The Motley Fool

Beat A Volatile FTSE 100 With Diageo plc, BT Group plc And BAE Systems plc


With a beta of just 0.8, shares in Diageo (LSE: DGE) (NYSE: DEO.US) should offer a less volatile experience than the wider index. In fact, for every 1% move in the FTSE 100, they should (in theory) move by just 0.8%. This means that, with the FTSE 100’s outlook still being relatively uncertain, they could prove to be a sound defensive play.

In addition, Diageo also has growth potential. Certainly, the last year has been a disappointing one, with the company’s bottom line being flat, but next year it is forecast to deliver earnings growth of 8%, which is slightly ahead of the wider market’s growth rate. And, with China apparently readying a stimulus package to boost its economy, emerging markets could deliver improved growth moving forward, which would aid Diageo’s top and bottom lines as a result of its considerable exposure to the developing world.


Although it may seem as though BT (LSE: BT-A) (NYSE: BT.US) is becoming an increasingly growth-oriented company, with its move into pay-tv and the possible acquisition of mobile network, EE, highlighting its bright prospects, it remains a great defensive play.

For example, over the last five years BT has increased its bottom line in each year, with it averaging 12% growth per annum. That’s a superb rate of growth and shows that, even when the wider economic picture is uncertain, BT can still deliver strong returns to its investors – as further evidenced by a share price that is up 200% in the last five years, versus a gain of 28% for the FTSE 100.

In addition, BT also has a beta of just 0.8, which should mean that it delivers a less volatile share price experience than the FTSE 100 moving forward.

BAE Systems

Although BAE’s (LSE: BA) industry is subject to wild swings in demand, in the long run defence budgets across the globe are unlikely to fall significantly. That’s because, while the developed world is undergoing a period of austerity, the developing world is likely to increase overall spending on defence as it becomes even wealthier. As such, BAE’s long term future appears to be relatively bright.

Furthermore, BAE has a beta of just 0.9, which means that its share price should be less volatile than that of the wider index and, with a yield of 4%, it could prove to be an excellent defensive play over the medium to long term.

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Peter Stephens owns shares of BAE Systems. The Motley Fool UK has recommended Diageo (ADR). We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.