Fears are mounting that the UK economy will enter a recession. I’m looking for FTSE 100 shares to buy that can help me weather macroeconomic storms ahead.
Here are three Footsie stocks I’d invest in to try to recession-proof my portfolio in 2022.
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AstraZeneca (LSE: AZN), the Anglo-Swedish pharmaceuticals giant, is a leader in the defensive healthcare sector. It has the second-largest market capitalisation of all FTSE 100 shares at £166bn.
Looking back, the AstraZeneca share price displayed relative resilience during the 2020 bear market caused by the pandemic. In my view, if the growing monkeypox outbreak begins to propel heavy selling in equity markets, AstraZeneca is likely to outperform again.
The company delivered strong financial results in 2021, highlighted by earnings per share of $2.49 and a 25% revenue increase in oncology treatments.
Admittedly, the Footsie-listed pharma company did struggle somewhat to compete with US rivals Pfizer and Moderna in selling its Covid-19 vaccines. Many countries showed a preference for the more expensive mRNA alternatives.
But there’s more to AstraZeneca’s business. For example, its metabolic and heart disease drug Farxiga saw revenue growth of 67% year-on-year to hit $1bn in quarterly sales in Q1, 2022. If it can maintain its status as an R&D champion, I’m bullish on AstraZeneca stock even in a recession.
British American Tobacco
The British American Tobacco (LSE: BATS) share price has outpaced the FTSE 100 index with 23.5% growth this year. Passive income is a big appeal to holding British American Tobacco shares — they carry a 6.3% dividend yield.
There are more acute moral considerations to investing in BAT stock compared to other FTSE 100 shares. The perennial threat of greater government regulation of the tobacco industry also poses a risk to shareholders.
However, the company’s development of reduced-risk products offsets these concerns somewhat for me. Indeed, consumers of BAT’s non-combustible products rose 4.8m to 18.3m in total during 2021.
In addition, the business generated a substantial £9.7bn in net cash from operating activities — only slightly down on the year before. I find the company’s 11.1% reduction in net debt particularly encouraging.
I’d buy BAT shares to lower the volatility of my portfolio as I hope this FTSE 100 stock will continue to provide stable returns and healthy dividends.
Tesco (LSE: TSCO) stock comes with a price-to-earnings ratio of 13.23. This means Britain’s largest supermarket stock is also one of its cheapest. Additionally, shareholders benefit from a handy dividend yield of 4.2%.
However, the Tesco share price has fallen 11.5% in 2022 and I have concerns about the company’s ability to raise grocery prices to keep pace with inflation.
Tesco has to try to protect its profit margins without driving consumers to budget competitors, such as Lidl and Aldi, during the cost of living crisis. It won’t be an easy task.
Nonetheless, I believe Tesco shares should prove reliable investments in trickier economic times. It’s a mature consumer staples business with solid recent financial results. Its latest adjusted operating profit was up 58% year-on-year and earnings per share rocketed nearly 89%.
I keenly await its next results on 17 June. If Tesco continues its positive financial trajectory, I’d buy this FTSE 100 share for its defensive qualities in a recession.