I’m piling into these 2 defensive stocks as markets brace for the US election

Global stock markets hold their breath as a neck-and-neck US election race leaves the future uncertain. I’m not taking any chances.

| More on:
The flag of the United States of America flying in front of the Capitol building

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

The countdown has begun!

In just one week, the US election will take place — an event that could send ripples through stock markets the world over. 

It looks like a close race but no matter who wins, market volatility will be the likely outcome. 

With a large portion of UK revenue coming from abroad, we will be no stranger to the effects. No doubt, the most cunning of Wall Street investors have some ideas of how to leverage the election in their favour. Events like these can offer up lucrative investment opportunities — for those with an appetite for risk.

Personally, I’d rather play it safe. 

As an amateur sailor, I’m particularly fond of the saying ‘any port in a storm’. When things get rough, get to safety! And that’s exactly what I plan to do this week.

Rather than try to second-guess the market, I’m putting my money where I know it’s (relatively) safe. That’s right, in defensive stocks — the safety blanket of the risk-averse investor.

These are two of my favourites at the moment.

British American Tobacco

As one of the world’s largest tobacco companies, British American Tobacco (LSE: BATS) tends to enjoy consistent demand regardless of economic conditions. Its profits stem from 180 countries, helping fund dividends and develop new products.

The 8.8% dividend yield is certainly one of its more attractive elements but I like its growth prospects too. Despite operating in a heavily regulated and controversial industry, it’s managed to adapt its business effectively. The transition to next-gen lines of less harmful tobacco products is doing well, accounting for 18% of revenue. It aims to increase this to 50% by 2035.

Still, there’s no denying that tobacco stocks carry inherent risks, including exposure to regulatory changes, health concerns and potential legal liabilities.

According to the firm, BATS is committed to a smokeless future and has outlined an ESG roadmap. This includes specific targets for climate action, biodiversity conservation, gender diversity, and ethical business practices.

GSK

GSK (LSE: GSK) has long been one of the most reliable and trusted companies on the FTSE 100. No wonder it’s often a company of choice for defensive investors. As an income-focused stock, its share price has remained quite stable, mostly trading between £13 and £17 for the past 20 years.

The multinational pharmaceutical and biotechnology firm was formed in 2000 through the merger of Glaxo Wellcome and SmithKline Beecham. The original name, GlaxoSmithKline, was eventually shortened to GSK in 2022. It demerged its consumer healthcare division the same year, forming the company Haleon.

Like many pharma companies, GSK is at risk of legal action related to adverse reactions to its drugs. Currently, it faces a potential billion-dollar lawsuit related to its heartburn drug Zantac. GSK claims there’s no merit in the suit.

Although its 4.4% yield is only half that of British American Tobacco, it has a good history of paying and increasing dividends. For decades, it was considered a Dividend Aristocrat but recent economic troubles forced a 27% dividend cut in 2022. However, with economic conditions improving, I expect it will do its best to reverse the reduction.

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.

Mark Hartley has positions in British American Tobacco P.l.c. and GSK. The Motley Fool UK has recommended British American Tobacco P.l.c., GSK, and Haleon Plc. 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

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »