Quench your risk with Northumbrian Water

published 12 December 2005

The reason for the spectacular volatility in the stockmarket in October was simple, says Clem Chambers, CEO of finance website Advfn.com, in The Business: with the economy slowing, investors are uncertain about the long-term prospects for corporate profits.

But at the moment, the underlying trend of the FTSE is working in investors' favour, so it doesn't yet make sense to sell up and get out. It may, however, make sense to cut your risk levels slightly by moving out of volatile shares and into "good, solid medium and large-cap shares".

Northumbrian Water (NWG, tipped by Chambers at 253p) is a good example of the kind of solid, defensive stock that investors should have in their portfolios right now. Utilities are a classic safe-haven defence play. The uncyclical nature of their business (we always need water) and the decent dividends they tend to pay out make them the ideal way to avoid the schizophrenia of the market. Indeed, until volatility falls, or a new theme hits the market, buying boring but solid stocks "is the way to go".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Since it was admitted to the London Stock Exchange in September 2003, Northumbrian Water a water and water-services group has seen its share price head steadily upwards. However, in this difficult market climate, Northumbrian with a 4% dividend, a solid long-term share performance and the possibility of one day being part of a utilities takeover round is "just the kind of company to put on your roster". The shares are currently trading on a reasonable price/earnings ratio of 13.3 times.

Annunziata was a deputy editor at MoneyWeek, covering financial markets, politics, economics and comment pieces. She then went on to the Daily Telegraph as a lead writer where she wrote a column on young women’s financial issues. She was briefly a member of the European Parliament for the East Midlands region in the UK as part of the Conservative Party. Annunziata continues to write as a freelance journalist.