If, like me, you’re becoming increasingly wary of the general frothiness of markets, it makes sense to look for those companies that could stand to gain from any panic brought about by economic or political concerns.
Here are three stocks that I’d like to be holding if and when we begin to experience some turbulence.
Batten down the hatches
£76m-cap insolvency specialist Begbies Traynor (LSE: BEG) could be a decent pick if you believe that many UK businesses are likely to run into trouble in 2018, perhaps as a result of our impending departure from the EU.
December’s half-year numbers from the Manchester-based small-cap revealed increases in revenue and pre-tax profit along with a reduction in net debt as a result of strong cash generation. Encouragingly, the interim dividend was also raised for the first time since 2011.
Changing hands for 19 times forecast earnings, Begbies isn’t a cheap stock to acquire. That said, the increase in insolvency market activity in the previous 12 months — as highlighted by the company — suggests that recent momentum in the share price could continue.
Pawnbroker, gold purchaser and personal loan provider H&T Group (LSE: HAT) is another counter-cyclical stock worth considering, particularly if future events put pressure on personal and household finances.
Recent numbers from the company have been very encouraging with this month’s trading update stating that full-year pre-tax profit will now be above market expectations after a strong performance in Q4.
Following the expansion of its product range, the company’s Personal Loans book rose 95% to £18.3m from the end of 2016. Its pawnbroking services also continued to thrive with the H&T’s pledge book increasing 11.6% to just over £46m over the same period.
Another huge attraction to H&T is the fact that its shares still look very reasonably valued, trading at 11 times forecast earnings for the next financial year. The predicted 3.2% dividend yield is a further bonus.
My final pick of stocks to own in the event of a reversal in market sentiment would be FTSE 100 mining giant Randgold Resources (LSE: RRS). While anything but a bargain — the stock has a forecast price to earnings (P/E) ratio of 26 for the new financial year — Randgold’s ability to deliver the goods has rarely been questioned.
Thanks to the perceived safety of gold during tough times, I see the company as a particularly good stock to hold should the current cryptocurrency mania come to an abrupt halt at some point in 2018. The fact that we’ve already seen a significant fall in the price of Bitcoin over the last week suggests a full-on meltdown isn’t out of the question.
Boasting a robust balance sheet, the £6.67bn-cap behemoth looks a safe bet for uncertain times.
If in doubt, diversify!
The fact that markets are looking rather exuberant at the moment is not to say, of course, that they won’t keep rising. Indeed, if many commentators and analysts are to be believed, we’re still to enter the euphoric stage of the current bull market — one of the longest in history.
Nevertheless, at some point, all good things must come to an end. Since none of us know when exactly this will happen, it makes more sense than ever to check that your share portfolio is properly diversified — by sector and geography — to deal with the inevitable panic.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.