Sometimes, boring can be beautiful. For example, when it comes to the stock market, steady returns can sometimes trump flash-in-the-pan ideas. Given the huge amount of uncertainty in the market this year, here are some stocks for me to buy that I’m thinking could save me if things suddenly turn south.
Why boring stocks could be needed
To be clear, these stocks are ones that I’m not buying right now, but are ones that I will look to buy should I start to see some more red flags emerging about the broader market.
An example of a red flag would be falling GDP growth. For Q3 last year, the economy shrank by 0.1%. If the Q4 data comes out with another contraction, I’ll start to add some defensive stocks.
Another case in point would be inflation. The latest reading showed that inflation for December rose to 4% from 3.9% previously. If we get another one or two prints that show inflation is rising again, I’ll take action.
The reason for this is that owning boring (defensive) stocks could help to protect my overall portfolio performance. Typically during economic downturns, growth stocks do badly. So to balance out my investments, defensive stocks can really help.
Consumer goods staples
Reckitt is a consumer goods company. It owns brands such as Dettol and Strepsils. In the latest Q3 trading update, the year-to-date net revenue was up 4% versus the same period in the prior year. Sure, this isn’t going to set the world on fire. But the brands it has are necessary goods for many of us.
Another case in point is Unilever. It has a large portfolio spanning from tea bags to ice cream and everything inbetween.
Granted, there are risks for both stocks. One that has been flagged recently (specifically for Unilever) is the potential to carve up the group and sell off underperforming brand units. Even though this is probably good for efficiency in the long run, it could hurt the share price in the short term.
One more for the road
Finally, I’d add a utility company such as Centrica. Ironically, the stock is up 42% over the past year, making the performance look more like a growth stock!
However, the British Gas owner has been beating expectations when it comes to financial results, so the share price jump is warranted. If we do get a wobble in the market, I expect the firm to keep doing well. Not only do we all need energy provisions, but thanks to the strong results, it now has a solid balance sheet.
One concern is the tough competition in this area, with several established companies all trying to eat away at market share.
If we start to see red flags emerging in the coming months, these are the stocks I’ll be buying.
