2 days ago
Electrify your portfolio with this reliable infrastructure gem
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest.
Investing in defensive stocks typically represents a significant opportunity cost. In exchange for holding companies that offer a relatively stable financial and share price performance irrespective of the prevailing economic weather, investors have historically accepted lower total returns compared with volatile cyclical stocks that benefit from positive underlying economic growth.
Given that Questor is generally unconcerned about the potential for elevated short-term share price volatility, with our focus squarely trained on long-term returns, our bullish stance on National Grid may be somewhat surprising. After all, we are highly optimistic about the long-term outlook for the UK economy and stock market amid ongoing interest rate cuts.
However, our positive stance on the highly defensive utility company begins to make much more sense when its total return prospects are taken into account. Although its price-to-earnings ratio of 14.2 suggests there is limited scope for an upward rerating, the company's recently released full-year results show it remains on track to deliver annualised earnings per share growth of 6-8pc over the next four years. Even if its earnings multiple remains unchanged, it therefore offers relatively upbeat capital growth potential.
