ChatGPT can be a convenient tool for investors to use when it comes to research. Like any opinion, it needs to be supplemented by additional research.
In some cases, I disagree with it! However, with the FTSE 100 at elevated levels, I thought it was worth asking the artificial intelligence (AI) bot which stock in the lead indices it believes would be the most resistant to a stock market crash. Here’s the answer.
And the winner is…
The one it picked was Unilever (LSE:ULVR). It owns globally-recognised consumer staple brands such as Dove, Lipton, and Hellmann’s, which are everyday necessities. Over the past year, the stock’s down 3%, with a modest 3.22% dividend yield.
ChatGPT provided some reasons as to why this was its top pick. One factor was the essential type of products it sells. People continue to buy soap, food, and household products even during economic downturns, providing consistent demand that helps protect the company from market crashes.
Additionally, ChatGPT pointed to the fact that Unilever operates in over 190 countries, spreading risk across regions. If one market suffers, others can help offset the impact.
A factor I agree with is that the company generates strong and reliable cash flow. This should allow it to maintain dividends even when profits dip, offering both income and stability for investors.
Finally, the AI bot mentioned Unilever’s strategic investments in premium and sustainable products. It believes this enhances brand loyalty gives it a competitive edge, further cushioning the company against market shocks.
Points to remember
I was pretty surprised at the number of different reasons it provided me to back up the case for Unilever. Not only that, but all of the points are valid. To that end, I give it a big thumbs up.
However, it did neglect to provide me with potential risks. In reality, there’s no perfect stock to hold when the market has a crash. In most cases, all stocks take a hit, so even Unilever’s unlikely to be immune to a falling share price. It’s really a case of trying to find the stocks that suffer the least.
At a company-specific level, if the crash coincided with a UK recession, a credit crunch could hurt Unliever. This is because the company has significant debt. This could increase financial strain and reduce investor confidence.
I think Unilever’s a smart option for a defensive stock pick. Right now, I see the risk of a stock market crash more pronounced across the pond in America. Here in the UK, I think valuations are still quite attractive. Of course, I can’t predict the future, which is why I’m thinking about adding Unilever to my portfolio as a protection.
