The UK economy’s growth just slowed down to almost nothing. Data released earlier today showed that the economy inched up by a mere 0.1% in February, compared to the month before. This is far slower than the 0.8% rise seen last month. It is also slower than the forecast for 0.3% growth. The stock markets have not really reacted to the news though. The FTSE 100 index, for instance, is holding steady from its last close.
UK economy’s prospects dim
This is good news. After all, this is also just a single month’s number. Growth may bounce back next month, and then February figures will be just an aberration. At the same time, risks to the UK economy are rising. Inflation, of course, is the big concern. At the last count, inflation based on consumer prices was at 6.2% on a year-on-year basis. And according to forecasts, it gets worse before it gets better!
AstraZeneca: a dependable growth stock
So, I do believe that it is a good idea to prepare for a slowdown this year anyway. I am doing so by focusing on FTSE 100 defensives that are likely to remain steady irrespective of the state of the economy. One such is the pharmaceuticals biggie AstraZeneca, which is my go-to growth stock during the recent slump.
I have accumulated it over time, and it has only held me in good stead. And this is despite a lot of ups and downs over the past few years. In the past five years, the stock has more than doubled anyway. On the downside, it is super pricey in market valuation terms. It price-to-earnings (P/E) ratio is a super-high 525 times right now. But this is because of a one-off drop in its statutory earnings though.
It is actually more like 27 times according to my calculations, based on its core earnings. Even this is higher than the FTSE 100 P/E of 16 times. But in all the years that I have covered the AstraZeneca stock, it has always traded at a premium. There is good reason for this. It provides crucial cancer treatments, and has been largely successful at doing so. Its demand is unlikely to vary much during times of economic slowdown. So, I continue to like the stock.
Hikma Pharmaceuticals: FTSE 100 healthcare alternative
Another pharmaceutical growth stock I like is Hikma Pharmaceuticals. Despite its robust financials, the company has not had great luck at the stock markets in the recent past. Its share price is down by 16% over the past year, so it has been a less reliable stock to buy compared to AstraZeneca in the recent past.
But on the other hand, it is far more affordable with a P/E of sub-15 times. And analysts are bullish on it. On average they expect a 40% increase in its price over the next 12 months as per the Financial Times. This is explained by a positive earnings outlook for the stock. I do not hold it in my portfolio yet, but I think I will add it now, especially if the UK economy slows down.
