Every investor’s portfolio should have a space for low-risk stocks, the stocks that you can trust to produce returns year after year without you having to keep an eye on them.
Today I’m looking at three such opportunities for investors of all experiences, that could help you sleep better at night.
My first low-risk FTSE 100 pick is Land Securities (LSE: LAND). Property is one of the safest assets around, and as the largest publicly traded landlord in the UK, I think this real estate investment trust should be a part of any low-risk portfolio.
Right now, shares in the business are at sale prices. The stock has declined by nearly 20% over the past two years, underperforming the FTSE 100 by 30%, excluding dividends, due to concerns about the impact Brexit might have on the UK property market.
However, while skittish investors have been jumping ship, Land Securities’ high-quality property portfolio gives me confidence in its long-term potential. Nearly half of its capital value is invested in offices across the City of London and West End, two markets that are unlikely to see a significant decline in property values.
The company is trading at a 30% discount to net asset value, which to my mind is far too steep. And on top of this bargain valuation, Land Securities yields around 5%.
My next low-risk pick is global cruise operator Carnival (LSE: CCL). This travel company often flies under the radar of investors because it’s hardly the world’s most exciting business. But while some investors might be put off by the firm’s slow and steady nature, it could be the perfect buy for low-risk investors.
Carnival is the biggest cruise operator in the business. Its size gives it a huge advantage over other operators. For example, as the group has grown since 2012, its operating profit margin has increased from 10.7% to 18.6% currently.
Growing economies of scale, as well as rising revenue has helped net profit more than double over the past five years. City analysts have pencilled in earnings per share (EPS) growth of around 7% per annum in 2018 and 2019 — above the industry average growth rate of 5% per annum.
Despite this impressive growth, shares in the company are changing hands for a relatively undemanding 13 times forward earnings. There’s also a dividend yield of 3.2% on offer.
My final low-risk FTSE 100 pick is St James’s Place (LSE: STJ). In the wealth management business, reputation counts for everything. Thanks to its size and rich heritage, it has one of the best reputations in the industry.
Customers flocked to the company last year. Assets under management (AUM) in 2017 grew 20% to £90.7bn, as new customers joined and old customers stayed. The positive trend has continued into 2018. At the end of the first half, AUM had risen to £96.6bn.
City analysts are expecting inflows to push EPS up 72% for 2018 to 47p per share, and further growth of 19% is expected for 2019.
Unfortunately, the market is already placing a premium on the stock so you are going to have to pay up to take part in St James’s growth story. The current price is 24.6 times forward earnings. Considering the company’s rate of growth and its reputation, however, I reckon this is a price worth paying. The stock yields 4.7%.
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Rupert Hargreaves owns shares in Landsec. The Motley Fool UK has recommended Carnival and Landsec. 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.