Is there any way for Foolish investors to come out on top? I think so. Today, I’m taking a closer look at two companies that could offer great protection from the looming fallout.

Recession-proof

Small-cap Begbies Traynor (LSE: BEG) is a company I’ve been positive on for quite some time. The £140m-cap is a property services consultant and insolvency specialist — the latter a service that, sadly, looks likely to experience greater demand as the recession hits. Indeed, today’s trading update was indicative of what’s likely to come.

Revenue for the financial year to the end of April is now expected to be around £70m — up from just over £60m in 2018/19.

Profits at its business recovery and financial advisory division were a highlight. They grew roughly 30% over the year as more firms faced insolvency, even before the pandemic struck. Recent acquisitions and higher average fee levels also provided a boost.

All told, adjusted pre-tax profit is likely to come in at £9.2m, up from £7m in 2019. The firm did say, however, this included a £600,000 hit after several of its property service lines were hit by the lockdown. 

Positive outlook

Begbies was trading 3% lower this morning, suggesting some traders were banking profits. The stock was, after all, up a stonking 77% since 23 March.

Today’s move aside, I still think the company could be a rare winner in the recession. While the full impact of the coronavirus is unknown, Begbies is expecting “progressive increases in the number of insolvencies” as we move through 2020. This could be compounded, of course, by Brexit.

In addition to this ‘positive’ outlook, Begbies finances look increasingly sound. Net debt stood at £2.8m at the end of April, down significantly from £6m in 2019. The firm had £7.2m in cash last month and undrawn borrowing facilities of £15m.

There’s good news for income seekers too. Having already paid its interim dividend this month, Begbies said it was intending to confirm a final dividend in July. 

Trading on 16 times forecast earnings before markets opened, the stock isn’t screamingly cheap. It could, however, be a great counter-cyclical, recession-beating pick.

Profits “ahead of expectations”

Begbies isn’t the only option for investors in this space. New-stock-on-the-block FRP Advisory (LSE: FRP) could be a great alternative. Larger than its peer Begbies, the company also supports businesses facing insolvency. 

Unsurprisingly, demand for its services has been just as good. In its recent update, FRP said it had “traded strongly” in the second half of its financial year. Revenue will likely to come in at £31.8m with profits “ahead of the Board’s expectations.” For the full 12 months, £63.2m of revenue has been predicted — a rise of 16.4% on the previous 12 months. 

Like Begbies, FRP looks financially sound (and you would hope so!). Like Begbies, the company also expects to pay a final dividend. 

Having only listed in March, the minnow looks to be flying under analyst radars. I expect this to change markedly in the coming months as the recession takes hold. I think those buying this defensive stock now could see great returns in time.

The post Don’t fear the recession. I’d buy these defensive stocks to come out on top 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.

Non-cyclical and growing fast

One sector that can depend on relatively robust demand throughout the economic cycle is pharmaceuticals. And of UK-listed pharma giants, one of my favourite is Shire (LSE: SHP). This is because the group has pivoted over the past few years to become a global leader in treatments for rare diseases, an area that commands high prices and has little competition.

In the first half of this year, the shift towards these higher-priced treatments paid off, with the group reporting a 3% constant currency uptick in revenue to $3.8bn. There was also a whopping 108% increase in operating profits, to $0.8bn, as costs related to its blockbuster Baxalta acquisition died down.

During the period, the business generated a significant $756m in free cash flow, which allowed management to reduce net debt by some $1.4bn during the period, to $17.6bn. For the time being, management will need to continuing prioritising de-leveraging rather than boosting meagre dividends. But over the longer term, there’s some income potential if management doesn’t prioritise more acquisitions.

Unfortunately for domestic investors attracted to Shire, the company is currently in the process of being acquired by Japanese pharma giant Takeda, for £49 per share. However, Shire’s current share price is significantly below this level, as many investors believe either Takeda’s nervous shareholders, or regulators, will nix the debt-fuelled deal.

With this in mind, I’m not buying shares of Shire right now. But if Takeda’s bid falls through, and Shire’s share price drops, it’s certainly one defensive stock that would high on my watch list.

Everyone loves a coke

But with Shire possibly off the table for domestic investors, I think another defensive share worth considering is Coca-Cola HBC (LSE: HBC). Coca-Cola HBC is the brand’s bottler serving 28 countries, stretching from Italy and Ireland in the west, to Russia in the east, and Nigeria in the south.

The group’s defensive characteristics are quite high as consumers tend to continue making small purchases, like a bottle of Coke, throughout the business cycle. Furthermore, with more than half of its sales coming from developing and emerging markets, such as Hungary, Ukraine and Bosnia, its fortunes are less tied to economic health in key developed markets, like Western Europe and North America, than many other FTSE 100 peers.

Over the longer-term, exposure to these markets is a big positive since they’re generally experiencing high levels of economic and population growth. In the first six months of the year, these attributes helped boost volumes sold by 4.6% year-on-year, with net revenue up 6.4% on a constant currency basis to €3.2bn. The group’s management has also implemented margin improvement measures that increased operating profits during the perod by a whopping 14.1%, to €0.3bn.

Rising sales and margins are also fueling increases to the dividend that currently yields 1.87% annually. While this yield is below the FTSE 100 average, I think the company’s defensive nature and rising profits could make it a solid, non-cyclical option for nervous investors at its current price of 21 times forward earnings.

The post Worried about the next recession? Consider these FTSE 100 defensives appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Shire. 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.

High margins equals high dividends 

One stock that should survive the next downturn in better nick than hot growth stocks is boring old tobacco giant Imperial Brands (LSE: IMB). The cigarette seller’s stock currently yields a whopping 6.74%, so investors are already being richly rewarded for investing in one of the market’s most out-of-favour sectors.

This yield, a nearly decade-long history of 10%+ dividend hikes, and a valuation of just 10 times forward earnings all make it one of the few true value standouts in the FTSE 100. However, this valuation isn’t without reason as the group, alongside the sector as a whole, is confronting very real problems in the form of declining rates of traditional cigarette smoking and market share gains from upstart competitors in the growing market for non-traditional smoking devices such as vaping.

In the first half of they year, this led to IMB reporting a 2.1% drop in constant currency net revenue to £3.5bn and a 2.2% downtick in adjusted operating profits to £1.6bn. Six months of results don’t tell the entire story though as IMB is making good progress in taking market share in key markets such as the UK, Japan and Germany and is investing in growth brands in places such as the US that should drive continued long-term profit growth.

Furthermore, although the business is already highly, highly profitable, management is still wringing out further cost cuts that are already driving both dividend increases and deleveraging of the balance sheet.

All told, the halcyon days for tobacco makers are undoubtedly behind them, but global giants like IMB still have billions of smokers to sell to and through consolidation and cost-cutting have the potential to keep driving significant profit growth. This won’t earn them a growth stock valuation, but for conservative investors seeking income and defensive characteristics, I reckon IMB could be a top choice.

Shifting goods consumers always need to buy

Another FTSE 100 defensive that’s looking interesting to me is Reckitt Benckiser (LSE: RB), which sports a forward valuation of 19 times earnings and kicks off a decent 2.6% dividend yield.

The group’s defensive characteristics are strong thanks to selling everyday items from Durex condoms to Lysol cleaners and Clearasil skin treatments. In the first six months of this year, sales of these goods were strong and sent group-wide revenue up 4% on an underlying basis and 30% on a reported basis to £6.1bn thanks to its Mead Johnson acquisition.

Adjusted operating profits bumped up 29% during the period to £1.4bn, but over the long term there is good potential for increases to already impressive 23.6% underlying operating margins as the Mead Johnson purchase is integrated. And as this big acquisition is bedded in, I believe dividends should naturally rise as the group deleverages, freeing up cash to be returned to shareholders.

With an impressive array of big brand names, global reach and a management team that has proven very capable of successfully executing acquisitions improving profitability, I reckon Reckit Benckiser could be an ideal long-term holding for conservative, income-focused investors.  

The post Two top FTSE 100 income stocks for conservative investors appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.

Profiting from data 

One is credit bureaux, which hoover up personal data and credit payment histories from hundreds of millions of people, synthesise the data and sell it on to financial services firms and the like that base credit acceptance decisions on the information. For market leader Experian (LSE: EXPN), this means steady revenue growth throughout the economic cycle as consumers apply for loans in recessions and boom times alike.

And the company isn’t just betting on steadily growing demand from its core UK and US credit services divisions to boost long-term profits. Rather, the group is expanding into growth regions such as Latin America and Asia where consumer use of credit is growing rapidly from a small base. In the quarter to December, organic growth from Latin American operations was 7% and in Asia it was 12%, which together with strong growth in the US saw group revenue rise 5% year-on-year on a constant currency basis.

Thanks to the incredibly high barriers to entry for competitors, Experian’s reams of data fetch a high price from lenders who have only two realistic competitors to consider. Last year this meant operating margins reached a whopping 24.7%. High cash flow is being used to acquire related business service companies in high-growth categories such as IT security that are already paying off.

On top of the non-cyclical nature of its business and very good growth opportunities, Experian also returns gobs of cash to shareholders. Last year this included $381m in dividends that equals a 2% yield, with an even bigger share buyback programme of $600m well on its way to completion this year. All of these positive characteristics mean Experian is pricey at 23.7 times forward earnings, but for a stable business with great long-term potential, I reckon this isn’t a ridiculous price to pay.

Modern day alchemy

Also on my list is Croda (LSE: CRDA), a speciality chemicals firm that grew sales and profits straight through the financial crisis as management steered the group towards selling more chemicals for consumer goods, rather than more cyclical industrial end uses.

This change in focus has proven a goldmine in recent years as its created immense sales opportunities, evened out earnings and helped boost margins. Last year, the group’s constant currency revenue grew 4.6% to £1.3bn, while adjusted operating profits increased by 6.9% to £332m.

For now, management uses the high and rising cash flow from operations to invest in its internal R&D process, acquire complementary businesses and push into other sectors such as life sciences. Like Experian, Croda isn’t cheap at 24 times forward earnings, but with good growth prospects, a rapidly growing 1.7% dividend yield, and non-cyclical characteristics, its still one great business I’d love to own in my retirement accounts.

The post The non-cyclical FTSE 100 defensives I’d buy and hold forever appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.

As defensive as they come

First up is credit bureau Experian (LSE: EXPN). It’s by far the largest of three giants in an industry that is an inescapable fact of modern life. Whether its applying for a car loan, mortgage, or credit card, you can be sure your credit details will be checked via Experian or a competitor. And with records on hundreds of millions of consumers, there are incredibly high barriers to entry for new competitors.

Experian leverages these assets into pricing power that manifests itself in operating margins that hit an enviably high of 24.7% last year. On top of high margins, the company also offers growth throughout the business cycle as consumers generally continue to apply for credit even in extreme downturns. This is clear in the company’s results for the years 2009-2011, in which it posted sales growth of 2.9%, 1.7% and 10.8%, respectively. While growth figures in 2009 and 2010 weren’t fantastic, there were few other companies posting positive sales momentum during the depths of the financial crisis.  

With high margins and few expensive capital investment needs, Experian is in a fantastic position to return loads of cash to shareholders. Last year, the company’s operations kicked off $1,525m in cash, of which management returned $383m via a dividend that currently yields 2.09%. In addition to cash dividends, the company also bought back $364m worth of its own shares.

The downside is that all these positives mean Experian is not cheap at 24 times trailing earnings. However, with strong positions in developed markets such as the US and UK, and exposure to long-term growth prospects in Brazil, I reckon this price isn’t too lofty for long-term investors.

Just a temporary setback? 

The second stock in the same vein I’m looking at is consumer goods juggernaut Reckitt Benckiser (LSE: RB). The company’s share price has dropped nearly 15% over the past three months as its sales growth has slowed and analysts have increasingly scrutinised the logic of its $17.9bn acquisition of baby formula seller Mead Johnson.

However, while sales growth has stuttered, with Q3 revenue down 1% year-on-year, I believe RB is still well-placed to support long-term sales and profit growth. One reason I’m bullish is that 2% of Q3’s sales reversal can be attributed to the recent cyber attack that crippled supply chains in North America, while another chunk came from – hopefully –  one-off problems in South Korea. Furthermore, the recent sales growth slump mirrors troubles competitors, such as Unilever and Nestle, have had.

Looking forward, it also appears RB may be gearing up to slim itself down, with management announcing a reorganisation into two businesses; consumer health brands such as Nurofen and Durex; and hygiene brands including Finish and Lysol. RB has successfully jettisoned bits of the business before, such as the Indivior spin off in 2014, and selling off the hygiene division would free up tonnes of cash and allow it to make further consumer health acquisitions. Either way, with high margins, a history of non-cyclical sales growth and a steady dividend – matched by high share buybacks, I like Reckitt Benckiser as a long-term holding.

The post 2 FTSE 100 growth dividend shares I’d buy to retire on appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Experian and Reckitt Benckiser. 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.

But that’s not entirely the case because waste management firms are generally paid per tonne of trash or recycling collected. That means when the economy implodes and consumers buy less and produce less trash, the firms that collect it suffer.

However, this does not mean Biffa isn’t an attractive stock to own for the long term. Due to regulatory pressure in the past few years, the company has transitioned away from simple trash collection and landfill ownership into recycling and energy production as well.

The business is now much more diversified than it was when it was taken private several years ago and in 2016 its waste collection contracts with businesses and municipal governments accounted for only 48% of underlying operating profits.

This is still a significant chunk, but investors should be relieved that pre-sold energy production accounted for a full 45% of underlying operating profits during the period. This energy is generated through anaerobic digestion from the company’s landfills and is a reliable source of renewable energy.

Biffa’s overall health is still tied to the economic cycle but the company today is looking relatively diversified, is growing organically and through acquisitions and is doing well to re-position itself as a leader in an increasingly regulated industry. With stellar dividend potential in the medium term and an attractive valuation of 10.7 times forward earnings, the company is worth a closer look for investors willing to get dirty.

More reliable than trash pick-up 

A much safer non-cyclical option is credit bureau Experian (LSE: EXPN). The firm owns credit information on hundreds of millions of consumers and businesses and sells access to this data to banks and other financial firms that want to better understand the credit risk of potential clients.

This is a very defensive business as consumers continue to apply for, if not receive, credit cards, mortgages and other loans during recessions as well as bull markets. This division is still the company’s breadwinner and in 2016 accounted for 50% of revenue and 60% of EBIT. It’s also growing at a steady clip, 8% year-on-year in 2016, as consumers in developing markets such as Brazil increasingly apply for credit that was previously unavailable to them.

As the company expands into new regions and continues to add related bolt-on services such as data analytics and identity verification, it is increasing its stickiness with companies, governments and consumers alike. This is providing reliable revenue streams which, combined with high margins are producing high cash flow that is increasingly being returned to shareholders. In 2016 the company was able to return over $930m to shareholders through share buybacks and dividends thanks to operations that kicked off $1.3bn in cash flow.

Huge shareholder returns and steady non-cylical growth have me interested in Experian despite its shares’ somewhat pricey valuation of 22 times forward earnings.

The post Is this the most recession-proof share you can buy? appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended 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.

A management team worth its salt 

That’s why I have my eye on two defensives that produce reliable income no matter the economic environment. The first is long-time investor darling Reckitt Benckiser (LSE: RB). Shares of the consumer goods giant have doubled in the past five years for good reason and there’s little to suggest they can’t do so again in the next five years.

Aside from steady top-line growth, 2% year-on-year in 2016 at constant exchange rates but 11% at actual rates, the company’s management team has long prided itself on its laser-like focus on continually improving profitability. This led to operating margins reaching a stunning 24.3% in 2016, nearly double those of competitors such as Unilever. This is filtering through to investors as earnings per share for the year rose 6% to 256.5p.

Rising earnings comfortably covered the company’s 153.2p annual dividend even as the latter rose 10% year-on-year. With cover this high and an incredibly cash generative business (free cash flow was £2bn in 2016), there’s plenty of room for the board to continue its long track record of increasing shareholder returns.

One potential pitfall investors should be aware of is the company’s $18bn bid for infant formula maker Mead Johnson. While RB’s core focus is consumer health products, this deal would dramatically increase the proportion of its sales coming from relatively lower margin, lower growth foodstuffs. The company has a long history of successfully pulling off acquisitions but investors will need to watch closely for signs of stumbles.

But if the deal goes as planned, like many have before, the combination of higher exposure to fast growing emerging markets and steady, non-cyclical sales from core brands could make RB shares a bargain even at 21 times forward earnings.

The big benefits of an addictive product 

Another top FTSE 100 defensive that could be on the other end of mega M&A deals is Imperial Brands (LSE: IMB). This is because the company is a relative minnow in the world of globe-spanning tobacco companies with a market cap of just £36bn.

And potential suitors have plenty of reason to take a bite out of the company as it controls 9.2% of the American market, the world’s most profitable tobacco market outside of China.

But even if an larger competitor doesn’t swoop in on Imperial, I reckon owning its shares still make a great deal of sense for more risk-averse investors. While the developed market-centric company isn’t growing organically, it is constantly improving free cash flow by cutting costs, focusing on a few core brands and making small bolt-on acquisitions.

Last year the company increased net cash from operations from £2.7bn to £3.1bn, which allowed it to increase dividends by 10% while maintaining a very manageable payout ratio of 62%. Shareholders now enjoy a 4% yielding dividend that is safely covered and growing sustainably as earnings rise.

Imperial’s shares trade at just 14 times forward earnings, a significant discount to higher growth peers. But with a 4% yielding dividend, stable revenue and the ever-present potential for a big buyout, this tobacco giant is one I’d be happy to own.

The post 2 top FTSE 100 defensives I’d buy right now appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Imperial Brands and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Well the bad news is that while everybody is going to die eventually, Dignity can’t predict when we’ll kick the bucket. It turns out the annual death rate can fluctuate dramatically. In the first three quarters of 2016, total deaths were down more than 2.7% year-on-year, which was enough to send underlying operating profits down 2.9% in the same period.

Over the long term however, the trend looks quite appealing for Dignity as an ageing population increases total deaths even as medical advances extend life expectancies. And while Dignity can’t control the number of deaths in the UK it can, and has been, growing through acquisitions and organic expansion.

Through September 23 the group had acquired 11 funeral locations for £11.3m as well as opened nine new ones. There’s also still plenty of room to continue expanding as Dignity controls only around 12% of this highly fragmented market.

There are a few red flags though. The company may need to pump the brakes on large acquisitions for a while as net debt as of June was £490m, or roughly 3.9 times the total cash generated from operations in the whole of 2015. Likewise it may have to contend with an increasing consumer demand for lower cost funerals or natural burials.

This may not be a major problem until millennials have aged into Dignity’s core demographic but I’m also leery at the lofty 22 times forward earnings valuation assigned to the company’s shares. High debt, a high valuation and low dividends don’t make Dignity an appealing share for me, but more risk-averse investors may want to take a closer look at what is a very, very non-cyclical share.

Now for a less depressing option

More appealing to me is food producer Cranswick (LSE: CWK). The company may not be a household name but its meats are consumed in most homes as it supplies grocers such as Tesco and J Sainsbury with pork, sausage and other meats. The overall domestic market for protein products is rather stagnant but the premium segment Cranswick targets is growing at a solid 3% per annum.

The company is supplementing growth in the premium domestic market with a series of targeted acquisitions and overseas expansion. These efforts helped boost revenue a full 15.9% year-on-year in the first six months of 2016 to £580m. Adjusted pre-tax profits rose an even more impressive 23.9% in the period, which allowed net debt to fall to £2.9m and an increase to dividends of 12.9%.

Other investors are also bullish and Cranswick shares now trade at a relatively pricey 19 times forward earnings. That said, a healthy balance sheet providing plenty of firepower for further acquisitions, a management team with a long history of growing the business and improving margins plus a relatively stable non-cyclical business make Cranswick a share I’ll be following closely.

The post Are these the best recession-proof shares you can buy? appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Global credit bureau Experian (LSE: EXPN) reported a very healthy 6% year-on-year jump in constant currency revenue in Q3 due to 4% organic growth and the effects of a small acquisition in the US. This is a very good level of growth for a company that posted $4.6bn in sales last year and digging deeper into the results shows that its future growth potential is still very high.

Continued growth will be coming from Experian’s exposure to fast expanding economies in Latin America and Asia. Brazil is already the company’s third biggest market after the US and UK and RoI and sales in the South American country are continuing to grow despite a poor economic situation. Indeed, in Q3 organic revenue growth in all of Latin America was a very impressive 8%.

Higher sales in South America and a 6% rise in organic revenue from EMEA more than offset the currency headwinds Experian is facing from the weak pound. And in the long run the potential from these two regions is rather astounding because as incomes rise, credit usage also increases. This is a boon for credit bureaux like Experian as banks need to access the records of millions of new customers applying for credit cards, mortgages and any other loans.  

As if the combination of long-term growth potential in emerging market and stable cash flow from developed markets wasn’t attractive enough, Experian also has the benefit of being a largely non-cyclical company. Financial institutions and other clients need Experian’s services even during recessions, as evidenced by the company recording organic sales growth each year from 2007/09 amidst the deepest downturn in recent memory.

Shares are pricey at 21 times forward earnings but with enviable sales growth and solid shareholder returns through dividends and share buybacks, I still reckon Experian is one of the best defensives out there.

Stick with tradition

If you prefer your non-cyclical shares to be the more traditional sort, one option is consumer goods giants Reckitt Benckiser (LSE: RB). The globe-spanning seller of Durex, Lysol and Nurofen has been in the media for all the wrong reasons of late with a former director jailed in South Korea and the CEO in hot water over his massive pay cheque. But there’s still reason for investors to be positive.

That’s because beneath these poor headlines the company’s trading is continuing to turn heads in the City. Q3 results released in October showed a 4% year-on-year increase in like-for-like sales as developing market consumers snapped up 8% more of RB’s products than in the same period a year prior. Aside from this underlying growth, the weak pound is also helping out as actual revenue rose 9% year-on-year and a stunning 17% in Q3 alone.

While the currency translation benefits of the weak pound don’t mean much over the long term, they will certainly help out British investors once dividends are paid. As with Experian, RB’s defensive nature, strong growth prospects and solid dividends have sent shares trading at lofty valuations, 22.9 times forward earnings in this case. While this is certainly a premium price, RB is a premium company for risk-averse investors who want to buy shares and hold them for decades.

The post 6% Q3 sales growth shows the huge upside for this FTSE 100 defensive appeared first on The Twelfth Magpie.

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• Start buying shares with just £20 a week? Here’s how even that could help someone build wealth
• If Experian is such a great FTSE 100 stock, why are its shares down a third?
• Here’s how putting £800 a month into a Stocks and Shares ISA from age 27 could fund a £2m retirement!
• Prediction: 2 FTSE shares that could outperform the S&P 500 between now and 2030

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The key to Experian’s ability to grow throughout the business cycle is its core operation of providing credit checks on consumers seeking mortgages, credit cards and any other form of lending. With records on some 900m consumers and over 100m businesses, Experian is one of the world’s largest credit bureaux. As we see in the below table, this scale means steady revenue growth even during the deepest of economic downturns.

The business of providing credit checks is necessary even during recessions and involves vast moats to entry for competitors, so Experian’s ability to repeat this success during future crises is fairly certain. We’ve seen this in action over the past few years as its Brazilian business, one of its three main markets, has grown steadily on a constant currency basis despite that country’s deep recession.  

While Brazil has been a drag on profits once Reals are converted into US Dollars, the increasingly wealthy country still holds huge long term potential. Other growth opportunities include the data analytics business, which takes advantage of Experian’s ability to sort through and find uses for massive amounts of data and sells this experience to an array of businesses. With shares trading at a reasonable 15 times full year EBITDA, I believe Experian is one of the most attractive non-cyclical shares to be found.

Sub prime

When the economy tanks and regular lenders such as high street banks begin bleeding red ink, sub prime lenders such as Provident Financial reap the rewards of consumers turning to door-to-door lending and other high interest forms of credit to pay the bills. This counter-cyclical business model proved valuable during the Financial Crisis as Provident performed well throughout the worst of the downturn.

Provident thrives in good economic times as well as sub prime borrowers’ confidence rises and they turn to Provident for car loans and credit cards to buy more goods. Since 2011 adjusted pre-tax profits have increased over 85% through organic growth and smart acquisitions, showcasing Provident’s ability to grow throughout the business cycle.

And while other financial firms like banks are still struggling to pay sustained dividends, Provident shareholders have enjoyed a 74% jump in dividend payments over the past five years. Rising dividends are quite safe due to earnings that cover payouts 1.35 times and a well-managed balance sheet that has improved substantially since the crisis. With shares trading at 16 times forward earnings and analysts forecasting a 4.8% dividend yield for the year ahead, Provident is definitely at the top of my watch list.

The post 2 non-cyclical stocks to avoid recession worries appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.