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Discover the stocks that delivered positive returns – even in the bad years
Companies in control of their own destinies are far less vulnerable to market downturns
Investors instinctively know sectors such as utilities, consumer staples and healthcare are defensive and have historically provided shelter during stock market turbulence. Yet the analysis usually focuses on sector performance alone.
This article takes a different approach and seeks to identify stocks within the S&P 500 and FTSE 350 indices which have had the least number of down years over the past decade while also delivering good returns with less share price turbulence.
2022 WAS A WAKE-UP CALL
It has been a great decade for investors with the S&P 500 delivering a double-digit annualised return equivalent to almost a three-fold gain. The FTSE 350 has delivered a more modest 6.4% annualised return equivalent to just under two times the original investment.
However, there have been three years over the past decade when the major indices have stumbled with 2022 being the most damaging. The S&P lost 19% while the FTSE 350 (the FTSE 100 and FTSE 250 combined) retreated a modest 3% as the commodity heavy FTSE 100 provided a defensive cushion against rising inflation. The year was a reminder that stock markets do not always go up in a straight line.
The other two periods which saw indices stumble were 2018 and 2015 but these were relatively shallow downturns. What’s interesting to us is whether any stocks bucked the general trend.
Finding The Stocks
We looked at calendar returns over the past decade for the constituent stocks of the S&P 500 and FTSE 350 (excluding investment trusts) indices. There isn’t anything special about the 12 months defined by the calendar, but it is commonly used to measure stock returns. Using Sharepad data, stocks were ranked by the number of years they delivered a positive return.
We calculated the share price return over the 10-year period as well share price variability. A useful metric here is standard deviation. A low number is better than a high one as it shows returns are relatively smooth.
Smoother returns are not only better for investors’ mental wellbeing but also their investment returns. For example, a stock which loses 33% of its value needs to rise by 50% to get back to where it started.
Often the steady grower wins the race in the long run because its drawdowns (peak to trough percentage moves) are shallower while it matches market rallies during expansions.
As the accompanying tables show, the least volatile stocks tend to be the best performers and the most consistent.
Feature: Most and least consistent performers
