LONDON -- If you want to invest like a fund manager, then take a look at some of the least volatile shares in the FTSE 100. You can find these shares by filtering on a company's beta. This is a statistical measure of the volatility of an individual company's share price movements vs. the rest of the market.
Low-beta shares are have historically avoided the market's wild swings. They are frequently companies with a high degree of earnings visibility and strong balance sheets. Here are the 10 lowest-beta shares in the FTSE 100.
Yield (%, TTM)
Market Cap (million pounds)
Wm. Morrison Supermarkets
With their incredibly loyal customer base and strong brands, tobacco shares have long been considered some of the safest investments available.
However, I believe that this industry's best days are behind it. As consumers have better access to information and statistics on the risks from tobacco, governments are enacting a pincer movement against the industry as anti-tobacco legislation increases worldwide.
Some of these fears are reflected in Imperial Tobacco's share price today. The shares today trade at 10.8 times forecast earnings for 2013 and offer the prospect of a 5.1% dividend yield. That's a lower price-to-earnings (P/E) ratio than the average FTSE 100 company and a significantly higher yield.
Imperial will announce its results for the year on Tuesday.
Gold producer Randgold Resources is the surprise name in this list. Usually, the shares of resources companies are highly volatile. Small changes in raw material prices can produce big swings in the value of exploration and production companies.
However, as a gold producer, Randgold's fortunes depend on the price of a commodity that has historically had little correlation with shares.
Despite all of that, I would not want Randgold Resources in my portfolio today. After a long bull run, gold prices have recently fallen away. In the last year, the market price of one ounce of gold is down 10.4%. It is down more than 14% in the last six months. So much for gold as a "safe haven" investment...
United Utilities provides water and sewerage services in the northwest of England. Today, the shares trade within a whisker of a five-year high.
United Utilities shares are up 9% this year, almost matching the FTSE 100's performance exactly. The company is forecast to pay a 34.4 pence dividend for 2013, meaning that the shares offer the prospect of a 5.7% yield. That's ahead of the 3.2% yield on offer from the average FTSE stock.
United looks less attractive on an earnings basis. Profits are forecast to fall this year, before heading higher again in 2014. This will bring dividend cover down to just 1.2 times.
Income investors will ask themselves if United will be able to continue growing its dividend into the future.
Harpic, Dettol, and Calgon are three of Reckitt Benckiser's best-known products. The company owns a collection of consumer products brands that frequently lead their market. This makes their products "must stock" items for supermarkets, meaning that Reckitt can command high prices.
This suite of brands has made Reckitt one of the most successful companies in the FTSE 100. In the last five years, earnings per share (EPS) has risen at an average rate of 16.4% a year. In that time, the dividend has been increased by 19.5% a year on average.
Profits and dividends are expected to rise this year and next. The shares today trade on a 2014 P/E of 16.6 times forecast earnings, with an expected yield of 3.2%.
Centrica owns domestic fuel supplier British Gas and a group of other energy businesses.
In the last five years, Centrica has managed to increase its dividends to shareholders by an average of 7.2%. Earnings and dividends are both expected to increase by a similar rate this year and next. This means that the shares offer an expected yield for 2013 of 4.6%, rising to 4.9% next year. The 2013 P/E is 13.5 times forecast earnings, falling to 12.6 times for 2014.
So far in 2013, shares in Centrica are up 12.6%, rising 20.3% in the last 12 months. Forecast dividend cover is around 1.6 times, meaning that the payout looks assured for the next few years at least.
If you are looking for shares that are likely to be safer for the long term, then low-beta stocks are a great place to start. For another five shares that are expected to be a reliable store of wealth, check out the latest free Motley Fool report, "5 Shares to Retire On." This report contains the five top long-term share selections from our team of analysts here at The Motley Fool. Even better, the report is 100% free. Just click here to get your copy today.
The article 10 FTSE 100 Shares to Avoid Market Madness originally appeared on Fool.com.
David O'Hara does not own shares of any of the above companies. The Motley Fool recommends Reckitt Benckiser Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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