In today’s turbulent global markets, where uncertainty seems to be the only constant, retail investors are increasingly seeking shelter from the storm.
Enter low-volatility stocks.
They are ‘steadier’ performers with lower betas (more on this below). These stocks have tended to weather market swings better than their high-flying counterparts.
For those new to the term, beta measures how much a stock’s price tends to move compared to the overall market.
A beta of 1 means the stock moves in line with the market – above 1, it’s more volatile, but below 1, it’s less volatile.
These names, often overlooked in favour of flashier growth stocks, offer a compelling option for investors looking to balance risk and reward without losing sleep over daily price swings.
Here are three low-volatility stocks that stand out in the current high-octane environment. Each has a proven track record of resilience, underpinned by strong fundamentals and low betas.
This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments and any income from them will rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future. Remember, yields are variable and no income is ever guaranteed. Ratios also shouldn’t be looked at on their own.
Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you can’t afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
Admiral
Admiral continues to demonstrate why it’s regarded as a best-in-class insurer, with its 2024 performance comfortably ahead of market expectations.
While Admiral operates several business units, its UK motor insurance arm remains dominant and critical to the group's success. The past few years' price hikes are now bearing fruit, improving profitability in this core segment.
The picture ahead looks more subdued.
Admiral proactively reduced prices throughout 2024, capitalising on its robust market position to attract new customers, which reached record highs.
However, due to the typical lag in insurance pricing impacts, these reductions will act as a headwind in the coming year.
Outside UK motor, Admiral’s smaller units, including a modest yet expanding home insurance division in the UK and international operations, have mixed outlooks.
The US business recently turned profitable, but European operations remain loss-making and are unlikely to materially influence overall group performance in the short term.
Admiral's strength lies in its unique approach to reinsurance, employing higher reinsurance rates than peers. This strategy allows the company to selectively manage risk, enhance profitability, and funnel detailed data into its sophisticated machine-learning models.
But regulatory scrutiny around profitable add-on products is still a notable risk and one to watch.
Admiral maintains a robust solvency ratio that supports attractive dividends. Although dividend growth might stall due to softer market conditions and one-off benefits inflating the 2024 payout, current yields remain attractive.
Given these competitive advantages, an attractive valuation, and a very low beta of 0.1, Admiral looks like a compelling name to help diversify a portfolio during volatile times
Remember though, the market is expected to soften in the near term, so growth might not shoot the lights out.
Compass Group
Compass Group is a leading provider of contract food and support services across multiple markets. Its business model is less affected by market swings, as companies often outsource catering to cut costs and boost efficiency.
This creates steady demand and reliable income from long-term contracts with major global clients.
With a five-year beta of 1.0, Compass has historically been no more volatile than the broader market.
Much of the food services industry is still dominated by small, self-managed operators, creating opportunities for Compass to expand through smart, strategic acquisitions.
The company’s robust cash flow and disciplined capital allocation support these merger and acquisition activities, without compromising shareholder returns through dividends and buybacks.
Acquisitions present challenges, like integrating with existing businesses and realising expected benefits, which require careful management. Compass is addressing this by exiting non-core markets to concentrate on areas where it has greater control and better market knowledge.
Geopolitical issues, particularly trade tensions in the US, present both challenges and opportunities.
While these tensions could disrupt operations, they might also lead companies to onshore in the US, potentially expanding Compass's client base.
The group could face supply chain risks due to tariffs, but its policy of sourcing most ingredients locally means it’s well-prepared to handle these challenges.
We think Compass has a lot to offer in a tricky and volatile environment. The shares trade at a valuation close to the historical average, reflecting investor confidence in its long-term outlook. That can increase the chances of disappointments though and as always, there are no guarantees.
Unilever
Unilever is a global consumer goods company that reaches over 3.4bn people daily with products like Dove, Vaseline, and Knorr in over 190 countries.
Under new leadership, Unilever is navigating the crossroads of significant transformation, focusing on its ‘power brands’ of household names to drive most of its sales.
The company's average beta of 0.4 over the past five years further underscores its stability, making it an attractive option in turbulent markets.
Despite facing challenges like subdued pricing, fragile consumer confidence, and tariff uncertainties, Unilever's transformation shows promise.
The emphasis on core brands is paying off, with resilient sales growth and significant gross margin improvements. These gains are being reinvested in marketing to boost brand desirability on a large scale.
A key part of Unilever's strategy is portfolio optimisation.
The planned spin-off of its ice cream business, a seasonal and high-cost segment, aims to streamline operations.
Revamping its portfolio is not just about pruning business segments – Unilever is also looking to acquire promising digitally native brands to drive long-term growth.
On the tariff front, Unilever's globally diversified supply chain, with localised production in the US, offers resilience against volatility. During economic uncertainty, consumers tend to favour essential items over things they could live without, which benefits Unilever.
Unilever's transformation is gaining momentum, which we think paves the way for long-term growth.
Plus, with so much uncertainty around, steady revenue streams and robust cash flows have their merits. But Unilever still needs to master the delicate balance of building portfolio resilience through strategic pricing while maintaining volume growth.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.