11 Large-Cap, Low Debt Stocks For Defensive Investors

During the past few years, the financial markets have been hit by one crisis after another. As a result, defensive stocks became much more attractive to investors. Although the S&P 500 index was up about 17% since the end of the third quarter, there are still some risks in the market. We recommend investors to be cautious in the near term. In order to avoid potential big losses, investors should consider defensive stocks that can provide them with a margin of safety.

Below we compiled a list of large-cap U.S. stocks that are relatively defensive because they have low debt and low beta. All companies have at least $10 billion market cap, total debt-to-equity ratios below 0.1, and beta of lower than 0.9.

Ticker	Company	Total Debt/Equity	Beta
VRUS	Pharmasset, Inc.	0.02	0.5
ALXN	Alexion Pharmaceuticals, Inc.	0	0.54
ATVI	Activision Blizzard, Inc.	0	0.59
ADP	Automatic Data Processing, Inc.	0	0.71
CHRW	CH Robinson Worldwide Inc.	0	0.72
V	Visa, Inc.	0	0.73
CVX	Chevron Corporation	0.08	0.79
CERN	Cerner Corporation	0.06	0.8
PAYX	Paychex, Inc.	0	0.85
MA	Mastercard Incorporated	0	0.9
NKE	Nike Inc.	0.05	0.9

There are only a few stocks with zero total debt-to-equity ratios. Activision Blizzard is one of them. It also has a low beat of 0.59. Activision Blizzard is engaged in online, personal computer, console, handheld and mobile game publishing. For the third quarter of 2011, the company reported net income of $148 million, up from $51 million for the same quarter of 2010. ATVI has a market cap of $14B and a P/E ratio of 18.67. At the end of September, there were 26 hedge funds with ATVI positions. For example, Cliff Asness' AQR Capital Management had $19.3 million invested in ATVI. Israel Englander and Whitney Tilson are also bullish about ATVI.

Visa also has a zero total debt-to-equity ratio and a low beta of 0.73. The global payments technology company reported third quarter net income of $880 million in 2011, up from $774 million for the same quarter of 2010. V has a market cap of $82B and a P/E ratio of 23.84. It is also a popular stock among hedge funds. As of September 30, 2011, there were 45 hedge funds disclosed to own V in their 13F portfolios. For instance, Jean-Marie Eveillard's Fisrt Eagle Investment Management had $245 million invested in Visa. Chase Coleman, Warren Buffett, Stephen Mandel and Rob Citrone are also bullish about Visa. All their funds had around $200 million invested in Visa at the end of September.

One mega-cap defensive stock is Chevron. It has a total debt-to-equity ratio of 0.08 and a beta of 0.79. CVX also has a decent dividend yield of 3.04%. And the energy company has been increasing its dividend payouts for 24 consecutive years. Recently it announced to increase its quarterly dividend from $0.78 to $0.91 per share. The dividend was paid in Mid December. CVX has a market cap of $212B and a low P/E ratio of 7.9. It is also a popular stock among hedge funds. There are 38 hedge funds with CVX positions at the end of the third quarter. For example, Bill Miller's Legg Mason Capital Management reported to own $125 million worth of CVX shares at the end of September.

Other large-cap stocks for defensive investors include Pharmasset Inc, Alexion Pharmaceuticals, Automatic Data Processing, CH Robinson Worldwide, Cerner Corporation, Paychex, Mastercard and Nike. We like defensive, low beta stocks. We urge investors to do some in-depth research on these defensive stocks for their own portfolios.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.