The Trump administration's chaotic fortnight of tariffs policy making - and unmaking - has injected a new level of uncertainty into financial markets. This has many fund managers in defensive mode, quietly unwinding their US tech positions and seeking something a little more defensive.
However, not everyone has the mandate to buy gold at the moment. In these trying times big investors will seek out so-called defensive stocks, companies which will tend to make money regardless of economic circumstances. Risk analysts will now also being paying attention to companies' level of exposure to tariffs.
Utilities are one area which can benefit from new investment as portfolios are re-allocated. This is because they provide essential supplies to the population, such as water, power and heating. In some respects they have a bit of a captive market. Shares could benefit as the market gets more defensive in Q2. For our Armchair Trader Plus+ subscribers we include a list of some of the best quality listed utilities in Europe right now.
1. Terna [ITA:TRN]
A case in point is Italy's Terna - aka Terna Rete Elettrica Nazionale. This is an electricity transmission operator based in Italy and with stock listed in Milan. The share price has increased over 4% in the last five days, but more importantly we saw a surge in interest in the stock in the course of March. The share price has been trading as high as EUR 8.68 in the last few weeks. The company has a market cap of EUR 16 billion but it is trading at a PE of under 16x. This is an important piece of Italy's electricity grid and is reporting strong financial growth at the moment.
2. Athens Water Supply [FRA:EYP]
Arguably one of the biggest listed utilities plays in southern Europe, Athens Water Supply and Sewerage Co serves the 4.3m inhabitants of metropolitan Athens. The stock recently dropped from just over EUR 6.0 to trade as low as EUR 5.40. It is slightly more volatile than I'd personally like, but its financials are very solid. The shares are trading in Frankfurt, which makes them more accessible to many international investors. Longer term risk factors to be considered include the increasing stress on Greece's water supplies with regional droughts being a challenge. Athens Water will need to address water shortages this year and in the future.
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