3 Stocks To Protect You In A Falling Market: National Grid plc, Centrica PLC And BAE Systems plc


With the FTSE 100 having fallen by 2.7% in the last week, it’s understandable for many investors to be feeling slightly nervous regarding their portfolios. After all, the optimism that was present following the Scottish referendum ‘no’ vote regarding the future potential of the FTSE 100 seems to have disappeared and been replaced with concern and uncertainty.

So, for investors who are feeling worried about the shorter term prospects for the FTSE 100, here are three defensive stocks that could help to protect you in a falling market.

National Grid

While many of its utility peers are often lambasted by the media and politicians for helping to create a cost of living crisis, National Grid (LSE: NG) tends to be left alone to get on with running ‘the grid’. This is good news for investors as it means increased stability and, with a beta of just 0.6, shares in the company should (in theory) fall by just 0.6% for every 1% fall in the wider market.

Clearly, this would be most welcome during a downturn and, in addition, National Grid’s yield of 4.9% could provide cash to invest when share prices are a little more attractive. So, due to its relative stability, low beta and strong yield, National Grid looks like a hugely appealing defensive play.


Unlike National Grid, Centrica (LSE: CNA) is rarely out of the news. Indeed, the domestic energy supplier is going through a period of uncertainty, with a new CEO set to start in 2015 and Labour’s plans for a new regulator and price freeze keeping shares pegged back.

Despite this, Centrica still offers strong defensive qualities. For starters, its current valuation seems to reflect most of the uncertainty it faces, with shares in the company currently having a price to earnings (P/E) ratio of 11.5. Furthermore, Centrica has a beta of just 0.4 and yields a superb 5.7%, which together make it a top defensive play.

BAE Systems

Although BAE’s (LSE: BA) business is more volatile than that of National Grid or Centrica, it’s still a capable defensive option. That’s because it has a well-covered dividend, with shares yielding 4.3%, and also has a beta of just 0.9.

Furthermore, while demand for BAE’s products will inevitably fluctuate, in the long run it is likely that the defence industry will recover – especially as austerity in the developed world is more of a short to medium term policy rather than a long-term commitment. As such, while profit is set to fall by 11% this year, the long-term future still looks bright (and stable) for BAE.

Of course, defensive stocks such as National Grid, Centrica and BAE aren’t the only companies that could be worth buying. So, which others should you buy, and why?

A great place to start is a free and without obligation guide from The Motley Fool called Where We Think The Smart Money Is Headed.

The guide could help you to pick out the best performing stocks and sectors in 2014 and beyond. As such, it could give your portfolio a boost and help you to retire early, pay off the mortgage, or simply increase your net worth.

Click here to obtain your free and without obligation copy of the guide. 

Peter Stephens owns shares in National Grid, Centrica and BAE Systems.