Three all-weather stocks to buy now
As the market rally stutters, the way ahead for investors is far from clear. So a balanced portfolio is more important than ever. Here, professional investor Martin Todd picks three varied stocks that should ensure good performance whatever the econoimc outlook.
Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Martin Todd, investment director, UK equities, Scottish Widows Investment Partnership.
As the market pauses for breath following the sharp rally that began in early March, now is a good time for investors to take stock and review their positioning for the coming months. The way ahead is far from clear.
On the one hand, a number of indicators suggest that at the very least the rate of economic decline is slowing. The combination of monetary and fiscal stimulus around the globe seems to be succeeding in kick-starting the economy. But the market remains unsure whether this will turn out to be a 'W', 'V' or even 'L'-shaped recovery. So our preference is for a more balanced portfolio which should prosper in a range of outcomes.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
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
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
One London-listed stock that needn't be concerned by the UK's economic outlook is Great Eastern Energy Corporation (LSE: GEEC). Despite uncertainties about the short-term outlook for the global economy, the case for structural growth in energy demand within emerging markets remains intact.
Great Eastern is perfectly placed to benefit. It controls exploration and production licences to extract coal bed methane in West Bengal, India. It has a deal in place with Indian Oil Corporation (IOC) to supply compressed natural gas (CNG), produced from its coal bed methane blocks, to power vehicles, and is well advanced in developing a pipeline network to supply direct to industrial customers. The cost advantage the group has versus existing suppliers represents a sustainable competitive advantage. When coupled with the structural growth story within India, Great Eastern has a very exciting future.
There can be no doubting the perilous state of the UK housing market. Mortgage approvals have fallen to record lows, accompanied by dramatic falls in house prices. So our choice of UK housebuilder Berkeley Group (LSE: BKG) may seem strange.
But the group has a number of competitive advantages over its peers. The £50m of fresh capital raised in February positions the company with over £300m of cash. Management is keen to use these funds to take advantage of distressed land sales, bolstering what is already an unrivalled land bank. Land write-downs are also unlikely, given the company's conservative accounting policies.
The recent share price weakness, driven by the forced sale of stock by the group's largest shareholder, provides an attractive entry point. Longer term, Berkeley is well placed to benefit from the strong fundamentals underlying the UK housing market.
In contrast to the more cyclical Berkeley, BAE Systems (LSE: BA) should be relatively immune to the economic cycle. Shares in the third-largest global defence firm have underperformed sharply during the recent rally, leaving it trading on an attractive valuation, particularly when compared with US peers.
Sceptics fear that the scale of the budget deficit in the UK and US will result in drastic defence spending cuts, particularly given reduced involvement in Iraq. Investors should be aware though that many of the areas within the US defence budget (to which BAE is heavily exposed), continue to show healthy growth. Internationally, the company's long-standing relationship with the Saudi government will be a significant source of growth over coming years. As a source of a stable earnings at an attractive valuation, and with a good dividend yield, BAE Systems is worthy of inclusion in any balanced portfolio.
TABLE.ben-table TABLE {BORDER-RIGHT: #2b1083 3px solid; BORDER-TOP: #2b1083 3px solid; FONT: 0.92em/1.23em verdana, arial, sans-serif; BORDER-LEFT: #2b1083 3px solid; BORDER-BOTTOM: #2b1083 3px solid}TH {PADDING-RIGHT: 5px; PADDING-LEFT: 5px; FONT-WEIGHT: bold; BACKGROUND: #2b1083; PADDING-BOTTOM: 10px; BORDER-LEFT: #a6a6c9 1px solid; COLOR: white; PADDING-TOP: 10px; TEXT-ALIGN: center}TH.first {PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 5px; BORDER-LEFT: 0px; PADDING-TOP: 5px; TEXT-ALIGN: left}TR {BACKGROUND: #fff}TR.alt {BACKGROUND: #f6f5f9}TD {PADDING-RIGHT: 2px; PADDING-LEFT: 2px; PADDING-BOTTOM: 5px; BORDER-LEFT: #a6a6c9 1px solid; COLOR: #000; PADDING-TOP: 5px; TEXT-ALIGN: center}TD.alt {BACKGROUND-COLOR: #f6f5f9}TD.bold {FONT-WEIGHT: bold}TD.first {BORDER-LEFT: 0px; TEXT-ALIGN: left}
The stocksMartin Toddlikes
Great Eastern Energy | 302.5p | 190p | 302.5p |
Berkeley | 1,071p | 577p | 810.5p |
BAE Systems | 492p | 294p | 341.75p |
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Inflation forecast: where are prices heading next?
Updated inflation forecasts were published alongside Rachel Reeves’s Autumn Budget on 30 October. How quickly will prices rise over the next few years?
By Katie Williams Published
-
Ryanair profits dive as passengers hold out for lower fares – should you invest in airline stocks?
Europe’s largest low-cost airline said on Monday that net profits had fallen by 19% to €1.79 billion for the six months to the end of September
By Chris Newlands Published