Markets across the world have run up very smartly and are now trading at record levels after the pandemic scare in 2020. The global economy went through an economic depression before stock markets bounced back spectacularly. However, now there is a fear that a stock market crash is just around the corner. Investors are wary about investing into stocks now as no one knows when markets will fall again. It’s time to look at defensive stocks that won’t be too impacted by a crash. If you are searching for such stocks then this list can help you. We are going to discuss four defensive stocks that you can buy in case of a market crash.

1. NextEra Energy (NEE)

With each passing day, the need for renewable sources of energy is increasing. As concern for the environment is forcing a shift towards clean energy sources, NextEra Energy is perfectly poised to capitalize on that opportunity. The American company has one of the largest renewable energy portfolios in the US and has provided a massive 700% return in the past decade while the S&P 500 Utility Index and S&P 500 have provided returns of 191% and 267% respectively.

Unlike many other business houses that were struggling for survival last year, this star performer with the help of its subsidiary NextEra Energy Partners has completed three organic projects and increased its distribution by 15%. This big leap was possible because of the 40% increase in its cash reserve. Furthermore, by the end of this year, it intends to increase its CAFD by another 12% and is planning to expand its distribution rate by another 12-15% through 2024.

NextEra Energy has all the attributes of a defensive and recession-proof stock. Despite facing headwinds from the coronavirus last year, it successfully grew its earnings by 10.5% along with providing a shareholders return of 30% which is significantly higher than the S&P 500. Though the stock is pretty expensive now but considering its consistent dividend-paying abilities and the capital appreciation it provides, investing in such stocks is always worth it.

2. Sea Ltd (SE)

Stocks belonging to the gaming, fintech, and e-commerce sectors took the opportunity of the country-wide lockdowns and emerged as absolute winners. Since most people had to make all their purchases online or spend time playing games, there was a high influx of revenues for these companies. Being exposed to these growing sectors like gaming, e-commerce, and digital payments, Sea Ltd is the biggest winner of this segment.

Sea Ltd. shares have grown by more than 500% from their 2020 lows riding on those bullish waves. The Singapore-based company is winning the race of market leadership and has grown its revenues by more than 5 times between 2017 and 2019.

Even during 2020 within the first nine months itself, the company grew its revenues by 101%. In the Q3 of 2020, its gaming division had gained 78% quarterly, active users, while quarterly paying users surged by 124%. Besides its Fintech division also got a push. The user base increased to 17.8 million users while the total payment volume exceeded $2.1 billion.

Sea Ltd. has mastered the art of gaining through the recession and its exposure to the South Asian market means the company still has a lot of room for growth. Its fourth-quarter results are expected before March 2^nd. Therefore it is the perfect time to buy this stock as after the results are announced the price might surge.

3. International Business Machines (IBM)

IBM is a century-old tech giant and has been transforming itself these days. Prompted by the increasing demand for data storage along with data safety, the company started transitioning itself towards providing hybrid cloud solutions after facing a huge dip at the end of March 2019. IBM’s CEO Arvind Krishna believes hybrid cloud computing alone can provide a $1 trillion growth opportunity and along with developments like artificial intelligence (AI), its revenues would translate to much higher levels by the second half of this year. 

Though IBM’s legacy software sales tumbled in 2020 as many big clients refrained from investing in uncertain environments, its cloud revenues did improve significantly and accounted for 37% of its total sales in the fourth quarter. This year the company expects to see revenue growth again and aims to achieve $12 billion free cash flows minus the impact of the restructuring plan.

The demand for cloud computing is so high now that even in the case of a recession, IBM should increase its cloud revenues, just like in 2020. Additionally, IBM’s dividend-paying ability is another added benefit for investors. The company has a dividend yield of 5.4% and its dividends are also covered by free cash flows thus ensuring sustainability. IBM is still undervalued so investors should grab this opportunity before the price goes up.

4. Duke Energy (DUK)

Though utility businesses are boring businesses, they easily generate a lot of predictable cash flows. Electricity and natural gas are basic necessities and no matter how poorly the economy is performing, their demand never ceases to exist. Due to this defensive income plays, these utility stocks can very well survive tough times.

Charlotte-based Duke Energy is one of the largest electric power companies in the US in terms of customer base and second largest in terms of market capitalization. Being exposed to utility business, the company had a 4.1% yield even in times of the pandemic. The company’s traditional electric and natural gas business is regulated by state public energy commissions so it can always predict its cash flows and make capital expenditures in ways that can ensure sustainability. It makes a great dividend stock as well having a payout of 65%-75% and has a history of increasing its dividend payments from the past 14 years.

On seeing people’s rising concern for a cleaner environment, Duke Energy has agreed to clean up its coal waste. In its next five years plan the company intends to invest $58 billion in cleaner and renewable energy sources and from 2025 to 2029 its renewable projects may hit $65 billion to $75 billion in value. With this focus, its annual average growth rate may reach 7% with its EPS growing by 4% to 6% through 2024. 

The stock market life is filled with ups and downs so 2020 couldn’t crush the financial hopes of long-term investors. If you want to be like them then try investing in any of the above stocks as these are relatively safer than the other options available in the market. If you are a Canadian investor, this article features some defensive Canadian equities to hold.