While the current recession in Britain is not expected to last much longer than a few years in total, it is still worth considering which stocks could withstand one in the future. Often in similar scenarios, investors turn to stalwarts (many of whom reside in the FTSE 100) for safety.
GSK
What it does: GSK has three global businesses that research, develop and manufacture medicines, vaccines and consumer health products.
By Harvey Jones. My portfolio is not particularly recession-proof. I'm optimistic about the economy and have been buying stocks that I expect will do well in the recovery.
That includes my most recent purchase, FTSE 100 pharmaceutical stock GSK (LSE:GSK).
In recent years, chief executive Emma Walmsley has prioritized creating a healthy line of treatments rather than rewarding shareholders.
GSK is no longer yielding the 5% or 6% of yesteryear, with a forecast yield of just 3.65% in 2024 and 3.93% in 2025. It's headed in the right direction, but there's a way to go.
I think the £68bn stock looks good value trading at 11.03 times earnings, while revenue is forecast to rise and net debt to fall.
The big risk is that new drug trials will not be done quickly enough to replace old ones that go off patent. There are no guarantees on that front.
People still get sick during the recession (possibly even more so) and that gives me some protection if my optimism improves in the wrong way. If I'm right, GSK could do even better.
Harvey Jones owns GSK shares.
Lloyds Banking Group
What it does: Lloyds Banking Group is a major UK bank and the country's largest mortgage lender.
By Alan Oscroft. Holding on to a volatile bank stock like Lloyds Banking Group (LSE: LLOY) in recession?
Lloyds' share price plunged sharply during the Covid crisis. And before that, it collapsed after Brexit. And that's not to mention the great financial crisis of 2008.
Well, when it comes to recession, investors often turn to stocks that provide essential products like food, energy, and medicine. And they can be great for a long-term stock portfolio.
But I think it may be a much bigger mistake to sell volatile stocks in a recession.
Recessions don't last long. And stock market bull runs have lasted a little longer, on average, over the last century and more.
So I don't care if the economy grows or shrinks. Lloyds would be the last stock he would sell, whatever the conditions.
And if the next recession drives the price down, I'll buy more.
Alan Oscroft owns shares in Lloyds Banking Group.
Unilever
What it does: Unilever is one of the world's leading consumer goods groups, with 3.4 billion people around the world using its products every day.
By Cliff D'Arcy. It is currently trading at 3,872 pence, Unilever (LSE:ULVR) shares have fallen 9.7% in the last 12 months. They are also 12% lower over five years.
This has brought the group's market value below £97bn. However, the figures above exclude cash dividends, which Unilever has increased considerably over the decades.
The final dividend yield is 3.8% per annum, slightly lower than the FTSE 100's 4% cash yield. But analysts expect the 2024 dividend to be higher than the €1.73 (148p) paid for 2023 .
History teaches me that owning shares of companies with powerful, established brands is one way to overcome recessions. However, even Unilever has seen its sales growth slow or turn negative in recent times.
Still, I consider Unilever shares to be undervalued at the moment. Therefore, my wife and I will firmly hold our stake for dividend income and future capital gains.
Cliff D'Arcy has a financial interest in Unilever.
Unilever
What it does: Unilever has a range of brands offering personal care, home care and packaged food products.
By Oliver Rodzianko. If I wanted to strengthen my portfolio against the adverse effects of a recession, Unilever (LSE:ULVR) is one of the best I would choose.
The company sells essential consumer products. Therefore, these items remain in demand during economic crises. After all, people leave out necessities last when budgeting.
I also like that the company doesn't have any typical debt on its books right now. Additionally, it has strong profitability, with a net margin within the top 20% of companies in the industry.
An investment in Unilever carries great risk. A recession could occur that includes disruption of global supply chains, as during the pandemic. That would significantly impact Unilever as it would have difficulty bringing its products to market.
Overall, I like stocks. If the economy got much worse, I would leave some cash in Unilever and I don't think I would be forced to sell my stake.
Oliver Rodzianko does not own shares in Unilever.
