US stocks go electric

Thanks to its forthcoming inclusion in the S&P 500 index, it’s no revelation that electric car maker Tesla makes the list.

Having now posted more than the four profitable quarters required to make it eligible, Elon Musk’s California-based giant gets its promotion on December 1. Institutions operating index-tracking funds will be obliged to buy the stock. And canny investors know that. This should push the share price higher, at least for a while.  

But UK investors’ desire for electric vehicle stocks goes beyond Tesla. Manufacturers Nio and Workhorse make the list of the most popular buys, as do US-listed Chinese equivalents Xpeng (or Ziaopeng Motors) and Li Auto. Interestingly, Canadian car designer ElectraMeccanica was the most popular stock traded by UK investors over the past week. 

Alternative power

Another in-favour share has been Plug Power. The $11bn cap makes hydrogen fuel cell systems that replace conventional batteries in vehicles such as trucks and equipment used in warehouses. Its shares have climbed an incredible 700% in 2020 alone.

A second popular alternative power buy in the last seven days has been FuelCell Energy. It designs, manufactures, operates and services fuel cell power plants.

With the push to green energy sources likely to play a significant role in Joe Biden’s presidency, it’s understandable that UK investors should gravitate to companies like these.

Also in the mix

The remaining two stocks in the Top 10 list offer a bit more variety.

Small-cap biotechnology firm Vaxart is currently developing a coronavirus vaccine that can be administered orally. Assuming it’s clinically effective, a big positive is that it won’t require cold storage, making the vaccine relatively easy to distribute. Vaxart may be running behind other candidates on results, but that doesn’t seem to be deterring UK investors from buying. 

The final share that made the list in the last seven days was GoPro — the leading manufacturer of action cameras and video-editing software. 

Should I buy?

Here at the Fool UK, we’re not the sort to buy shares in companies just because they’re popular. Sentiment can turn quickly. So any strategy based purely on momentum is inherently risky. Moreover, the valuations attached to some US stocks now look crazy. Tesla is a prime example.

This is not to say we think owning shares in businesses listed overseas is a bad idea. Quite the opposite, in fact. Diversifying a portfolio to include these stocks can help protect UK-based investors from events closer to home.

It can also lead to better returns. While US markets have soared since markets crashed in March, the FTSE All-Share is still down around 15% in 2020. Buying London-listed firms feels safe, but this ‘home bias’ can prove a drag on profits.

Lastly, it’s a fact that most of the major players in ‘megatrends’ such as the move towards automation, healthcare innovation and, yes, electric cars, are listed overseas. As a long-term investor, I think getting some exposure is vital.

The post The top 10 most traded US stocks on Stake by UK investors in the past week appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. 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.

Buffett’s first rule

Buffett’s first rule of investing — “never lose money” — is good all-weather advice. As such, I think it’s likely the ‘Sage of Omaha’ will continue to recommend that all investors should do their homework, regardless of who might win the US election. The more you know about a company before buying its shares, the better your chances of making money.

Gambling with your cash based on the outcome of events, however tempting, isn’t advised. This is partly why the wealthiest investor on the planet doesn’t have a TV in his office. Not being hooked up to the 24/7 newsflow allows him to concentrate on the things that truly matter. The businesses he buys stakes in.

Buffett’s first rule has an additional meaning for those investing in the UK. By not keeping your shares within an ISA, you will lose money by virtue of paying capital gains tax on any profits you make. To make matters worse, you’ll also be taxed on any dividend income you receive from stocks you own. This double-whammy could really hurt your chances of ever making it to millionaire-status.

Keep buying wonderful companies

Buffett buys shares in quality businesses when they go on sale. The coronavirus crash earlier in the year was an excellent example of when, to parphrase the great man, “we should all have been greedy rather than fearful.” The forthcoming US election could be another. 

Great companies are likely to remain great. This is regardless of who emerges triumphant and whatever decisions they make during their presidential term. Sure, increased regulation of big tech giants, or the resumption of the trade war between the US and China, could make investors temporarily skittish. But the major themes of investing in the years ahead are unlikely to be affected.

Companies specialising in clean energy sources, for example, are very likely to remain popular, given the ongoing concerns around climate change. Demand for healthcare will also continue to rise as populations age. The need for cybersecurity will increase as the amount of ‘smart’ stuff in our homes grows.

None of the above will be impacted by who gets the keys for the White House. Invest accordingly. 

Hold forever

Market commentators will continue to speculate over what a second term for Trump, or a first for Biden, will mean for global markets. The truth is, it really shouldn’t matter to ISA investors buying shares for the long term.

Buffett has frequently said that his favourite holding period is “forever.” Earlier this year, he also remarked that “nothing can stop America when you get right down to it.”

So far, he’s been absolutely right. Pull up a chart of the S&P 500 index over the last 50 years, or so. You’ll see a line rising from the bottom left to the top right. In other words, US stocks have gained massively in value, regardless of all the Republican and Democratic leaders over that time.

Don’t fear any US-election volatility. Do the same as Buffett. Embrace it.

The post Forget the US election. I’d listen to Warren Buffett and buy cheap shares to become an ISA millionaire appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

With no vaccine in sight, there’s certainly no shortage of catalysts. The return of students to university campuses (despite ongoing restrictions on teaching) is one example. Concern surrounding the effectiveness of the ‘rule of 6’ is another. Now factor in temperatures dropping and people spending more time indoors. Oh, and did I mention Brexit was back on the political menu?

Stock market crash ahead?

But it’s not only events at home that are causing people to worry. The recent sell-off of tech titans such as Apple and Amazon in the US suggests that even the most coveted businesses may have peaked in valuation for now. 

Considering how far these stocks have bounced since mid-March, it’s understandable that investors have started banking profits. A victory for Democrat Joe Biden in the forthcoming election and the possibility of increased regulation and/or taxation of some of the biggest companies in the world could hit sentiment hard.

If all this makes for pretty grim reading, don’t despair. I actually think there are only two moves Foolish investors need to make in the event of a second market crash in 2020. 

Buy stocks…

Exactly what you buy naturally depends on what sort of investor you are. If you have limited time and/or energy to get down and dirty with individual shares, a selection of funds is the way to go. These can be passive (effectively managed by a computer) or active (managed by a professional investor). Personally, I like a combination of the two. That said, you should always check a fund manager’s track record for evidence that they have the ability to outperform the market. 

Of course, buying individual stocks can be a lot more financially rewarding if you can accept the risks involved. But as long as you pick great companies trading cheaply after the March market crash (relative to their average valuations over a few years), there’s a good chance you’ll beat the return you might get from holding a basket of funds. 

…do nothing

The second move is the hardest of the two. It’s even tougher if markets continue to fall. Doing nothing is tricky for us goal-obsessed humans. We’re wired to believe that the amount of success we achieve correlates with the amount of effort we put in. We’re also attracted to the idea of timing the markets perfectly, even though this is pretty much impossible to do consistently.

But strange as it sounds, you stand a better chance of getting rich from the stock market by doing as little as possible. In practice, this means not checking your portfolio too often. It also means limiting your news consumption so you’re less likely to buy or sell on an impulse and incur broker commissions.

If you simply can’t keep a distance from the markets, be productive with your time. Build a watchlist of quality shares you’d be willing to buy if funds allowed and their prices keep dropping. If, and when, panicked traders begin selling indiscriminately, you can be there to mop up the good stuff.

Stock market crash 2.0? Bring it on…

The post Market crash! The only 2 moves I think you need to make in another sell-off appeared first on The Twelfth Magpie.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Apple and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.

However, since the US presidential election, these shares have come under pressure. Donald Trump’s shock election victory and his proposed infrastructure spending spree sent global inflation expectations to their highest level in more than a decade. Together with the better-than-expected economic outlook in the UK and the plunge in the value of the pound, this means a further interest rate cuts in the UK is now unlikely and interest rates may rise sooner than expected.

So, should you take advantage of the recent share price weakness to buy into these unloved stocks?

Uncertainty

The fears which drove investors to these defensive stocks have not gone away. In fact, there is probably more uncertainty than ever before. After all, Brexit hasn’t actually happened yet. Also, Italy is due to hold a referendum on the constitution before the end of the year, with French and German elections to take place next year.

In investing, as in buying things in general, you’re naturally concerned about whether you’ll be paying too much for something that will be cheaper at a later date. As is always, it’s hard to tell if shares in National Grid and SSE may indeed be cheaper in the future, but valuations are already rather attractive right now.

Plus, if you decide to wait, you could miss out on their upcoming dividends and other distributions, which means you could potentially end up worse off in the longer run by waiting for a better price. Shareholders in both companies may be in line to benefit from special dividends or share buybacks following recent and upcoming asset sales.

Steady returns

Shares in National Grid have fallen by 19% since its July peak, and now trade at a forward P/E of 14.5. This compares favourably to its 3-year historical average forward P/E of 16.4. Its dividend is also attractive, with shares currently yielding 4.7%, beating the sector average of 3.7%.

This is all the more impressive given its low cyclicality and minimal commodity exposure. Because it gets nearly all of its revenues comes from regulated transmission and distribution businesses, it earns a “rent-like” return based on the value of its capital investments, as determined by its regulators.

Of course, regulators could reduce future returns. Each of National Grid’s businesses goes through a process of regulatory review every few years, which obviously provides a degree of risk and uncertainty. But following its major regulatory review in the UK last year, the company is largely free of regulatory uncertainty – the main exceptions being its relatively smaller New York and Long Island gas distribution operations.

Higher yield

SSE is slightly more risky, as it owns a mixture of power generation and regulated assets. This means SSE has more exposure to commodity prices than National Grid. Nevertheless, SSE still generates relatively stable cash flows year-on-year, especially when compared to pure-play electricity generators, such as Drax Group.

And importantly for income investors, SSE maintains an inflation protected dividend policy. SSE trades on a forward P/E ratio of just 12.2 and currently yields 6.1%.

The post Is the worst over for these trusted defensive stocks? appeared first on The Twelfth Magpie.

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

However, with Trump widely seen as an erratic and unpredictable character, it’s unclear which sectors, and in particular which stocks, will genuinely benefit in the long run. With this in mind, I’m taking a look at whether Trump winners BAE Systems (LSE: BA) and Shire (LSE: SHP) can extend their earlier gains.

More defence spending?

Defence stocks, such as BAE Systems have been flying high, and on the surface, it makes a lot of sense. Trump has pledged to strengthen the military, with particular emphasis on traditional military firepower – a larger army, more navy ships, more fighter aircraft and better nuclear and missile defence capabilities. Defence analysts reckon that if he follows through on what he’s promised, his defence initiatives would add more than $50bn to the US defence budget annually.

With the Republicans maintaining control of Congress, you’d think that Trump is in a strong position to deliver on more defence spending. However, things are never as simple as they seem. The Republicans have a smaller majority in the House than in 2014, and Senate Democrats could still filibuster everything.

In addition, Trump is relying on unrealistic cost savings and efficiency improvement to deliver what he’s promised and has many competing pledges, ranging from increasing infrastructure spending to cutting taxes and reducing the national debt – all of which will no doubt compete for funding.

BAE, which derives 36% of its revenues from the US, may also be hit by Trump’s protectionist views. He’s pledged to bring back jobs to America, and would likely favour US contractors over foreign ones.

Despite this, shares in BAE are up 10.2% in just a week, and currently trade at 14 times expected earnings this year. This forward price-to-earnings multiple is below its five-year historical average of 18.1, which indicates shares in BAE still seem undervalued despite recent gains. 

Policy uncertainty

Trump’s election win has been good news for healthcare stocks and one of the top performers in the London market has been Shire, a biotechnology company that focuses on rare diseases. Shire gets nearly all of its revenues from the US, so it’s no surprise that the stock is more sensitive to potential US policy shifts than GlaxoSmithKline or AstraZeneca.

While both candidates were critical of high drug prices, Trump has been less vocal on measures to regulate prices and has been more supportive of deregulation. This could cut development costs and speed up the approval process – and boost profits for the sector. Nevertheless, he hasn’t given any specifics on his health plan yet, and the potential long-term benefit for the sector remains to be seen.

Shares in Shire already gained 9.9% this week, and currently trade at a forward P/E of 11.4. Although this is significantly below its five-year historical average of 20.8, the firm’s recent disappointing haemophilia drug sales figures point towards slowing earnings growth in the near term.

The post Can these Trump winners extend their gains? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

So often, we find the least expected outcome in life is the thing that actually happens. I notice it in the stock market, for instance. Many times the market moves to confound the majority. If most investors expect the market to rise, it falls; if investors expect falls, it rises, and so on. 

Just like Brexit?

Look no further than the FTSE 100 after the Brexit referendum for evidence. Many feared financial Armageddon, as the London markets would surely collapse. In the event, many shares in the Footsie have done well this year, confounding the worriers.

What will happen in the markets now, though? I hope there’s a big sell-off, which will give long-term investors an opportunity to buy more shares in good-quality companies that have  decent prospects for the years ahead.

The US under Trump will likely not be as bad as the world seems to fear, an outcome that could end up being another example of how events can confound the majority.  He may even make a decent job of the role. His speeches are already beginning to sound more presidential and less hillbilly. I found his victory speech to be conciliatory and uplifting, and he delivered it in calm, even, matter-of-fact tones. To me, he had the air of a man who is intimately familiar with what it takes to get things done in the real world , and he probably has a deep knowledge of how his own abilities and weaknesses measure up to the task ahead.

Upside potential?

In investing parlance, I reckon Donald Trump is poised to surprise on the upside. He is an experienced businessman and will probably run a tight ship. Arguably, the world needs a move away from career politicians towards leadership from people with real-world experience. 

I had been worried for some time that politicians in the UK increasingly seemed to have no experience of working life other than being politicians. We could say that career politicians are “institutionalised”, moving from school to university, then from university to the houses of parliament.

We could also argue that the state-funded salaries MP’s receive are unrealistic when compared to the wages that many employees and small business owners get in the private sector. MP’s salaries are also protected from economic pressures, lending a level of financial security to the role of a career politician that could end up distorting their view of events in the country, its economy and the wider world.

Such factors are among the drivers of the historic Brexit and Trump movements, I reckon. However, ten years from now I bet it will be difficult to detect the effect of either event on the stock market charts. Business will carry on and there’s a good chance that many things will be better than they were before, especially if we get better politicians from now on. I expect markets to normalise over time and any weakness now is a buying opportunity for investors like me who focus on owning shares in firms with great businesses for the long term.

The post What Donald Trump’s victory means for investing appeared first on The Twelfth Magpie.

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

Therefore, many investors may feel that owning shares right now is a dangerous move. After all, if Donald Trump wins then share prices could fall significantly. That’s because his policies represent a major change from the status quo and this could cause uncertainty among investors.

Even if Hilary Clinton wins, a rally in share prices may be short-lived due to her lack of popularity among vast swathes of the population. Hilary Clinton may also struggle to implement change in Republican-dominated upper and lower houses, which may lead to a lack of confidence in the US political landscape.

Certainly, there are risks to investors from today’s election result. However, to consider them bigger than problems faced in previous years would be somewhat out of focus. After all, the stock market has faced a number of huge problems in previous years and yet has always survived and prospered in the long run.

Known risk

And unlike many previous challenges, today’s risk is a known risk. In the past shares have been subject to events that were impossible to predict prior to them taking place. Therefore, the surprise factor for the US election is unlikely to be high, especially with the polls being relatively tight.

It may be the case that investors have already priced in the outlook for the election. In other words, investors expect a Clinton victory but Trump as President wouldn’t be a major surprise. This could mean that in the short term, share price falls aren’t quite as dramatic as they would be if a ‘known unknown’ event took place. For example, 9/11 took the world by surprise and caused a significant fall in share prices in the short run.

However, over the medium term share prices could fall substantially. That could be the case as the new President begins to attempt to implement their manifesto, which could prove unpopular among investors. In this sense, any share price falls could be more akin to those from the credit crunch, which started off as a concern and gradually escalated into the worst recession since The Great Depression. As such, a short, sharp fall following the election result could be followed by a gradual decline rather than a quick recovery.

In this environment, long term, patient investors could prove to be the beneficiaries. High quality companies could begin to trade at more appealing valuations following the election, which makes it more akin to an opportunity as opposed to a risk. Therefore, today could prove to be a time to buy, rather than a time to panic.

The post Is this the riskiest day in the history of the stock market? appeared first on The Twelfth Magpie.

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Today’s US election is probably the biggest and most uncertain election for many years. I haven’t touched my share portfolio ahead of this potentially seismic event, and I don’t expect to do so afterwards. Let me explain why.

Brexit on steroids?

Over the last few weeks, we’ve seen US stock markets rise and fall in line with Hillary Clinton’s polling numbers. Even Monday’s UK market rebound seemed to coincide with the news that Mrs Clinton had been cleared of any email-related wrongdoing by the FBI.

The implication seems to be that if Donald Trump wins, markets could crash. June’s UK referendum sell-off could look trivial in comparison.

The problem with this argument is that I’m just guessing. There’s no way to know what the outcome of the election will be, or how markets will react. It’s also worth remembering that what happens in the stock market tomorrow is likely to be a short-term reaction. As we’ve seen with Brexit, the picture could be quite different by the New Year.

That’s why I’ve decided to base my investment plans on the facts I do have, and leave the guesswork to the 24-hour news channels.

Are you happy with your stocks?

If you’re still unsure about whether you should have sold any of the stocks in your portfolio ahead of the US election, then the first question I’d ask is whether you’re happy with them.

Are the companies in your portfolio reasonably valued and performing to plan? Do they fit with your overall investment strategy, whether it’s growth, value, or income? If the answer to these question is yes, then I’d sit tight and do nothing.

Whatever the outcome of the election, the world will keep turning. Political changes usually come slowly and are often flagged up well in advance. There will probably be winners and losers in the months ahead, but you’ll still be able to buy or sell shares once the facts are known.

There’s still one big question

Politicians are often accused of failing to keep the promises they made on the campaign trail once elected. A more charitable way of looking at this is that once in power, politicians have to compromise in order to get things done.

Today’s election is a good example. I suspect that whoever is elected president will find their freedom to make dramatic changes limited by both financial constraints, and the opposition or support they receive from Congress.

I’m still slightly worried

The Brexit sell-off was followed by a powerful stock rally in many sectors of the market. My portfolio is worth more than it was at the start of June. As we head into the end of the year, I am — naturally — keen to hold onto these gains.

However, selling now to protect my profits would make no sense. I’d have a load of extra trading costs, and might end up having to pay more to buy back my stocks. In the meantime, I could miss out on dividends, takeover bids and big rallies.

In my view, there’s no option but to sit tight and do nothing.

The post Why I haven’t touched my portfolio ahead of the US election appeared first on The Twelfth Magpie.

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After months of campaigning (or should that be feuding?), Hillary Clinton and Donald Trump will soon learn just how persuasive they have been in getting their fellow Americans to the polls and winning their votes. By midday on Wednesday, we should have a reasonably good idea as to who will be the 45th US president.

A few weeks ago, a Clinton win seemed almost certain. Then last week’s email-related ‘revelations’ undoubtedly handed the momentum to Trump, leaving the result too close to call. But with the FBI dramatically saying it found nothing illegal in the emails, things could change. Even so, markets have now begun to consider the possibility that the divisive Republican could pull off the most unexpected of victories.

Let’s be clear: regardless of who triumphs this week, markets will react. But how should Foolish investors respond?  

What could happen…

It seems likely (but never guaranteed) that a Clinton victory would bring a relief rally of sorts to UK equities. One of the few exceptions to this might be in pharmaceutical stocks, considering the former Secretary of State’s determination to end ‘excessive’ pricing. It won’t be surprising if the share prices of FTSE 100 favourites like GlaxoSmithKline and Astrazeneca come under pressure if Clinton prevails. Energy stocks might also lag the market, given her desire to turn American into the world’s clean energy superpower. 

If Trump wins, expect something approaching the opposite of that just described. A shock victory would put pressure on stock markets in general, at least in the short term. Energy stocks might drop less than most, however, given his positive attitude to the fossil fuel industry. The aforementioned pharmaceuticals could also make gains, simply because Clinton’s views would no longer carry any weight. Over time, of course, the markets will settle, particularly when it’s realised that getting initiatives through Congress will prove extremely difficult (as Barack Obama knows only too well).

Some sectors look set to benefit regardless of who wins. Defence and security spending will surely rise whoever gets the keys to the White House. If this happens, giants like BAE Systems and G4S could benefit. Construction, industrials, healthcare and technology stocks may also get a boost.

…and what Fools should do…

While no one knows how things will play out, we do know that knee-jerk reactions from investors rarely work out well. 

Think back to June. In the post-referendum bloodbath that was British politics, many stocks tanked. The FTSE 100 dropped 6% in just two working days. The FTSE 250, generally regarded as a better reflection of the UK economy, fared worse, down roughly 14%. Days later, the markets rebounded. By October, the FTSE 100 and FTSE250 were both challenging record highs (reaching 7,097 and 18,342 respectively). The former was no doubt boosted by many of its constituents benefitting from sterlings’s fall, the latter by the realisation that the market had overreacted and UK plc would carry on as usual, for now. Not only did those who sold shares in the immediate aftermath of the referendum crystallise loses, they also missed the rally back up.

As such, I suspect the best course of action for UK investors over the next few days is actually very simple: do as little as possible. Clinton or Trump, the next few weeks won’t matter all that much if you hold a sufficiently diversified portfolio.

The post How should Fools handle the nail-biting US election? appeared first on The Twelfth Magpie.

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• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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Paul Summers has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The problem is that many low-beta stocks are looking pricey these days, especially after the recent rush for relatively safe assets ahead of the US election. Nevertheless, I think I’ve found two such stocks that seem to offer reasonable value.

Attractive free cash flow

With a beta of 0.35, shares in cruise company Carnival (LSE: CCL) should be able to weather the potential rise in market volatility over the next few months. The company has expected earnings growth of 26% for the current year, and the shares currently trade at 14.4 times its expected 2016 earnings. That’s lower than the sector average forward P/E of 16.8, and substantially cheaper than its five-year historical average of 20.6.

Despite concerns over the spread of the Zika virus and recent terrorist attacks in Europe, forward bookings for this year and next are ahead of last year’s levels and have exceeded earlier expectations. Margins are also improving because of lower fuel costs and growth in onboard spending, which should help the company’s bottom line to grow faster than its revenues.

With cash flow from operations expected to rise to around $5bn this year and capital spending set to taper off over the next few years, Carnival has excellent free cash flow prospects. The company has already committed to buying back $1bn worth of its own shares, but I expect the company to return even more cash to shareholders in the next few years, given its strong balance sheet and robust cash generation.

The stock has a trailing dividend yield of 2.3%, and City analysts expect its prospective yield to be 2.7% in the coming year.

Thriving on volatility

It may seem odd that an investor who hates volatility would buy shares in a company that thrives when the markets move sharply. But it’s exactly because the company tends to do well during periods of volatility that makes its shares a good hedge against an increase in volatility.

This explains why spread betting and CFD company IG Group (LSE: IGG) has a beta of just 0.49. And it’s because retail traders tend to trade more actively during periods of higher volatility, particularly around high profile news events, that the company generates more revenues and profits when market volatility is higher.

City analysts are pretty optimistic about the financials of the company. Adjusted earnings are forecast to grow 5% this year, with a further 14% increase pencilled-in for 2017/18. This implies shares in IG trade at 17.5 times its expected earnings this year and 15.3 times its earnings for 2017/18.

The stock is also tempting from an income standpoint. Given its strong capital position and limited capital spending requirements, IG intends to pay approximately 70% of annual earnings out as dividends. The shares currently yield 3.8% and analysts expect dividends to rise by 6% next year.

The post 2 low-beta stocks for investors who hate stock market volatility appeared first on The Twelfth Magpie.

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