Two stocks I’d buy to protect my portfolio in uncertain markets

A bull outlined against a field
A bull outlined against a field

If you’re looking for stocks to protect your portfolio from uncertainty, I think you need look no further than gaming company Games Workshop(LSE: GAW).

It has a history of beating expectations and producing enormous returns for investors. Today, the company announced that for the first six months of the 2018/19 financial year (to December 2), the group is on track to generate sales of £124m and an operating profit of £41m. Even though there are still six months of the financial year to go, management believes these numbers are “in line with expectations for the year ending 2 June 2019.” According to my figures, these numbers indicate year-on-year sales and operating profit growth of 14%.

Management did not include its trading expectations for 2018/19 in today’s release, but the City is forecasting earnings per share (EPS) of 169p on sales of £235m. We still have the critical Christmas trading period to go, but looking at the numbers in today’s update, it seems to me that the firm is already on track to surpass City estimates for the full year.

Cash cow

On top of the steady growth, Games Workshop also has a policy of returning all excess cash to investors. Today, the group announced a distribution of 30p per share as part of this cash return policy. Analysts believe a full-year dividend of 120p is possible, based on the company’s projected profitability, suggesting a total dividend yield of 4%.

Overall, while the shares might not look cheap, changing hands at 17.8 times forward earnings, I think the company’s devoted customer base, steady growth and cash return policy is worth buying into in these uncertain markets.

Sausage roll champion

Another company that I believe won’t let you down in stormy markets is the country’s most loved sausage roll producer Greggs(LSE: GRG).

It has defied expectations over the past decade. Analysts had believed that the enterprise, which is best known for its sausage roll and pasty offer, would struggle to grow as consumers moved away from unhealthy food, towards lighter options. However, Greggs has adapted to the challenge and sales have continued to rise. What’s even more impressive is that the company has continued to expand during the high street’s recent problems.

Since 2012, net profit has expanded at a compound annual rate of 7.4%. It doesn’t look as if the company’s growth is going to slow down any time soon.

In a trading update published at the end of last month, Greggs announced that total sales expanded 9% for the eight weeks to 24 November, with like-for-like sales up 4.5%. Before this update, analysts had pencilled in a small decline in EPS for 2018, but following the upbeat statement, the City has rushed to update its numbers.

Having said all of the above, this is not a cheap stock. The shares are currently changing hands for 20.7 times forward earnings. Still, I think it is worth paying a premium to invest in this business as it has proven time and again that it can defy expectations and grow in a tough market.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.