The countdown has begun!
In just one week, the US election will take place — an event that could send ripples through stock markets the world over.
It looks like a close race but no matter who wins, market volatility will be the likely outcome.
With a large portion of UK revenue coming from abroad, we will be no stranger to the effects. No doubt, the most cunning of Wall Street investors have some ideas of how to leverage the election in their favour. Events like these can offer up lucrative investment opportunities — for those with an appetite for risk.
Personally, I’d rather play it safe.
As an amateur sailor, I’m particularly fond of the saying ‘any port in a storm’. When things get rough, get to safety! And that’s exactly what I plan to do this week.
Rather than try to second-guess the market, I’m putting my money where I know it’s (relatively) safe. That’s right, in defensive stocks — the safety blanket of the risk-averse investor.
These are two of my favourites at the moment.
British American Tobacco
As one of the world’s largest tobacco companies, British American Tobacco (LSE: BATS) tends to enjoy consistent demand regardless of economic conditions. Its profits stem from 180 countries, helping fund dividends and develop new products.
The 8.8% dividend yield is certainly one of its more attractive elements but I like its growth prospects too. Despite operating in a heavily regulated and controversial industry, it’s managed to adapt its business effectively. The transition to next-gen lines of less harmful tobacco products is doing well, accounting for 18% of revenue. It aims to increase this to 50% by 2035.
Still, there’s no denying that tobacco stocks carry inherent risks, including exposure to regulatory changes, health concerns and potential legal liabilities.
According to the firm, BATS is committed to a smokeless future and has outlined an ESG roadmap. This includes specific targets for climate action, biodiversity conservation, gender diversity, and ethical business practices.
GSK
GSK (LSE: GSK) has long been one of the most reliable and trusted companies on the FTSE 100. No wonder it’s often a company of choice for defensive investors. As an income-focused stock, its share price has remained quite stable, mostly trading between £13 and £17 for the past 20 years.
The multinational pharmaceutical and biotechnology firm was formed in 2000 through the merger of Glaxo Wellcome and SmithKline Beecham. The original name, GlaxoSmithKline, was eventually shortened to GSK in 2022. It demerged its consumer healthcare division the same year, forming the company Haleon.
Like many pharma companies, GSK is at risk of legal action related to adverse reactions to its drugs. Currently, it faces a potential billion-dollar lawsuit related to its heartburn drug Zantac. GSK claims there’s no merit in the suit.
Although its 4.4% yield is only half that of British American Tobacco, it has a good history of paying and increasing dividends. For decades, it was considered a Dividend Aristocrat but recent economic troubles forced a 27% dividend cut in 2022. However, with economic conditions improving, I expect it will do its best to reverse the reduction.
The post I’m piling into these 2 defensive stocks as markets brace for the US election appeared first on The Motley Fool UK.
Should you invest £1,000 in British American Tobacco right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if British American Tobacco made the list?
See the 6 stocks
More reading
Down 17% with a P/E of 9.4! Is this dividend star the best share to buy after recent good news?
£6,000 in savings? Here’s how I’d try to turn that into £611 a month of passive income!
A 5-step approach to getting higher ISA returns
How to invest a £20k Stocks and Shares ISA to seek a 7% dividend yield
Here are the 2025 dividend forecasts for FTSE giants Unilever, GSK, and AstraZeneca
Mark Hartley has positions in British American Tobacco P.l.c. and GSK. The Motley Fool UK has recommended British American Tobacco P.l.c., GSK, and Haleon Plc. 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.
