As Greece teeters on the brink of default once again, the markets are becoming increasingly concerned. And this concern is leading to volatility as investors try to second-guess what Greece’s next move will be.
Unfortunately, it’s almost impossible to tell what will happen if Greece does default on its debts. Although, it’s likely that after it defaults, Greece will be forced out of the Eurozone block, which will be a messy separation.
Overall, no one really knows what the future holds for Greece and the Eurozone. With this being the case, investors need to look for safe, defensive investments to protect themselves from a worst-case scenario.
SABMiller (LSE: SAB), Britvic (LSE: BVIC), Diageo (LSE: DGE) and A.G. Barr (LSE: BAG) are four such companies. Based on past performance, the four beverage producers will help keep your portfolio afloat during stormy waters. Indeed, during 2008/2009, when the financial sector was collapsing under its own weight, SAB, Britvic, Diageo and A.G. Barr all easily outperformed the market.
From 1 September 2008, to 31 July 2009, SAB, Britvic, Diageo and A.G. Barr beat the FTSE 100 by 31%, 56%, 5.6% and 24% respectively, excluding dividends. So, while the financial world was falling apart, shareholders of SAB, Britvic, Diageo and A.G. Barr were sitting pretty.
SAB, Diageo, Britvic and A.G. Barr’s outperformance during this period of turmoil can be traced to the companies’ defensive nature.
All four of these companies produce highly sought-after beverages, both alcoholic and non-alcoholic.
Consumer demand for beverages tends to remain relatively stable during times of economic turmoil. Greece’s beer market is a great example.
In particular, last year, despite the country’s troubles, Greek beer consumption increased by around 5%. The volume of soft drinks sold increased by around 2%.
That said, during the financial crisis, global sales of soft drinks and alcoholic beverages did dip slightly, although sales quickly rebounded and surged to new highs.
SAB’s full-year results, released today, showed the strength of the company’s brands. Sales jumped by 5% on a constant currency basis, outperforming global economic growth by around 1.7%. Profit slipped slightly due to the negative impact of currency movements.
Paying for protection
SAB, Diageo, Britvic and A.G. Barr will all provide a degree of protection for your portfolio during times of market turbulence. However, you do need to pay a premium to get your hands on the shares of these companies.
Specifically, at present SABMiller trades at a forward P/E of 22.6. Diageo trades at a forward P/E of 19.9, Britvic trades at a forward P/E of 18.1 and A.G. Barr trades at a forward P/E of 22.3. The FTSE 100 currently trades at a P/E of 15.1.
Still, while they may be expensive, these four companies all offer dividend yields that surpass the rate of interest on offer for many bank accounts. SAB’s dividend yield currently stands at 2.1%, Britvic’s yield stands at 2.8%, A.G. Barr offers a yield of 1.9%, and Diageo supports a yield of 3.0%.
Buy and hold
Overall, due to their defensive nature, SAB, Diageo, Britvic and A.G. Barr are perfect investments to protect your portfolio from Eurozone turmoil. What’s more, the four companies also offer an attractive level of income.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.