Tips for share market turbulence: when buying boring is best

Telstra, Woolworths, Coles and Origin Energy are among the companies that may be worth a closer look as share markets struggle.

Some investors call them boring, others call them safe, or defensive, but whatever name you give lower-risk shares, it’s clear that turbulence on global financial markets has brought them back into vogue.

US and Aussie shares slipped into correction territory – a 10 per cent-plus fall – during March but recovered some losses in past fortnight. Sharp falls are tipped in Australia on Monday after key US share indices tumbled 2 per cent on Friday.

And the federal election on May 3 and Donald Trump’s looming April 2 “liberation day” tariff announcements mean more uncertainty for investors.

A BetaShares analysis of 70 years of stock market corrections has found that falls of at least 10 per cent occur on average every three years, and when that happens there’s a 45 per cent chance that the fall will go beyond 20 per cent.

Defensive stocks are not immune to market falls and volatility, but their history of steady cash flows and strong dividends helps investors ride out financial storms.

While Australia’s overall share market is 7.3 per cent below its mid-February highs, defensive stocks such as Telstra, Woolworths, Ramsay Health Care, APA Group, Origin Energy, CSL and Coles have outperformed it significantly.

Supermarkets are seen as steady and defensive. Picture: Lisa Maree Williams/Getty Images)

Baker Young managed portfolio analyst Toby Grimm said there was a lot more investor money seeking out “boring, old established businesses that got left behind because everybody was chasing shiny and new”.

“Money is moving back into old-economy stocks – it’s a thematic we have seen play out strongly over the last 4-5 weeks as the correction happened,” he said.

“The one thing about those old, boring quality stocks is they have been around for donkey’s and chances are they will continue to be around.”

Mr Grimm said Woolworths and Ramsay Health Care were two defensive stocks that had struggled in the past year but could shine if overall market sentiment soured further.

“We think there’s more upside in them – at the end of the day it’s a very defensive business,” he said of Woolworths.

“If trade policies lead to a recession you want to be in defensive.”

Analysts’ lists of the most boring stocks on the ASX often include the big banks, supermarkets, health care, infrastructure and Telstra.

Equity Trustees head of equities Chris Haynes said Telstra was in a good place after years of turmoil with the NBN rollout.

“Firstly, no stock is boring,” he said.

“Certainty of earnings and a reasonable valuation is probably the best place to start in any market. Telstra, Origin and the Lottery Corporation fit the bill in terms of adding some conservative balance to a portfolio.”

Australian Shareholders’ Association director Lel Smits said Telstra had a dominant market position “with a huge client base, valuable infrastructure that’s hard to replicate and the most reliable mobile network”.

“Telecoms-related spending by households and companies, a necessary part of modern living, has trended higher, fuelled by smart phone take up, streaming services and a broader ongoing shift towards digitalisation,” she said.

Australian Shareholders' Association director Lel Smits.

Ms Smits said investing in large, safe, defensive stocks gave investors liquidity – the ability to convert them to cash if wanted.

“When the macro-economic picture is turbulent, an investor’s portfolio should have defensive stocks with a history of delivering steady cash flows and strong dividends over the life of economic cycles,” she said.

“Investors continue to nervously eye the economic policy decisions of the Trump administration while geopolitical concerns persist.

“In Australia, investors are awaiting the outcome of the pending 2025 federal election and are trying to work out the RBA’s policy intentions. With these uncertainties hovering, defensive sector stocks are expected to outperform growth stocks until greater clarity on the macro front materialises.”

Mr Haynes said the market appeared to be halfway through a correction: “we have already seen a sell-off in the risky stuff and the boring stuff has been bid up”.

“The sell-off is justified as stock prices ran well in excess of earnings over the last two years,” he said.

“As markets continue to rerate downwards in these uncertain times boring looks OK in the short term, but we should be looking at some of the quality businesses as they de-rate. Quality should be the focus.”

Originally published as Tips for share market turbulence: when buying boring is best