With investor nerves at fever pitch, now seems to be a good time to load up on classic safe haven stocks.
The steady spread of the coronavirus is dominating the financial market mindset now. The economic impact is expected to soar past that of the SARS outbreak almost two decades ago. The steady rise in the global infection rate (which currently sits north of 80,000) means that it’s something that is likely to keep rocking stock bourses in March, too.
The COVID-19 tragedy isn’t the only thing that could hammer market confidence in March, either. Tough talks between Britain and the European Union over their future trade relationship are due to begin next week. And things are looking gloomy before they even kick off.
The UK government announced this week that it could cut off discussions as early as June should both sides fail to reach a broad agreement on trade terms. The European Union remains steadfast in its desire for similar legal and regulatory alignments for a free trade deal to be signed off, though. Something has to give, and it could end up with Britain exiting the transition period in 2020 on economically damaging ‘no deal’ terms.
Another healthcare star
I recently explained why buying safe haven stocks could be a good idea at the current time. And one such share I tipped was GlaxoSmithKline. Global drugs demand is something that remains broadly constant regardless of macroeconomic and geopolitical times like these. And a growing, and ageing, global population means sales of its medicines can only be expected to move higher.
Glaxo, then, is a terrific flight-to-safety stock today. But for those looking to reduce their investment risks still further then Alliance Pharma (LSE: APH) could be a more attractive healthcare stock to buy today.
Troubles with drug development can cost pharmaceuticals developers a fortune. Rollout delays can cause R&D costs to balloon and result in many millions of pounds in lost revenues, too. This is something that Glaxo certainly isn’t any stranger to.
Safe as houses
Alliance Pharma is a much safer pick in this regard. The company specialises in drugs that have already passed the testing process, meaning that troubles at the lab bench aren’t anything it needs to worry about. What’s more, the products that it acquires have already been on the market for a long period, lessening the chances of the business suffering financially painful litigation action.
The AIM-quoted firm is also seeing sales of its ‘International Star Brands’ like Kelo-Cote and Nizoral rip higher. Revenues from the former, for example, a treatment for scars, leapt 38% in 2019 thanks to booming demand from the Asia Pacific region. Group revenues boomed 16% year on year as a result.
City analysts expect earnings at Alliance Pharma to rise a healthy 9% in both 2020 and 2021. And thanks to its strong balance sheet, investors can look forward to the business engaging in more profits-boosting acquisition activity, too (free cash flow leapt more than 80% last year). This is a share I’d buy for these turbulent times and hold for many years to come.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?
Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!
It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
Of course, nobody likes to see the value of their portfolio fall, but fortunately, you don’t have to go it alone. Download a FREE copy of our Bear Market Survival Guide today and discover the five steps we believe any investor can take right now to prepare for a downturn… including how you could potentially turn today’s market uncertainty to your advantage!
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Alliance Pharma. 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.