Never mind the Cash ISA. I think these stock market stalwarts will help you beat a recession

Paul Summers picks out three defensive stocks that should hold their own in the event of a Brexit-linked recession.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Having some cash in the bank is never a bad idea and with more than a few analysts predicting that the UK could slip into recession following Brexit, it’s particularly prudent at the current time.  

Many of us will be using a Cash ISA for this purpose. The fact that these accounts pay interest way below inflation, however, means it’s vital not to leave any surplus funds in there — that is, anything beyond roughly six months of living expenses.

As such, here are three resilient companies I’d consider buying for my portfolio with what’s left over. 

Should you invest £1,000 in Prudential right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Prudential made the list?

See the 6 stocks

Recession-proof

People will always need medicine, regardless of what the economy is doing. As such, my first port of call is the pharmaceutical industry and, more specifically, GlaxoSmithKline (LSE: GSK). 

Despite the fact that it’s not been increased since 2014, one of the biggest attractions to Glaxo, aside from its defensive qualities, is its dividend. The 80p per share total payout for the current financial year means a yield of almost 4.8%. Perhaps most importantly, the extent to which this cash return is covered by profits is starting to look more stable after a rocky few years. 

Unsurprisingly given the Brexit stand-off, Glaxo’s shares have been steadily growing in popularity, rising 11% since the beginning of 2019. Assuming analysts are correct in their predictions, the shares currently change hands for just over 14 times earnings — far below FTSE 100 peer Astrazeneca’s frothy-looking P/E of 24. 

Another stock that should hold its own in the aftermath of Brexit, if it happens at all, is waste management and recycling firm Biffa (LSE: BIFF).

Last week’s trading update was as no-nonsense as you can get with the company stating that trading over H1 had been in line with management expectations with no change to the outlook for the full year. 

Of course, a business like this will never generate the same level of excitement as your average tech company. On a little less than 10 times earnings, however, I’m tempted to say that Biffa looks cheap.

At its current price, the forecast dividend yield sits close to 3.6% and is easily covered by earnings. There’s quite a bit of debt on the balance sheet (something I usually steer clear of), but the predictability of its line of work arguably makes this less of a red flag.

My last pick is a retailer. That might sound strange considering that consumer confidence is usually battered during economic wobbles, but stick with me.

Here I’m talking about discount retailers — the sort that offer people the most bang for their buck. FTSE 250 member B&M European Value (LSE: BME) is the standout candidate here, especially when recent trading is considered.

In late July, the company stated that it had made a “solid start” to FY20 with group revenue climbing 21.4% over Q1 (31 March-29 June). In sharp contrast to high street peers, 12 new stores were opened over the period with lots more planned over the entire year.

This optimistic outlook goes some way to explaining why B&M’s shares trade on almost 18 times forecast earnings. The 2.4% yield is also the lowest of the three in focus today (although it’s been hiked by double-digits in three of the last four years). With signs that consumers are continuing to tighten the purse strings, however, I think this is still a reasonable price to pay. 

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK owns shares of B&M European Value. 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.

More on Investing Articles

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

Analysts have upgraded this FTSE 100 stock to Buy. What should investors do?

Associated British Foods shares have been uninspiring for some time. But is it finally time to consider buying the FTSE…

Read more »

Man changing battery on electric bicycle
Investing Articles

Prediction: in 12 months the sizzling National Grid share price could turn £10,000 into…

It's been another solid year for the National Grid share price and the dividend yield is decent too. So why…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 185% in 3 years, why does the market love this FTSE 250 stock

Over the past three years, this stock has vastly outperformed the FTSE 250. Dr James Fox takes a closer look…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Looking for growth, dividends, or value? These 3 ETFs could be smart ideas to consider

Exchange-traded funds (ETFs) provide a way for investors to spread risk without sacrificing the possibility of huge long-term returns.

Read more »

Happy couple showing relief at news
Investing Articles

Is the Rolls-Royce share price fast becoming a joke?

The FTSE 100 engineering titan has done brilliantly in recent years. But our writer wonders whether the Rolls-Royce share price…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

Is there a ‘best age’ to start buying shares?

Christopher Ruane weighs some possible pros and cons of waiting to start buying shares for the first time, versus starting…

Read more »

piggy bank, searching with binoculars
Investing Articles

Is it time to look again at the FTSE 250’s worst performers?

Our writer considers the prospects for two of the worst-performing shares on the FTSE 250, with falls of at least…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing For Beginners

Down over 40% in the past year, I think investors should consider these value shares

Jon Smith points out two value shares that have fallen heavily over the past year but are starting to look…

Read more »