Add these 4 defensive stocks to your watchlist

The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has plunged 1.5% in early trading today, as Brexit fears continue to reverberate around global markets.

US markets were hammered overnight, with the Dow Jones losing 1.5% and the broader S&P 500 dropping 1.8%. European markets were hit even worse as you might expect – with the UK’s FTSE 100 down 2.6%, while the German DAX and the French CAC 40 both sinking 3%.

Uncertainty is the key factor driving these falls, and it could remain a key driver of markets until we have more clarification of how the Brexit will actually work and what the impact will be.

At times like this, investors should consider adding defensive stocks to their portfolio – if they haven’t already.

Defensive stocks are called that because they tend to be all-weather companies performing whatever shocks markets suffer and whatever economic conditions are occurring. They tend to sell staples and essential products that people can’t do without for extended periods of time. Think supermarkets, utilities and health care companies.

Interestingly, a number of software companies are likely to become increasingly more defensive stocks, but here are 4 you might want to consider…

Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW) are typical defensive stocks, although Wesfarmers does have some exposure to the UK now after acquiring the Homebase home improvement business earlier this year. Millions of people visit Coles and Woolies supermarkets each week and will continue to do so.

Coca-Cola Amatil Ltd (ASX: CCL) faces some headwinds in shifting consumer habits and concerns over the sugar content of its fizzy drinks. However, the bottler is backed by its giant US parent and has a growing non-fizzy drinks business as well as offshore earnings from Indonesia and Papua New Guinea.

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is an often overlooked defensive company, which has paid consistent dividends for many years. A mini-conglomerate, Soul Patts owns solid stakes in a number of defensive businesses including a cross-holding with Brickworks Limited (ASX: BKW), 27% of TPG Telecom Ltd (ASX: TPM), 60% of coal miner New Hope Corporation Limited (ASX: NHC) and 25% of Australian Pharmaceutical Industries Ltd (ASX: API), not to mention an investment portfolio of solid blue chips.

Foolish takeaway

Defensive stocks can limit the damage to your portfolio when markets are falling. If you don’t have any in your portfolio, now might be the time to consider the 4 above.

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Motley Fool writer/analyst Mike King owns shares in Wesfarmers, Woolworths and TPG Telecom. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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