Cautious Investors' Picks: Stocks Recommended for Conspiracy Theorists
In these uncertain times, fund managers are recommending a select group of companies as 'tin hat stocks' for cautious investors. These resilient, low-correlation stocks are expected to weather market volatility and geopolitical risks better due to their business models and sector characteristics.
One such company is Michelin, a tyre maker that stands out for its brand strength, global scale, and technology leadership. Despite the markets touching all-time highs, a number of fund managers are holding big cash positions, a sign of nervousness. However, Michelin's durability in niche, recurring-demand markets positions it well for uncertain times.
Another recommended stock is MHA, a healthcare-related company operating in a strong market where pricing, regulatory change, cross-selling, and consolidation underpin its multi-year growth. MHA was valued at a single-digit enterprise value to EBITDA multiple during its IPO earlier this year, representing a significant discount to private equity transactions at low to mid-teens multiples.
Republic Services (RSG), a provider of non-hazardous solid-waste management and recycling services in the US, is also a favourable choice. Its recurring business model provides stable revenue streams, making it resilient to economic downturns. RSG is currently experiencing a rerating, an increase in its share price that suggests a positive shift in the market's perception of the company's future prospects.
RSG's strong free cash flow, disciplined capital allocation, and prudent dividend policy are additional factors that make it an attractive investment. Fund managers like Saurabh Sharma, manager of the Regnan Sustainable Water and Waste strategy, are invested in RSG.
L'Oréal, a company with an unmatched portfolio of brands across categories, price points, and geographies, is another 'tin hat stock' worth considering. Despite a general consumer slowdown driven by inflation and higher interest rates, L'Oréal remains resilient. The company should benefit from aging populations' increasing demand to look younger, growth in underpenetrated markets like India, and the shift to science-based, more complex beauty products and routines.
Male beauty is a big opportunity for L'Oréal, as there is a lot of room for men to be more attentive to the finer points of their appearance. Furthermore, L'Oréal benefits from consumers increasing spending on small, affordable treats as a much-needed boost to morale during economic stress, a phenomenon known as the 'lipstick effect'.
Investments in advanced recycling and landfill gas-to-energy projects reinforce RSG's leadership in sustainability and technology. Meanwhile, L'Oréal's brand strength, coupled with its ability to adapt to changing consumer preferences, makes it a reliable choice for investors.
Darius McDermott, managing director at fund research firm FundCalibre, is seeing demand rising for funds and assets that are boring but dependable, known as 'tin hat stocks'. This approach aligns with the viewpoint of portfolio managers like Jeremiah Buckley at Janus Henderson Investors, who emphasize outperformance of defensive sectors during uncertain times.
For instance, in 2025, defensives outpaced cyclicals amid inflation and tariff volatility. These 'tin hat stocks' tend to be in sectors or businesses that are less sensitive to economic downturns and thus offer stability and steady cash flows during turbulent periods.
Some fund managers believe the long-term drag from protectionism and geopolitics is being underestimated by investors. Brendan Gulston, co-manager of the WS Gresham House UK Multi Cap Income fund, is a fan of MHA for its high profitability and cash generation, which it uses to improve its operations using tech, automation, and offshoring.
In summary, cautious investors looking for 'tin hat stocks' are often advised to consider defensive, low-volatility stocks such as Michelin, Republic Services, MHA, and L’Oréal. These resilient, low-correlation companies are expected to weather uncertainty better due to their business models and sector characteristics.
Investing in Michelin, a tyre maker with strong brand strength, global scale, and technology leadership, could be advantageous due to its durability in niche, recurring-demand markets. Fund managers are finding Republic Services (RSG), a provider of solid-waste management and recycling services, appealing due to its recurring business model, strong free cash flow, and rerating. L'Oréal, with its unmatched portfolio of brands, should remain resilient in uncertain times, benefiting from aging populations' beauty demands, growth in underpenetrated markets, and the 'lipstick effect'. These companies, along with MHA, are often recommended as 'tin hat stocks' for their stability and steady cash flows during turbulent periods.
