3 ‘safe haven’ FTSE 100 stocks to buy

Paul Summers picks out three FTSE 100 (INDEXFTSE:UKX) shares that should prove to be less volatile than most if the markets continue tumbling.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Scene depicting the City of London, home of the FTSE 100

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With investors enduring a tough start to 2022, I’m been taking a closer look at FTSE 100 stocks that tend to experience less price volatility relative to the market.

These are known as low beta stocks. In theory, anything with a beta of below one should move less in line with the index (which always has a beta of one). By contrast, stocks with a beta of over one could give investors a more bumpy ride. 

FTSE 100

The essential nature of what National Grid (LSE: NG) does — “connecting millions of people to the energy they use” — makes the company a potentially great stock to hold at times like these. The Grid has a beta of just 0.3, according to data from Stockopedia. This should make it far less prone to violent market moves.

Another attraction is the dividend stream. In its current financial year, the company is expected to return 50.8p per share to its owners. Using today’s share price, that gives a yield of 4.7%. So, even if it did fall back, there’s a nice payout to compensate. 

The P/E of 17 is higher than the five-year average of just under 14. However, this makes sense considering how rattled investors have been recently. One potential drawback is that the shares probably won’t fly when markets recover.

Resilient sector

As sectors go, anything to do with healthcare tends to hold its own when investors get skittish. Hence, a company like GlaxoSmithKline (LSE: GSK) may offer me some protection. In line with this, GSK has a beta of 0.6. 

The shares are up slightly so far this year, although this may be more to do with Unilever sniffing around its consumer healthcare business. It will be interesting to see what under-fire CEO Emma Walmsley has to say about the rejected bid when the company reports on Wednesday.

At 3.3%, GSK stock comes with a decent dividend yield. It’s also cheaper than FTSE 100 peer AstraZeneca at less than 14 times earnings. That said, its drugs pipeline could do with a shot in the arm and remains a potential risk. 

‘Buy again’ brands

Speaking of consumer goods companies, a final stock I’d consider buying to mitigate market volatility would be Reckitt (LSE: RKT).

Like the other stocks mentioned, Reckitt has a low beta (0.3). It also possesses a bursting portfolio of ‘sticky’ hygiene, health and nutrition brands. While the rising cost of living can force people to reel in their discretionary spending, products that keep things clean and safe are unlikely to be sacrificed, especially following a global pandemic. 

My only concern with Reckitt is that it hasn’t learned from its horrible acquisition of the infant formula business from Mead Johnson a few years ago. This brings me to a vital point about low-beta stocks.

No guarantees

A low-beta value now does not guarantee anything about the future performance of a company’s share price. Before the Financial Crisis, FTSE 100 juggernauts like Lloyds Bank were regarded as relatively safe destinations for investors’ money. That hasn’t worked out well. 

Therefore, a vital point to grasp is that beta values change over time. Nor are they a replacement for in-depth research. This is why I will continue to diversify my portfolio across all sorts of quality companies, thereby giving myself a better chance of growing my wealth slowly but surely over the long term.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline, Lloyds Banking Group, Reckitt plc, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mixed-race female couple enjoying themselves on a walk
Investing Articles

A once-in-a-decade chance to get rich buying growth stocks?

We haven't seen a good spell for growth stocks for quite a few years now. But I reckon the signs…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

The FTSE 100 is full of bargains! Here’s 1 stock I’m eyeing up

A weak economic outlook has hurt the FTSE 100. This Fool explains why she likes the look of this consumer…

Read more »

Investing Articles

2 no-brainer beginner FTSE 100 stocks to buy for my portfolio

Getting started with investing can be daunting. Here are two stocks for beginners to consider buying to build their first…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 recession-resistant UK shares investors should consider buying

Our writer details two UK shares she feels could withstand some of the ill-effects of the current malaise to provide…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Glencore share price drops on results. Time to buy?

The Glencore share price wobbled a bit after a weak set of 2023 results. Here's why I have the stock…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Big trouble in China sinks HSBC shares. Should I invest after record FY results?

HSBC shares have slumped following a disappointing end to 2023 for the FTSE stock. Royston Wild explains why this may…

Read more »

View of Tower Bridge in Autumn
Investing Articles

3 dirt cheap FTSE 100 shares to snap up today?

The FTSE 100 is rallying, but many shares still look super cheap on fundamentals. Is our writer buying these three…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

FTSE 100 earnings: what can we expect from Rolls-Royce in 2024?

The Rolls-Royce share price tripled in 2023. Roland Head wonders whether this FTSE 100 stock could continue that impressive trajectory…

Read more »