Fears of inflation dominated the first part of 2022. UK stocks in the oil and gas and mining businesses did well. Now fears of a recession are starting to dominate. I think it’s about time I looked for stocks and shares that could offer some protection for my portfolio if a recession hits.

Recession-proof UK stocks don’t exist

There’s no such thing as a recession-proof stock, but some stocks are more sensitive than others to the peaks and troughs — or booms and busts — of the business cycle. Cyclical stocks tend to follow the ups and downs in an economy. When a recession hits, cyclical shares tend to perform poorly and fall in price. On the other hand, defensive stocks are less affected by the economy. There are also sensitive stocks that fall somewhere in between. 

Defensive stocks can be found in the following sectors:

• Consumer defensive
• Healthcare
• Utilities

There are hundreds, if not thousands, of UK stocks in the consumer defensive, healthcare, and utility sectors. I can’t buy them all but I could look for a fund that invests in these sectors. Yet I would prefer to pick my own stocks. So I need something to help me select companies with a recession in mind. That something is quality.

Quality UK stocks

Quality stocks tend to have higher margins, profitability, and cash flow than their peers. Strong balance sheets and stable or improved business operations are also hallmarks of quality stocks. These features are sought after by investors when a recession is looming and during one. In my opinion, quality is never out of fashion.

Key quality measures

Two stocks have caught my eye for quality and defensive sector membership: healthcare stock Bioventix and AG Barr from consumer defensives. One quality non-defensive sector name also struck me as worthwhile. Given that I was looking for stocks to add to my stocks and shares ISA for a recession, this company’s business model had immediate appeal. That stock was FTSE 100 member Experian. The company owns a database of millions of consumers’ and businesses’ credit activity and repayment histories. It sounds like the sort of outfit that might see demand for its services holding up when the economy sours.

Taking stock of recession risks

I’m intrigued by these three stocks. They look good on measures of quality. Two are from defensive sectors, and one has a business model that seems like it should hold up well in a recession. So, do I buy these three UK stocks for my Stocks and Shares ISA? Not without further research.

Although consumers will likely cut spending on food and beverages less severely than on, say, eating out and cinema visits during a recession, will they switch from AG Barr’s brands to cheaper alternatives?

Bioventrix makes antibodies for diagnostic procedures and drug and compound detection. I want to know what proportion of its sales goes to organisations less likely to cut spending dramatically in a recession (like, for example, the NHS).

For Experian, although checking credit seems to make sense when times are tough, in a prolonged and severe recession, would reduced spending render its services redundant? These are some questions I must mull over before pulling the trigger on any of these three UK stocks. 

The post 3 UK stocks to consider for a recession appeared first on The Twelfth Magpie.

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James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr, Bioventix, and Experian. 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.

The FTSE 100 has recovered about 80% of the slump it saw in March. That is the good news. But the cause of the slump, the Russian invasion of Ukraine, is sadly ongoing. The coronavirus pandemic is not yet over either. Concerns about inflation and central bank policy are still with us.

There are plenty of potential causes for further FTSE 100 volatility from the Ukraine to Covid, and inflation.

Not all indexes are created equal

There are no certainties in investing. However, in times of turmoil, large-cap stocks tend to do better. The FTSE 100 has performed positively over the last three years, one year, and the last six, three, and one months. The FTSE 250, which consists of more UK-focused mid-cap companies and the smaller, speculative FTSE AIM 100 index, have had more mixed fortunes.

Table 1. Price changes of UK stock market indices over various timeframes

As the table above shows, large-cap stocks look like they handle volatile markets better than others. Yet the FTSE 100 is not immune to volatility. Indeed I started this piece by pointing out that the UK’s leading index had seen a recent slump, albeit one from which it has partially recovered.

Defensive FTSE 100 sectors

Investing convention distinguishes between cyclical, sensitive and defensive sectors. The latter classification includes the consumer defensive, utilities and healthcare sectors. Stocks in these sectors tend to be less volatile and react less dramatically to broader market declines than stocks from other sectors.

But that does not mean that defensive sectors always shine. There is a trade-off to be made. Let’s look at the ‘beta’ metric, which measures a stock’s expected reaction to broader market moves. When a stock has a beta of one, it tends to behave on par with the market. A beta of more than one means the stock amplifies market moves. Finally, a stock with a beta of less than one tends not to move as much as the broader market, be that up or down.

Defensive stocks typically are low-beta shares. So, the possible protection I get in market declines might be offset by these stocks underperforming when the FTSE 100 is rising. Still, I think a basket of these stocks in my portfolio is worth the trade-off.

Tesco, a consumer defensive, and GlaxoSmithKline, a healthcare stock, have some of the lowest daily volatilities of all FTSE 100 stocks at 1.55% each, plus low betas of 0.69 and 0.61, respectively. British American Tobacco (beta 1.06) and Diageo (beta 0.64) — both consumer defensive stocks — and SSE (beta 0.635), a utility stock, are other examples that come with lower-than-average volatility than other stocks in the FTSE 100. These five also pay dividends that help boost returns.

Table 2. Analyst forecast 2023 dividend yield for my top 5

The lower historical volatility and betas of these stocks might not hold going forward. However, I would consider adding these five large-cap defensive stocks to my portfolio today for their potential to protect it when stock markets are volatile.

The post My defensive FTSE 100 stock picks for volatile markets appeared first on The Twelfth Magpie.

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James J. McCombie owns shares in Diageo, GlaxoSmithKline and SSE. The Motley Fool UK has recommended British American Tobacco, Diageo, GlaxoSmithKline, and Tesco. 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.

The Unilever (LSE: ULVR) share price was firmly in negative territory this morning. Is this connected to the wobbly market conditions we’ve seen earlier this week or are investors simply unimpressed with today’s first-half numbers? I think it’s a mixture of the two. 

“Good progress”

As far as I’m concerned, today’s results were far from bad. Unilever delivered sales growth of 5.4% over the first six months of 2021. In fact, this was better than analysts had been expecting. 

Like so many other businesses, the FTSE juggernaut is also seeing the benefit of having a solid online channel. Its e-commerce arm grew 50% over the first half of 2021. No less than 11% of the firm’s sales now come from here.  

On top of this, CEO Alan Jope said that the company had made “good progress” on its strategic goals. These include rotating its portfolio to “high growth spaces” such as Prestige Beauty and Functional Nutrition. 

As a result, the company remains “confident” that it will hit its 3-5% sales growth target for the full year. That doesn’t sound too bad, right?

So why is the Unilever share price lower?

There might be a few reasons. While it’s confident on its sales growth target, it did highlight that it would face “more challenging comparators” in the second half of 2021.

In addition to this, cost inflation is starting to have an impact. In fact, the company can’t be sure what margins will look like by the end of 2021. For its part, Unilever thinks they will come in flat. However, that’s unlikely to have gone down well with a market that’s already worried about rising Covid-19 infections and the accompanying ‘pingdemic’.

Chuck in some currency headwinds and a reduction in free cash flow and the fall in the Unilever share price makes more sense. More generally, some investors may simply be less bullish on management’s ability to grow the business. That’s understandable to a point. Growth has stalled somewhat in recent years. 

Here’s why I’d buy today

Before markets opened this morning and Unilever’s share price dived, the stock traded on 20 times earnings. To me, this already looked like a fair price to pay. This is a high-quality, defensive business with a portfolio of familiar brands and a track record of generating great returns on capital. It’s unlikely to ever trade at a ‘bargain’ valuation.

Unilever isn’t lacking in big-name supporters either. Tellingly, top UK fund manager Nick Train continues to hold the stock in spite of near-term issues. In fact, Unilever represents Train’s third-biggest holding in both the Lindsell Train Global Equity and UK Equity funds. 

I also think the dividend stream compensates for the uninspiring performance in the Unilever share price over the last year. The current analyst consensus has the FTSE 100 firm returning 144p per share this year. That’s a yield of 3.5% at today’s price.

On top of this, the firm is busy buying back up to €3bn of its own stock. In time, this should help push the Unilever share price higher.

Opportunity knocks

When looking for potential core holdings for my portfolio, this FTSE 100 company always springs to mind. And, despite today’s tumble, I still reckon Unilever is a great stock to own for the long term. I’d be happy to buy today. 

The post What’s going on with the Unilever share price? appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Lindsell Train Global Equity. The Motley Fool UK has recommended Unilever. 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.

Unilever share price: Groundhog Day?

Back in March, investors sold what they could to preserve their capital. As one of the biggest (and therefore most ‘liquid’) UK stocks, it was perhaps inevitable that a FTSE 100 juggernaut like Unilever would be sacrificed by so many in the stampede.

Even so, that sell-off was scary. From mid-February to mid-March, Unilever’s share price fell almost 20%! Despite riding the recovery wave like so many other UK stocks since then, it’s now sunk back to below the 4,000p mark. 

I can understand why this must be frustrating for committed ‘buy-and-hold’ investors, particularly those who began buying back in August 2019 when the Unilever share price had climbed to almost 5,200p. So, what’s going on?

Why has Unilever sold off again?

There may be a few reasons. Chief among these is how the company is currently trading. Put simply, Unilever’s recent set of full-year numbers fell short of analysts’ expectations. At a time when many consumer staple stocks are benefiting from multiple lockdowns, the £100bn cap is struggling to increase profits.

Another reason is that Unilever just isn’t a very exciting business. How could it possibly compete with the hype and noise associated with (temporary?) market darlings such as US electric car maker Tesla? To use another example, why would anyone leap at the top-tier giant when there are some UK stocks climbing 200% in just one week?

I get it — Unilever is boring, boring, boring. But that’s why I like it. Moreover, investment decisions should never be made on just a single year’s earnings, at least in my opinion. We need to look at the big picture.

Quality stock

In many ways, Unilever is still the great defensive company it’s always been. Here are a few attractions that jump out at me. 

• Consistently high margins and returns on capital
• A truly global player
• A reliable dividend payer
• Manageable levels of net debt
• Strong corporate governance and ‘green’ credentials
• A monster portfolio of brands/products that people repeatedly buy. 

The FTSE 100 has some great stocks and some truly awful laggards. Based on the above, Unilever is surely in the former camp.

Another option

Of course, no business is perfect. Unilever’s growth rate is admittedly sluggish (although I think the beauty division is destined to bounce back when lockdowns lift). Moreover, not every investor will want to own the shares directly due to their risk tolerance and/or investing horizon.

This being the case, a fund holding a substantial portion of its money in the FTSE 100 giant might be more appropriate. Clearly, there’s no shortage of candidates here. Star stock-picker Nick Train, for example, has 8.8% of his near-£6.5bn LF Lindsell Train UK Equity fund invested in the company. That’s a conviction holding if I ever saw one!  

Unilever share price: the bottom line

Unilever’s average price-to-earnings (P/E) ratio over the last five years has been a little under 21. Given that it now trades on just 17 times earnings, I think this stock could prove an absolute steal in time. The time to buy quality is when it goes on sale. This may be the case now with Unilever. 

The post The Unilever share price is struggling. I’d buy this FTSE 100 stock now! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. The Motley Fool UK has recommended Unilever. 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.

There’s a lot going for the FTSE 100 index, which I’ve talked about in another article today. But there’s something to be said for caution, too. There are still potential roadblocks ahead.

Here are two of them:

#1. Continued corona-crisis

The vaccine rollouts are a huge positive, but what about the new virus variant in town? We still don’t know if it’s going to respond appropriately to the Covid-19 vaccines. And if it doesn’t, we have another problem at hand. 

Moreover, there are at least some people who are wary of the vaccine. If the number increases to a level that keeps virus levels high, that could be an additional challenge. 

#2. Brexit delays

Despite the Brexit deal being struck, there are still thorny issues to contend with. A news piece I read today, for instance, pointed to struggles faced by parcel courier providers because of more complex processes.  

Financial services is another area that needs resolution. And this is important, because of the large financial services industry in the country. 

While I hope that neither of these situations blows out of control, I think they do serve as a good reminder that we should still maintain some caution in our investments. 

To that end, I would still consider buying ‘safe’ stocks or those that can withstand stock market crashes better than others.

Here are three that I’d consider:

#1. AstraZeneca — FTSE 100’s Covid-19 star

This FTSE 100 pharmaceuticals biggie hasn’t just been a literal life-saver this year, it was also one of the best performing stocks in the months following the stock market crash. 

Like all others, it saw a dramatic fall in March, but by July it made big gains and was trading at all-time highs. It has seen a sharp reversal in fortunes since the stock market rally started in November, however, as investors flocked to beaten down stocks. It’s trading at levels 20% below its 2020 highs now. 

I think it’s a solid stock in any case, but even more so when I keep the risks of another market meltdown in mind. 

#2. Hikma Pharmaceuticals — improving performance

This is another FTSE 100 healthcare stock I like, and not just because it’s a defensive one.

It put out a positive guidance in November last year, and its share price is currently near all-time highs. Though with a price-to-earnings ratio of 12.5 times, I reckon that it can increase more. 

#3. Ocado — fortune-favoured share to buy

Much like AZN, OCDO too has seen subdued share prices since the stock market rally began.

But also like AZN, it has a lot going for it in terms of long-term prospects. With the continued lockdown, I think this FTSE 100 stock will continue to perform in the short term as online deliveries remain in demand, not something we can say for all businesses. 

The post Shares to buy: 3 reasons why I’d still love to buy these FTSE 100 stocks appeared first on The Twelfth Magpie.

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Manika Premsingh owns shares of AstraZeneca and Ocado Group. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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.

Should today’s trading statement change this? I think so. Let me explain.

BAE: down but not out

Predictably, BAE has been impacted by the coronavirus during the second quarter of its financial year. Its UK-based Air and Maritime divisions were among the worst hit, although this was mitigated by “strong underlying operational performance and cost control measures”.

Across the pond, the FTSE 100 member’s Controls and Avionics business has also been affected and this could continue for a while. Demand has also been lower at its Power and Propulsion business and cybersecurity division.

On a brighter note, BAE does look to be getting back to work. Productivity levels at its defence businesses (which generate most of the firm’s revenue) “improved” in June. Although many are still operating from home, the company said that more than 90% of its staff were getting on with things.  

What about the outlook?

Here’s where things get interesting. According to BAE, sales are predicted to be “broadly stable year-on-year“, although profit over the first six months of 2020 is likely to be around 15% lower. That’s not great, but it’s not a disaster compared to what’s going on at other UK-listed stocks. 

Encouragingly, the company also said the performance in the second half of 2020 will be “much stronger” as operations return to full steam. The caveat, of course, is that this outlook could change rapidly in the event of a significant second wave of the coronavirus. 

Despite the disruption caused by the pandemic, BAE’s acquisition spree has not been impacted either. The $275m purchase of Raytheon’s Airborne Tactical Radios, revealed in January, completed last month. Another acquisition, Collins Aerospace’s Military Global Positioning System business, should be finalised “early in the second half“. 

On top of this, the £15bn cap is continuing to invest in new facilities as part of its growth strategy. It’s also trying to get its pension scheme in order, having recently “injected” £1bn.

This doesn’t sound like a company in crisis to me. 

A potential bargain then?

I’m tempted to think so, even if BAE’s shares were trading fairly flat today. Perhaps investors are more concerned over the possibility of a second coronavirus wave to see the green shoots in today’s statement.

Then again, there could also be some reluctance to buy given the uncertainty surrounding the company’s final dividend payment from the last financial year.

Back in April, BAE said that it would make a decision on this when half-year numbers are confirmed next month. Personally, I think there’s a fair chance of the dividend being paid based on this update.

Ultimately though, it shouldn’t matter. As we never tire of saying at the Fool UK, stocks should be purchased with the intention of holding on to them for the long term. Don’t let the tail wag the dog.

Bottom line on BAE

At a little less than 11 times earnings and considering its defensive qualities, I think BAE is something of a bargain right now. Hold it as part of a diversified portfolio and the eventual returns should make up for any near-term volatility. 

The post Fear another market crash? BAE Systems shares look a great buy to me! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

This is why I think the most rational approach in the current climate is to focus on maximising the chances of achieving a great result rather than stretching for an exceptional one. Here are three smart investing moves that fit well with this mentality.

1. Drip-feed

The desire to buy at the very bottom and sell at the very top is natural. In reality, it’s very hard (if not impossible) to consistently do so. This is partly because no one rings a bell to announce market extremes. 

There’s also a human element to this. When markets crash, fear abounds. Most people worry that they’ll fall further. When markets then rally, greed takes over. A lot of us assume we’re in danger of missing the boat and dive in headfirst. And then they fall again.

Enter ‘pound-cost averaging’, otherwise known as drip-feeding your money into the market. Simply set up an instruction with your broker to invest the same amount of cash into a fund or stock on a monthly basis.

By following this process, you remove emotion from the equation. You also help smooth out returns by (automatically) buying more when prices are down and less when prices are up. It saves a lot on commission too! 

2. Diversify

Gradually moving your cash into stocks is all well and good, but it will count for very little if your portfolio isn’t sufficiently diversified. Having the vast majority of your wealth in oil stocks, for example, won’t protect you in the event of a crash in the price of the black stuff (such as we’ve recently experienced). Holding only small-cap stocks can be a recipe for a disaster in tough economic times as many of these might fail.

This is why holding a combination of nimble minnows. solid mid-caps and established blue-chip stocks in a variety of sectors is smart for most people.

Of course, diversification can extend beyond stocks. Having a balanced portfolio containing some exposure to bonds, property and gold can provide protection if/when one or two of these assets perform poorly. 

Will this put a cap on returns? Yes, up to a point. Research has shown that keeping all your money in stocks will give you a better return over time compared to spreading it around.

What research can’t do, however, is replicate the emotional rollercoaster inherent in such a strategy. I’d argue that sacrificing some profit for good health is worth it.

3. Defend

A final smart move to make in uncertain times is to gravitate towards those stocks that have proved particularly resilient in previous economic storms.

Within this category, I’d include consumer goods firms, utility companies and big pharma. All three sectors provide goods and services that are always in demand so earnings should remain relatively stable. This also means that many of these companies will continue to pay dividends to their owners at a time when a lot of firms won’t.

The only flipside to the tendency of defensive stocks to hold their value is that they are unlikely to generate the biggest gains as markets recover.

The post 3 smart moves for investing in uncertain markets appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

This episode has cut fast and deep with investors too, a whole generation of whom have never witnessed markets bleed to this extent before.

That’s not to say that all stocks will perform poorly during the most difficult times. Here are some that might do better than most.

Bargain hunters and sinners

Of all the sectors most impacted by the outbreak, retailers feature near the top. With all but essential shops shut and some online operations being stood down (e.g., Next), it’s going to be a hard few months for companies of all sizes. Even when the lockdown lifts, shoppers will surely be more careful with their cash than ever before. 

One group that tends to do well during recessionary times, however, are discount stores. FTSE 250 firm B&M European Value Retail would be a good example. I also suspect that Primark-owner and top-tier member Associated British Foods will remain popular.

The outlook for other sectors is unclear. The postponement of huge sporting events such as Euro 2020 and the Olympics, for example, will have a huge impact on betting firms in the near term but it may also dissuade some who like the occasional flutter from doing so during the nailed-on recession. For this reason, I suspect gambling firms might still be a risky bet going forward.

Other sin stocks, such as tobacco firm Imperial Brands, could fare better. Aside from their addictive nature, smokers may regard their products as affordable ‘treats’ during stressful times. Despite pubs and clubs being closed, firms such as Diageo may be another beneficiary as more of us drink at home.

Steady stocks

Of course, there are less controversial stocks that should offer stability regardless of what the economy is doing. Within this category, you might include phamaceuticals, waste management firms, and funeral services. As such, businesses like GlaxoSmithKline, Biffa, and Dignity should all prove resilient.

Having already benefited from panic-buying as the coronavirus outbreak worsened, supermarkets should be something of a safe haven too. My preference in this space would be Tesco, for its dominant market share.

Given the UK’s devotion to our furry friends, those in the pet space could also be worth a look. Earlier this week, FTSE 250 firm Pets at Home stated that it would keep its stores, website, and veterinary practices open for owners to pick up “essential“ products and obtain emergency health care, underlining how demand for these things won’t suddenly disappear. Veterinary services provider CVS Group is another option.

A word of caution

While most or all of the above should do better than most in troubled times, it’s worth mentioning that this will not necessarily translate into big share price gains. In reality, it may simply be that their value falls less than others.

For this reason, it’s worth remembering that all but the most cautious of us should still consider quality growth stocks if we plan on staying in the market for many years to come.

The post Fear a recession? Here are the stocks I think might thrive appeared first on The Twelfth Magpie.

More reading

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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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. The Motley Fool UK has recommended Associated British Foods, Diageo, Imperial Brands, and Tesco. 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.

Here are three of my favourites from the FTSE 100.  

Steady income

With the threat of nationalisation under a Jeremy Corbyn-led government now eliminated, it’s no surprise that power provider National Grid (LSE: NG) is back in favour with investors looking for reliable blue-chip stocks.

The only drawback to buying a slice now is that it’ll cost you more. A 20% increase in its share price since Boris Johnson’s election victory means the £37bn cap now trades on 18 times earnings. That’s not expensive compared to, say, your average tech play, but it’s quite rich for what is, to be frank, a rather dull company with fairly limited growth prospects.

Of course, one could say that this is a price worth paying for stability. Moreover, the Grid remains a great source of income. In the current financial year, for example, analysts are predicting a total cash return of 48.7p per share. Based on the current share price, that gives a yield of 4.6%.

All-weather stock

As industries go, I think you’d struggle to find one more defensive than healthcare. Regardless of whether the economy is thriving or not, people will always require drugs and medical treatment.

This fact makes owning a pharmaceuticals giant look prudent if you suspect a crash is on the cards. Of the two that feature in the FTSE 100 — GlaxoSmithKline (LSE: GSK) and AstraZeneca — I’d probably opt for the former, even if it’s in the process of splitting out some of its operations following its consumer healthcare joint venture with Pfizer. That JV is called GSK Consumer Healthcare and it intends to de-merge it from its main ops within three years and to list it.

Although Astra has a more impressive pipeline of drugs, Glaxo’s shares are significantly cheaper at 14 times earnings (compared to Astra’s 24).

The latter’s income credentials are also better. It’s expected to pay out 80p per share in 2020, which converts to a 4.8% yield. Its top tier peer yields 2.8%. 

Temporary weakness

A third stock worth holding, in my opinion, is beverage giant Diageo (LSE: DGE) — owner of popular brands such as Johnnie Walker whisky and Smirnoff vodka. In contrast to National Grid and Glaxo, its share price has been on a downward trajectory of late thanks to concerns over slowing sales growth.  

I don’t think holders should be unduly concerned by a period of stodgy trading. While there’s no way of knowing for sure how long this selling pressure will continue, we can be confident that global demand for premium alcoholic drinks won’t evaporate. Indeed, the low price of Diageo’s spirits relative to other discretionary items means that spending on this kind of item is likely to be fairly steady if the economy wobbles.

Diageo’s shares trade on 23 times earnings, making it the most expensive of the three mentioned today. At 2.3%, it also offers the lowest prospective yield. For the geographical diversity it offers, however, I still rate the shares as a ‘buy’.

The post If a crash is coming, I think these FTSE 100 stocks are worth buying appeared first on The Twelfth Magpie.

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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 has recommended Diageo. 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.

That investors don’t seem all that concerned may be partly down to the fact the company’s performance in emerging markets was more encouraging. That highlights why geographically diversified companies such as Unilever can be ideal for most defensively-focused portfolios. In these markets, collective sales rose 5.1%. Overall revenue increased by 5.8% — in line with analysts’ forecasts, although this was helped by a 2.3% currency boost.

Investors are also likely to be relieved by the prediction full-year results will show an improvement in profit margins and “another year of strong free cash flow.” Looking ahead, Unilever said it was now anticipating underlying sales growth of somewhere “in the lower half” of its multi-year range of 3-5% in 2019. 

Newish CEO Alan Jope (who replaced Paul Polman at the helm late last year) seemed satisfied with these numbers, saying the performance had shown “a good balance between volume and price.” He also commented that the owner of ‘sticky’ brands, such as Marmite and Pot Noodle, was “taking action to remain relevant to the consumer of the future, such as setting stretching goals on plastic use.”

So, are the shares worth buying? Well, they certainly aren’t cheap, despite being 12%-or-so lower in value than the all-time high hit back in September. That said, the current price-to-earnings ratio of 21 is pretty much bang on its average valuation over the last five years, suggesting that new investors won’t necessarily be overpaying. A 3.1% yield, while nowhere near as high as that offered by other top-tier firms, is worth grabbing and should be adequately covered by profits. 

For me, Unilever is just the sort of stock to hold if markets get choppy. It won’t necessarily rise while others fall, but the predictability of its earnings should ensure any damage is both temporary and relatively limited. 

Another defensive demon

Another stock I think should appeal to defensively-minded investors is Robinsons and J2O owner Britvic (LSE: BVIC). Even if the UK does enter a recession, demand for small-ticket items, like the drinks produced by the FTSE 250 member, is unlikely to be hit as hard compared to those selling more discretionary items.

Things have been fairly quiet at the business since I last looked at its stock in July. The only real news was the appointment of a new chief financial officer (Joanne Wilson). To be honest, that’s how things should be with any company worth holding for the long term… no panic, no stress, just quietly chugging along.

Notwithstanding this, Britvic’s stock has been in scintillating form, moving almost 40% higher in the last twelve months alone. Following this strong performance, shares currently change hands for almost 19 times earnings. Again, that’s not cheap compared to the general market, but it does, I think, reflect the quality on offer (based on consistently stellar returns on capital employed). 

A secure-looking 2.8% dividend yield is another bonus, particularly for those only looking to protect their wealth in the event of an economic downturn.

The post Looking to protect your wealth? Unilever isn’t the only stock I think should appeal appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. 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.