Are these the best defensive stocks to watch?

What are defensive stocks?

Defensive stocks are companies whose revenues and profits tend to remain relatively stable regardless of the wider economic environment. This is often because they provide essential services, operate under regulated frameworks, or supply everyday necessities that consumers continue to buy even during downturns.

They are typically large, established businesses with predictable cash flows. While they may not deliver rapid capital growth in strong bull markets, they can offer relative stability and consistent dividends when economic conditions weaken.

By contrast, cyclical stocks tend to rise strongly in periods of expansion but fall more sharply during slowdowns. Defensive shares are often viewed as portfolio stabilisers when volatility increases.

Timing still matters. Rotating into defensives too early can mean missing out on upside in growth sectors, while holding them too long in a recovery phase can lead to underperformance. As always, balance and diversification are key.

Below are five defensive FTSE 100 names from utilities, consumer staples and essential services

How to trade or invest in defensive stocks

1. Learn more about defensive shares
2. Decide whether you want to trade or invest
3. Open an account
4. Search for your chosen stock on our app or web platform
5. Make your trade or investment

Investors look to grow wealth by buying and holding shares over an extended period of time. Capital can be gained through share price return and dividends (if paid).

Trading often uses leverage and takes a more short—term approach. With leverage, you can take a position larger than your initial deposit. This can amplify potential profits, but it can also amplify potential losses.

For instance, with 5:1 leverage, you could open a £5000 position by depositing a margin of £1000. A 10% market movement could result in a 50% loss or gain on your initial margin.

Although negative balance protection means you won’t lose more than your deposit, markets can be highly volatile and you could lose your whole deposit.

The best defensive stocks to watch

These stocks are the largest defensive stocks on the FTSE 100, if you consider defensive sector companies to be only those which deal in healthcare, consumer staples, utilities or tobacco.

1. National Grid
2. Severn Trent
3. United Utilities
4. Tesco
5. Compass Group

National Grid (Market cap: £68bn)

National Grid operates electricity and gas transmission networks in the UK and US. Its revenues are largely determined by regulators, providing visibility over returns and helping smooth earnings across economic cycles.

Because energy transmission is essential infrastructure, demand is relatively stable. The group also benefits from long-term investment programmes tied to grid upgrades and the energy transition, supporting steady growth alongside income generation.

National Grid daily candlestick chart

​Severn Trent (Market cap: £9.6bn)

​Severn Trent supplies water and wastewater services to millions of households and businesses across the Midlands and Wales. Water is a non-discretionary service, making demand highly resilient.

Like other UK utilities, its returns are set within a regulatory framework, offering predictability over multi-year periods. The company is often viewed as an income play, with inflation-linked elements embedded in the regulatory model.

​Severn Trent daily candlestick chart

​United Utilities (Market cap: £9.3bn)

United Utilities provides water and wastewater services in north west England. As with Severn Trent, revenues are regulated and demand is steady.

The group’s performance is typically driven more by operational efficiency and regulatory settlements than by the economic cycle, making it less sensitive to swings in consumer spending or business investment.

United Utilities daily candlestick chart

Tesco (Market cap: £31.9bn)

Tesco is the UK’s largest supermarket chain and a core player in food retail. Grocery spending tends to hold up even during downturns, as food and household staples remain essential purchases.

Its scale provides pricing power and supply chain advantages, which can help defend margins in competitive environments. While supermarket shares can be affected by input costs and price competition, demand itself is relatively stable compared with discretionary retail.

Tesco daily candlestick chart

Compass Group (Market cap: £37.5bn)

Compass Group is a global contract catering business serving schools, hospitals, offices and major events. A large proportion of its revenues come from long-term contracts, providing earnings visibility.

Exposure to healthcare and education adds defensive characteristics, as these sectors are less sensitive to economic swings than consumer-facing hospitality. While not immune to slowdowns, Compass tends to be more resilient than leisure and travel operators.

Compass Group daily candlestick chart

Top defensive shares to watch summed up

Defensive stocks can play an important role in balancing portfolios, particularly during periods of economic uncertainty or market volatility. Utilities, food retail and essential service providers often offer steadier earnings and dividend potential, even if growth is more modest.

As always, investors should consider valuation, regulatory risk and company-specific factors before making decisions. Past performance is not a guide to future returns.