In worrying times like these it’s good to have exposure to some classic safe-haven assets. Holding gold and gold-producing stocks is one great idea as a hedge against the multitude of geopolitical and macroeconomic issues heading into 2020, but of course it’s not the only way to play volatile markets.
With this in mind I reckon BAE Systems (LSE: BA) is a share that’s in good shape to rise next year. It’s already up 17% in 2019 versus the 8% rise in the broader FTSE 100, paying testament to the defence sector’s reputation as a lifeboat in troubled times.
Humans simply can’t resist waging war among themselves, which gives this particular business, exceptional earnings visibility. BAE System’s provides a wide variety of industry-leading tech. And what’s more, fresh military action in Syria and ongoing tension between the US and Iran – sagas that have led President Trump to suggest possible intervention by US armed forces – could in particular cause a spike in the company’s share price next year.
A modest forward price-to-earnings ratio of 11 times for 2020, along with a bulky corresponding 4.5% dividend yield certainly gives the weapon-builder plenty more scope to rise.
Drink it in
Diageo (LSE: DGE) is another blue chip that’s outperformed the wider Footsie so far this year. The beverages behemoth’s share price is up 12% since the turn of January.
Like BAE Systems, this particular business is also a safe-haven in troubled times. It doesn’t matter, broadly speaking, what horrors are developing in the global economy. Thanks to the striking popularity of products like Captain Morgan rum, Smirnoff vodka, and Guinness stout, profits can still be relied on to grow.
This was perfectly evident in latest trading guidance last month in which Diageo advised that organic net sales would rise a healthy 5% in the fiscal year to June 2020.
Critically for income chasers, this splendid earnings visibility has enabled the company to consistently raise annual dividends for donkeys’ years now. And unsurprisingly, City analysts expect further progress on this front, leaving an inflation-topping yield of 2.3%.
The right medicine
If you’re not content with guaranteed (well, almost) dividend growth and want big yields today, then GlaxoSmithKline (LSE: GSK) may be more up your street. The annual dividend is expected to remain locked at 80p through to the close of 2020 but the good news is that this offers a bulging 4.8% yield.
Healthcare-related stocks are of course more of those classic flight-to-safety assets and this has helped Glaxo rise 13% in value since the start of the year. But this isn’t the whole story. Investors have also been tempted in by the rate at which Glaxo’s new medicines are blasting off, not to mention the release of significant regulatory approvals and key testing milestones. The latest of these in late September revealed some terrific study data for its zejula ovarian cancer battler.
With a packed product pipeline and a terrific track record of getting its drugs from lab bench to pharmacy shelf, I’m expecting another year of progress for Glaxo’s share price. A low forward P/E ratio of 14.3 times gives it space to rise, too.