The recent fall in the FTSE 100 has caused pain, worry and despair for many investors. A portfolio that had previously been relatively stable and increasing in value for a number of years is now back to where it was many months ago and, looking ahead, it appears as though volatility is almost certainly set to be on the agenda for the rest of the calendar year.
As a result, many investors are choosing to either sell their holdings in case things do get worse before they get better, or else wait for an improvement before buying. However, both of those moves may be rather unwise in the long term, since it is through buying when prices are low that future profits are made. And, while the theory sounds easy, in practice no share price is ever low without a degree of uncertainty or worry.
Of course, a sensible idea when the market falls is to buy well-diversified businesses. That’s because they should be able to better weather any economic storm and provide a degree of stability which could prove invaluable when the outlook is bleak.
One such company is Reckitt Benckiser (LSE: RB). Certainly, its exposure to Asia is significant and a major reason behind the company’s share price having risen by 232% in the last ten years is the potential for a growing middle class across emerging markets to purchase its products in higher volumes. And, while this story may not be as compelling as it once was, Reckitt Benckiser’s wide range of products in a very wide range of markets means that it is likely to offer stability, resilience and also growth potential in the long run. In other words, if one region or product category underperforms, it has many others to pick up the slack.
Similarly, Santander (LSE: BNC) remains one of the best diversified banks in the world. It operates across the globe and recently took the decision to maintain its exposure to a variety of regions, with its recent placing providing it with the capital to invest in its divisions in both developed and developing markets. Certainly, a dividend cut caused investor sentiment to weaken but, having fallen by over a third in the last year, shares in Santander still yield a very enticing 3.7%. And, with dividends being covered 2.6 times by profit, it looks to be a relatively safe income play for the long term.
Meanwhile, health care stocks such as Smith & Nephew (LSE: SN) remain hugely appealing – especially when their prices have been hurt by uncertainty regarding China. In fact, Smith & Nephew now trades on a price to earnings growth (PEG) ratio of just 1.4, which indicates that its shares look set to continue the run that has seen them soar by 112% in the last five years.
Looking ahead, Smith & Nephew is likely to benefit from increasing demand for its wound care and orthopaedic reconstruction products – especially in the developed world where an ageing population is presenting significant growth potential for the business. With an excellent track record of growth (earnings have risen in each of the last five years), Smith & Nephew remains an ultra-reliable stock for the long term.
