UK share prices are slipping again as fears concerning the fight against Covid-19 resurface. It’s clear that investors like me need to remain careful as the pandemic rages on. And in this climate, spending money that I can’t afford to lose on stock is a particularly bad idea. But I don’t think the uncertain economic outlook means investors like me should stop buying British stocks altogether.
This is because there are plenty of UK shares out there to keep even the most pessimistic of investors happy. British stock pickers can choose from a galaxy of defensive shares like general insurance providers, food manufacturers, energy suppliers and healthcare providers. Earnings at these sorts of stocks remain relatively stable during all points of the economic cycle.
Some UK shares will even thrive in the event of a long slump in the global economy. From pawnbrokers to gold producers and insolvency practitioners to alcohol makers, many London-quoted stocks enjoy their most fruitful periods during downturns like this.
Additionally, investors can buy companies that derive all, or almost all, of their profits from parts of the world where the Covid-19 crisis is less of a risk. Take China for instance. Strict clampdowns there at the start of the pandemic have caused infection rates to slow to a trickle. So the outlook for a large number of Asia-focused UK shares is quite robust.
I think there are many quality stocks trading far too cheaply to miss out on today. Some trade on historically-low price-to-earnings (P/E) ratios. Others boast big dividend yields. A large number of British stocks even carry both.
2 UK shares on my ISA shopping list
With all this in mind, here are two UK shares I’m thinking of buying for my own Stocks and Shares ISA in March.
#1: United Utilities
Utilities shares like United Utilities Group are always under threat from regulators, as recent proposals from Ofgem surrounding National Grid have shown. There’s also the threat posed by elevated levels of water consumption which can require extra spending on infrastructure. But I still think this FTSE 100 water supplier is a great buy today. Demand for its services remains relatively constant, regardless of broader economic conditions. And, right now, United Utilities boasts a gigantic 4.5% forward dividend yield. Remember that dividend projections and earnings estimates can sometimes miss their mark by a wide margin however.
#2: ECO Animal Health Group
Drugs developer ECO Animal Health Group also operates in a mega-resilient market. The amount spent on healthcare for animals in the food chain is always pretty stable. This is because meat and dairy product sales remain hardy even during recessions. In fact, City analysts think annual earnings at this UK share will soar 215% this year (to March). This leaves it trading on a low forward price-to-earnings growth (PEG) ratio of 0.1. A word of warning though. Animal-related stocks like this can see revenues take a major hit if disease rips through livestock markets. This is what happened last year when African Swine Flu swept through pig stocks in China.
