With the FTSE 100 being relatively volatile in recent months, I’m contemplating the investment appeal of AstraZeneca plc (LON:AZN) (AZN.L), SSE PLC (LON:SSE) (SSE.L), Diageo plc (LON:DGE) (DGE.L) and National Grid plc (LON:NG) (NG.L). Could they offer defensive appeal?
AstraZeneca’s growth prospects appear to be encouraging in my view. The company is expected to return to profit growth next year after a period of significant investment in its pipeline as it has sought to overcome the challenges posed by generic competition.
With the company’s financial performance potentially less correlated to the wider economy than many of its index peers, I feel that AstraZeneca could offer defensive growth appeal at the moment.
SSE’s recent profit warning showed that the stock may not be as defensive as some investors had believed. It is also undergoing structural change through the possible demerger of its UK domestic energy supply business, while political risk remains high to my mind.
While perhaps less defensive than it once was, I feel that the SSE share price could offer good value for money after a period of decline. It yields over 7%, which is around 275 basis points higher than the FTSE 100’s yield.
Diageo’s global presence and wide range of brands means that it is not reliant upon one region or product when it comes to delivering sales growth. I am also of the view that demand for its products may remain relatively solid even if the prospects for the world economy come under a degree of pressure.
With Diageo seeking to improve its business model through an efficiency drive, I feel that it could offer resilient EPS growth over the medium term.
National Grid faces heightened regulatory and political risk at the moment in my view. The threat of nationalisation may remain fairly high over future months, since the chance of a general election could increase if Brexit challenges persist with regard to the current proposed deal passing through Parliament.
With National Grid having a dividend yield of around 5.5%, I think it offers good value for money. Risks remain, but in the long run I’m cautiously optimistic about its total return potential.