FTSE 250 investors were able to breathe a sigh of relief on Friday, as Britain’s second-tier share index recorded its first daily gains in more than a fortnight.
Welcome respite for exhausted share pickers, sure, but no reason for celebration. The FTSE 250 may have risen by 5% on the final day of the trading week. But it’s still lost almost four months’ worth of value during the past one month.
It’s possible, too, that there will be more blood on the trading floor next week should coronavirus infection rates spike again.
It pays to be well invested in some classic safe havens, then. One particular sector, which is a great buy in times like these, is the defence sector. There are a number of promising looking defence companies in the FTSE 250.
One is QinetiQ, whose vast range of operations encompass robotics, cyber security, pilot training, and a broad range of engineering solutions for air, land, and sea. Others worth looking at include protective mask builder Avon Rubber and aerospace specialist Senior.
Investors see these types of companies as bankable earnings generators even during times of social, economic, and political upheaval. Demand for their products remains robust whatever the weather. Human conflict and preparations for war don’t stop in spite of other considerations like pandemics. And fresh rounds of Iranian rocket attacks on US military bases in Iraq earlier in the month underscore this point.
Another safe-haven sector you might want to buy into is food production. Buying shares in meat item producer Cranswick, for instance, is one way to do this. Another way is to invest in sugar and ingredients supplier Tate & Lyle. This theme can also be played through Hilton Food Group, a food packaging specialist with operations in the UK, Ireland, Continental Europe, and Australia.
I don’t need to break down why profits at food companies tend to be more stable than those of most other stocks. However, it does pay to be careful here. Bakkavor Group warned this week that falling demand in China and temporary factory closures there would take a bite out of 2020 profits.
Things are looking rosier for fellow FTSE 250 constituent Greencore Group, which has just advised that its operations have been unaffected by the recent Covid-19 outbreak.
It could also prove a good idea to buy into utilities shares. Like food, we as modern citizens cannot do without services such as electricity, water, telephone, and broadband. So buying the likes of Pennon Group, the owner of South West Water, could be a good idea.
I wouldn’t suggest that telecoms giants TalkTalk Telecoms Group and Telecom Plus (which also supplies energy) are wise buys, though. Intense competition weighs heavily on these FTSE 250 companies’ long-term profits outlooks.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Greencore. The Motley Fool UK has recommended Avon Rubber and Pennon Group. 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.