While every investor ought to do their own due diligence before buying stocks, it can be useful to see what others with a long-term focus have in their portfolios (and why they went for those shares, of course).
BAE Systems
What it does: BAE Systems is Europe’s largest defence contractor. It makes combat vehicles, radar, ammunition, and missiles.
By Charlie Carman. BAE Systems (LSE:BA.) is a defensive stock in every sense of the word.
As a leading supplier of military products, the company’s benefitted from elevated geopolitical tensions. With the tragic wars in Ukraine and Gaza showing no end in sight, I think this trend’s set to continue.
The firm’s global customer base of government clients makes it less sensitive to market cycles than those in many other industries, bolstering its defensive credentials.
Moreover, 30 consecutive years of dividend growth suggests the stock’s worth considering for investors hoping to generate passive income.
Granted, I’m somewhat concerned by today’s valuation. The forward price-to-earnings (P/E) ratio of 18.7 looks high and could limit future returns.
Nonetheless, a robust £58bn order book and strong full-year guidance for 11%-13% growth in underlying operating profits bodes well.
It’s enough to soothe my doubts, which is why BAE Systems shares are a key part of my portfolio.
Charlie Carman owns shares in BAE Systems.
Primary Health Properties
What it does: Primary Health Properties owns a property portfolio of 500-plus assets spread across the UK and Ireland.
By Royston Wild. Real estate investment trusts (REITs) like Primary Health Properties (LSE:PHP) have been damaged by higher-than-usual interest rates in recent years.
It’s expected that the Bank of England will start loosening monetary policy in the coming months. But a timid approach to rate cuts could keep net asset values (NAVs) for property stocks like these under pressure.
Sure, this is a risk. But I believe Primary Health Properties will prove an excellent investment over time. As the British Isles’ elderly population grows in size, so will demand for GP surgeries and other medical facilities.
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This FTSE 250 share has excellent defensive characteristics in my book. Primary healthcare assets remain in constant demand at all points of the economic cycle. And what’s more, the rents paid to property owners are guaranteed by government bodies.
These qualities also make the REIT a reliable dividend provider. Shareholder payouts have risen for 28 straight years. What’s more, for 2024 its dividend yield stands at a whopping 7.5%, making it an attractive buy (to me at least) for near-term passive income.
Royston Wild owns shares in Primary Health Properties.
Unilever
What it does: Unilever manufactures and retails nutrition, hygiene and personal care goods to countries around the world.
By Mark David Hartley. People always need food, hygiene and personal care products. No matter the country, corner shops around the world stock the type of products that Unilever (LSE: ULVR) markets. With a portfolio of popular brands including Dove, Hellman’s, Persil, and Omo, they’re a staple in every household. The likelihood of such a company suffering extended periods of loss is low because of its broad reach and diversified product list. Over the past 20 years, the stock has delivered annualised returns of 7%.
However, with a share price down 14% in the past five years (at the time of writing), the current economic strain is evident. Smaller firms with lower overheads are capable of producing cheaper alternatives, undercutting Unilever’s market. During tough economic periods, cash-strapped consumers tend to switch to low-cost options to save a few cents. Slashing prices can hurt a brand’s image so in these times, Unilever needs to be extra creative when it comes to cost-saving exercises.
Mark David Hartley owns shares in Unilever.
Unilever
What it does: Unilever is a consumer goods giant. It has 400 brands under its umbrella, including its 30 Power Brands.
By Charlie Keough. I recently opened a position in Unilever . It has had a strong start to the year, and I reckon it can keep this performance up.
I’ve made it my mission to add more defensive stocks to my portfolio over the coming months. That’s because they bring stability during difficult spells.
For example, last year despite tough trading conditions and raising its prices by 6.8%, Unilever still delivered underlying sales growth of 7%.
The same applies to Q1, where underlying sales grew 4.4% and 6.1% for its 30 Power Brands.
One of the biggest risks is that consumers switch to cheaper alternatives. A good chunk of the products it sells come at a premium price.
But with its strong market position and continued effort to streamline its operations, I’m bullish on the stock.
Unilever also has a 3.3% dividend yield. That’s below the FTSE 100, but its payout hasn’t been cut for multiple decades.
Charlie Keough owns shares in Unilever.
The post 4 defensive stocks Fools have bought for long-term gains appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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The Motley Fool UK has recommended BAE Systems, Primary Health Properties Plc, and Unilever. 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.
