a persistently demanding rate environment. They have no mechanical one-for-one relationship with Treasury yields. Earnings growth and dividends can cushion losses; declining earnings can make them larger.

P&G shows how the holding period changes the arithmetic. With flat $6.89 core EPS, an 18-times exit multiple and four annual dividends of $4.354, total proceeds after four years would be about $141.44. Against the $146.23 reference price, that produces a 3.3% nominal loss before tax, with dividends held as cash. The income helps substantially, but does not fully repair the purchase valuation. [1][5]

Berkshire supplies a tougher example. Starting with $22.57 of annualized operating EPS, assuming 2% annual growth and a 20-times exit multiple produces about $489 per B share after four years. That falls below the roughly $505 reference even with earnings growth. Its investment assets and deployment flexibility complicate a full valuation, but the exercise makes our reservation concrete. [1][6]

This is also why familiar defensive names do not automatically qualify. Costco's reference price represented about 44 times reported fiscal 2026 earnings; Walmart traded near 38 times guided fiscal 2027 adjusted earnings. Johnson & Johnson combined a demanding valuation with patent erosion: STELARA reduced second-quarter Innovative Medicine growth by approximately 760 basis points. For this mandate, we prefer the balance of cash generation, financial flexibility and valuation in our five selections. [1][18][19][20]

Cash-flow durability must keep earning the premium

The strongest objection to our list deserves substantial weight: these may be resilient companies at prices that still demand too much. We would become more constructive as entry prices approached the stress values, provided the earnings supporting them remained intact.

For Chubb, we would reassess if recurring combined ratios moved above roughly 95%, particularly alongside adverse reserve development. For Berkshire, productive cash deployment would strengthen the case; falling short-rate income without compensating operating growth would weaken it. These are the operating tests behind our preference for underwriting and flexibility.

For P&G, dividend headroom must survive. PepsiCo would become a stronger replacement if volumes stabilized and comparable annual cash after capex covered dividends at least 1.2 times. That is our threshold for a more durable cushion. For ADP, the next test is delivery of its $1.540–$1.560 billion client-interest outlook alongside continued recurring service growth. [2]

For CME, sustained volumes, fee growth and stable margins would validate the franchise case. Weakening activity, reduced collateral-income retention or rising financing needs would change it. Across the list, the unresolved details that matter most are debt maturity exposure, insurers' asset-liability sensitivities and the persistence of cash conversion.

Investors also retain a straightforward alternative. The September 23 thirteen-week Treasury bill coupon-equivalent yield was 4.14%. Maintaining that reinvestment rate for four years would compound principal by approximately 17.6%, although future short rates will determine the realized return. A maturity-matched Treasury instead aligns the nominal repayment date with the investor's need; inflation remains a separate risk. [21]

Our five stocks earn their place through the ability to keep financing their businesses when money is expensive. The price paid must leave shareholders that same freedom.