A portfolio of defensive stocks is aimed at minimising the risk of capital loss through holding carefully selected companies that are unlikely to perform poorly during tough market conditions. To do this, you need to find the important traits present in these companies, which are namely a robust balance sheet, strong liquidity and a proven ability to earn money over time. Through my own research I found Brickworks, Whitehaven Coal and Regis Resources, which can be a good place for you to start your hunt.

Brickworks Limited (ASX:BKW)

Brickworks Limited manufactures, sells, and distributes building products in Australia. Founded in 1934, and headed by CEO Lindsay Partridge, the company provides employment to 1,454 people and with the market cap of AUD A$2.35B, it falls under the mid-cap group.

BKW is well-postioned financially , with a debt-to-equity ratio of 16.77%, meaning the majority of capital has been funded by equity. Additionally, operating cash flow is at a good level relative to overall debt at 41.40%, which provides a safe buffer for servicing debt if difficult conditions prevail in the market. Moreover, as its price gives it a AU$2.35B value on the market and a PE of 13.09x, there is room for enough active participants in the market for the stock and there could still be space for value in the price, which reduces risk of firm price declines and allows you to sell without a large loss due to unattractive spreads. Seeing that last year’s earnings growth continues the previous 5 years’ positive annual growth trajectory at 70.11% and 8.82% respectively, BKW holds many of the keys to avoiding the potentially destructive forces of a bear market. Interested in Brickworks? Find out more here.

Whitehaven Coal Limited (ASX:WHC)

Whitehaven Coal Limited develops and operates coal mines in New South Wales. Founded in 1999, and currently lead by Paul Flynn, the company provides employment to 1,500 people and with the market cap of AUD A$4.26B, it falls under the mid-cap group.

WHC is well-postioned financially , with a debt-to-equity ratio of 7.34%, meaning the majority of capital has been funded by equity. Additionally, operating cash flow is at a good level relative to overall debt at 313.02%, meaning if economic conditions dampen the company’s ability to grow earnings, WHC should still be able to service debt. because it’s a mid-cap stock priced at AU$4.26B and a PE of 8.35x, greater liquidity is offered at a good price relative to the market, which minimises the potential for rapid share price falls in down cycles. With that has also been annualised earnings growth of 25.10% for the last 5 years and an even greater 197.49% last year, which demonstrates WHC has some of the necessary characteristics to maintain value during a cyclical downfall in the market. Dig deeper into Whitehaven Coal here.