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3 companies to protect you against a market pullback

Stock markets around the globe have performed strongly over the past 18 months or so, aided strongly by the US Federal Reserve’s bond buying program. However, fears that the Fed will reduce the stimulus program have dominated Wall Street this week, with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) feeling the flow-on effects.

The benchmark index fell roughly 1.5% between Monday and Tuesday before recovering slightly yesterday. Whilst some analysts have suggested that the tapering of the Fed’s program has already been priced into the index, others have predicted that a significant pullback could occur.

By no means does this mean that investors should be selling all their shares and running for the hills – any pullback that may or may not occur would only be temporary.

After all, “the market always goes down faster than it goes up. But it always goes up more than it goes down”, says David Gardner, the founder and CEO of The Motley Fool.

However, investors should be reassessing the strength of their portfolio to ensure that they are prepared for a pullback. Small-cap and growth stocks and much more vulnerable to market pullbacks, making it as important as ever to have a strong foundation for your portfolio. Here are three core companies you could consider buying at today’s prices:

Since its low in early 2011, Telstra (ASX: TLS) has rallied strongly with shares climbing from around $2.57 to today’s price of $5.05 – almost a 100% gain. However, given the strength of the telco’s business and the competitive advantage it holds against others in the industry, Telstra is well-positioned to continue climbing strongly well into the future. If that wasn’t enough for investors, then its 5.6% dividend yield makes it even more appealing.

Coca-Cola Amatil (ASX: CCL) is the manufacturer and distributor of some of the strongest brands in the world. Despite having delivered investors with consistently strong gains over the last five years, the company has struggled this year due to pressures from supermarket giants Woolworths (ASX: WOW) and Wesfarmers (ASX: WES) as well as a pricing war with rival Schweppes.

Whilst it’s been a year to forget for shareholders, the future remains bright, particularly due to the company’s expansion prospects in Indonesia. At $12.14, the shares are sitting 21% below their March high and could deliver excellent returns in the long-run.

Twenty-First Century Fox (ASX: FOX) is another opportunity for you to consider. The company split off from News Corp (ASX: NWS) earlier this year and holds many of the higher growth assets from the old combined business, including film and television studios as well as cable channels. Commsec has forecast strong price-to-earnings growth in the coming years, which would see the company’s shares climb considerably higher than their current level of $36.16.

 

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Motley Fool contributor Ryan Newman owns shares in Twenty-First Century Fox.

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