3 Stocks For A FTSE 100 Storm: British American Tobacco Plc, AstraZeneca plc & Reckitt Benckiser Group Plc

Weather market turbulence with British American Tobacco Plc (LON:BATS), AstraZeneca plc (LON:AZN) and Reckitt Benckiser Group Plc (LON:RB).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Predicting where the stock market is heading next is a bit of a mug’s game — you’ll find credible arguments for the FTSE 100 moving up, down and sideways.

If you’re concerned that the Footsie could be heading down, but don’t want to miss out on rising shares if you’re wrong, backing companies in so-called “defensive” sectors can be a good strategy.

These companies’ shares tend to be less volatile than the market as a whole, and offer some protection when markets head down.

In the Great Bear Market of 2007-09, the FTSE 100 plummeted by 48% in less than 18 months between 12 October 2007 and 6 March 2009. Some shares suffered much larger falls… but others much smaller declines.

In the classic defensive sectors of tobacco, household essentials and big pharmaceuticals, British American Tobacco (LSE: BATS) (NYSE: BTI.US), Reckitt Benckiser (LSE: RB) and AstraZeneca (LSE: AZN) (NYSE: AZN.US) were the top shares for cushioning the bear market blow.

  Bear market
performance
British American Tobacco -4%
Reckitt Benckiser -14%
AstraZeneca -17%
FTSE 100 -48%

These three companies not only gave relative downside protection, but also continued to pay dividends. Furthermore, while the FTSE 100 is currently below its pre-bear-market level of 6,731, the three companies’ shares have comfortably surpassed the price they were trading at on the same date — British American Tobacco  is up 105%, Reckitt Benckiser has gained 85%, with AstraZeneca close behind with a rise of 83%.

Of course, there’s no guarantee that these three shares will be the best performers in their sectors in the next downturn, but they should provide relative protection. And if that’s what you’re looking for, tobacco, household essentials and big pharma remain excellent sectors to be picking from.

Companies in these sectors typically trade on higher price-to-earnings (P/E) ratios than the wider market, but they merit higher P/Es because of their attractive characteristics.

At a share price of 3,582p, British American Tobacco trades on 16x forecast 2015 earnings. Also consider: Imperial Tobacco at 2,850p, P/E 14x (Great Bear Market performance -24%).

Reckitt Benckiser, at 5,390p, trades on 22x forecast 2015 earnings. Also consider: Unilever at 2,732p, P/E 20x (Great Bear Market performance -21%).

AstraZeneca, at 4,729p, trades on 17x forecast 2015 earnings. Also consider: GlaxoSmithKline at 1,407p P/E 15x (Great Bear Market performance -20%).

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »

Investing Articles

Why I’ve just sold two of the largest investments in my Stocks and Shares ISA

Stephen Wright has been making room for a new addition to his Stocks and Shares ISA. What is it and…

Read more »