There’s nothing that brings out the bull in investors like a continued stock market rally. The over-1,000 point gain in the FTSE 100 index over the past two months is enough to bring even the most cautious investors among us out into the action.
There’s a lot going for the FTSE 100 index, which I’ve talked about in another article today. But there’s something to be said for caution, too. There are still potential roadblocks ahead.
Here are two of them:
#1. Continued corona-crisis
The vaccine rollouts are a huge positive, but what about the new virus variant in town? We still don’t know if it’s going to respond appropriately to the Covid-19 vaccines. And if it doesn’t, we have another problem at hand.
Moreover, there are at least some people who are wary of the vaccine. If the number increases to a level that keeps virus levels high, that could be an additional challenge.
#2. Brexit delays
Despite the Brexit deal being struck, there are still thorny issues to contend with. A news piece I read today, for instance, pointed to struggles faced by parcel courier providers because of more complex processes.
Financial services is another area that needs resolution. And this is important, because of the large financial services industry in the country.
While I hope that neither of these situations blows out of control, I think they do serve as a good reminder that we should still maintain some caution in our investments.
To that end, I would still consider buying ‘safe’ stocks or those that can withstand stock market crashes better than others.
Here are three that I’d consider:
#1. AstraZeneca — FTSE 100’s Covid-19 star
This FTSE 100 pharmaceuticals biggie hasn’t just been a literal life-saver this year, it was also one of the best performing stocks in the months following the stock market crash.
Like all others, it saw a dramatic fall in March, but by July it made big gains and was trading at all-time highs. It has seen a sharp reversal in fortunes since the stock market rally started in November, however, as investors flocked to beaten down stocks. It’s trading at levels 20% below its 2020 highs now.
I think it’s a solid stock in any case, but even more so when I keep the risks of another market meltdown in mind.
#2. Hikma Pharmaceuticals — improving performance
This is another FTSE 100 healthcare stock I like, and not just because it’s a defensive one.
It put out a positive guidance in November last year, and its share price is currently near all-time highs. Though with a price-to-earnings ratio of 12.5 times, I reckon that it can increase more.
#3. Ocado — fortune-favoured share to buy
Much like AZN, OCDO too has seen subdued share prices since the stock market rally began.
But also like AZN, it has a lot going for it in terms of long-term prospects. With the continued lockdown, I think this FTSE 100 stock will continue to perform in the short term as online deliveries remain in demand, not something we can say for all businesses.
Don’t miss our special stock presentation.
It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.
They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.
That’s why they’re referring to it as the FTSE’s ‘double agent’.
Because they believe it’s working both with the market… And against it.
To find out why we think you should add it to your portfolio today…
Manika Premsingh owns shares of AstraZeneca and Ocado Group. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.