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When considering which shares to buy in 2025, I’ve become increasingly concerned about the uncertainty ahead. From interest rate fluctuations in Europe to trade tariff threats in the US, markets look set for a rocky year.
Sure, when the economy is strong, it can pay to consider riskier growth stocks. But as a risk-averse investor, the current environment has drawn me to consider the benefits of defensive stocks. With slow growth, these stocks may appear less attractive but are usually more stable. I’m thinking consumer goods, healthcare, and utility stocks as they remain in demand even when the economy falters.
With that in mind, I think the following stocks are worth considering. I already own them and plan to buy more as the year progresses.
Consumer Goods
British American Tobacco (LSE: BATS) has experienced volatility of only 1.09% over the past month. It’s also a solid and reliable dividend giant and a top 10 constituent of the FTSE UK High Dividend Low Volatility Index (as of December 2024).
Its yield looks high at 8% but, unlike some others, this isn’t due to a falling price. In fact, the stock is up 26% in the past year. What’s more, its dividends have been increasing consistently for over 20 years.
However, it’s fair to say that tobacco is controversial and might face a questionable future. Although it’s working hard to transition to less harmful smoke-free products, there’s no guarantee this strategy will work. Increasingly strict regulations could derail its progress.
Based on future cash flow estimates, it’s trading at 54% below fair value with the average 12-month forecast targeting a 9.7% price increase.
Utilities
National Grid (LSE: NG.) is another solid dividend stock with low volatility. As the core supplier of gas and electricity to the UK, it’s well positioned to maintain steady revenue.
The stock has weathered previous market dips relatively well. Over the past two decades, it’s up 158% — an annualised growth of 4.85% per year. It also has a 5.4% yield and experienced only 1.33% volatility over the past month.
Yet it does face challenges. Balancing the need to supply low-cost energy while meeting carbon-reduction goals has proven difficult, pushing it into debt. It needs to find a way to balance these requirements without risking losses.
Earnings are expected to fall to 71p per share in the next full-year results. Despite this, the average 12-month price target envisions a 23.4% rise.
Healthcare
AstraZeneca (LSE: AZN) is one of the most well established UK healthcare companies.
It’s slightly more volatile than others, at 1.48% in the past month. During Covid, it experienced unusually high growth and has since gone through several corrective periods. If faces risks from an ongoing government probe in China and clinical trial setbacks that could threaten profits.
Historically, long-term price growth has been good, increasing at an annual rate of 7.4% since 2005. It’s also a reliable dividend payer although the yield is currently low, at only 2%.
Analysts expect earnings to rise to £6.59 per share in the next full-year results, up from £5.70 in 2003. The average 12-month forecast predicts a 28% increase in price, with the most bearish analyst expecting only a 0.42% loss.
