Defend Your Portfolio With National Grid plc, Cranswick plc & Pennon Group plc

These 3 stocks could be great additions to your portfolio: National Grid plc (LON: NG), Cranswick plc (LON: CWK) and Pennon Group plc (LON: PNN).

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

With the Greek debt crisis unlikely to come to a decisive conclusion any time soon, buying defensive stocks that offer greater consistency and a clearer outlook could be a prudent move for Foolish investors. Certainly, no stock in the index is immune from a rapidly deteriorating macroeconomic outlook and its effects on the stock market. However, there are a number of stocks which offer business models that are much more resilient than most companies and, as such, could provide additional stability and more robust performance over the medium term.

One such company is food supplier, Cranswick (LSE: CWK). It is a very steady business which supplies mainly meat to supermarkets in the UK, while also having its own brands of sausages and other meat products. And, with demand for such products unlikely to change significantly whether or not Greece remains in the Euro, Cranswick offers a consistency that few other companies can match. For example, in the last five years it has been able to increase its earnings in each and every year.

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Looking ahead, Cranswick’s bottom line is expected to increase by 6% in each of the next two years. And, while this is in-line with the expected growth rate of the wider index, the chances of Cranswick meeting its guidance are arguably higher than for the wider market, since Cranswick is far less cyclical and is has a much more dependable business model. Therefore, its price to earnings (P/E) ratio of 16.3 indicates good value, with there being scope for an upward rerating moving forward.

Meanwhile, the likes of National Grid (LSE: NG) (NYSE: NGG.US) and Pennon (LSE: PNN) also have very defensive business models. In fact, like Cranswick, demand for electricity and water is very unlikely to change in the wake of problems in the Euro or any other region in the world. As such, their bottom lines are unlikely to come under any significant pressure, which increases their appeal at an uncertain time.

Of course, National Grid’s future earnings growth rate is not particularly brisk, with the company expected to see its bottom line rise by just 3% next year. However, it offers a yield of 5.3% and a P/E ratio of 14.1, which indicate that an upward rerating plus generous income return should equate to an impressive total return over the medium to long term. And, while Pennon’s scope for an upward rerating is somewhat limited, owing to its P/E ratio of 20.5, it is expected to grow its net profit by 9% next year, which is ahead of the wider index’s growth rate and seems to justify a generous rating.

In addition to the above, all three stocks have low betas, with Cranswick’s being 0.5, National Grid’s being 0.9 and Pennon having a beta of 0.7. As a result their share price movements should be less volatile than those of the FTSE 100 which, when combined with their consistent outlook and appealing valuations, makes Cranswick, National Grid and Pennon great options to defend your portfolio against the challenges that lie ahead.

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Peter Stephens owns shares of National Grid and Pennon Group. The Motley Fool UK has recommended National Grid. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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