3 recession shares I’d buy in August

As the economic outlook continues to look unpromising, our writer picks a trio of recession shares he thinks might offer promise for his investment returns.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

We are in the second half of the year, during which the Bank of England expects the UK to enter a recession. That is bad news for the economy and could be awful news for certain companies. But some businesses can actually do well when the wider economic picture is bleak. Here are three recession shares I would consider adding to my portfolio in the coming month.


Will people use their phones and devices less in a recession?

Overall, I do not think so. Some may, while others might shop around for a better deal on their call and data plans. But in general I expect demand to stay robust in the telecoms sector even if the economy is performing weakly.

One company that could keep doing well on that basis is mobile giant Vodafone (LSE: VOD). The company operates across a wide range of countries and has a well-known brand. It is a highly cash generative business and last year Vodafone paid out €2.4bn in dividends. At the moment, the dividend yield is 6.4%. If I bought these shares, that income could come in handy to me in a recession.

There are risks to Vodafone, though. Net debt of nearly €42bn on the balance sheet could mean the dividend is reduced at some point if money is needed for interest payments instead. But strong demand and a large customer base make Vodafone one of the recession shares I would consider for my portfolio.


The agricultural supplier Carr’s (LSE: CARR) has a dividend yield of 5%.

I think its business model is fairly resilient. Selling feed, equipment and fuels to customers such as farmers is a business that will tend to see robust demand in good seasons and bad. One risk is inflation hurting profitability. If Carr’s cannot pass on the increase in costs on items such as fuel to customers, that threatens to hurt earnings.

But I see Carr’s as a durable business. It has weathered a dozen recessions in almost two centuries of trading. I would consider adding the company to my portfolio ahead of the next one.

British American Tobacco

Whatever else they may stop buying when money is tight, many smokers will not sacrifice cigarettes. That is one of the defensive qualities of shares such as British American Tobacco (LSE: BATS).

The long-term demand trend for cigarettes is still downwards. That is good for people’s health but could be bad for profits at the company. Then again, its pricing power should allow British American to charge customers more, which could help support profits. The firm is also aggressively moving into non-cigarette products.

The dividend yield is 6.4%. The shares have grown 23% in value over the past year. But they are still a third lower than the level they hit in 2018. If the business continues to perform well, I think its defensive qualities could attract more investors. So there may be potential for further share price growth.

I hold British American in my portfolio and would consider increasing my holding.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Christopher Ruane owns shares in British American Tobacco. The Motley Fool UK has recommended British American Tobacco and Vodafone. 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.

More on Investing Articles

Smart young brown businesswoman working from home on a laptop
Investing Articles

Should I be watching the Greatland Gold (LSE: GGP) share price?

Recent rallies in valuable metal prices has boosted the Greatland Gold share price, but is there still an opportunity for…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

The abrdn share price is down 23% in the last year, should I buy?

Asset management firms have had a rough time lately, but with the abrdn share price down heavily, is now the…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

If I’d invested £5k in red hot BAE Systems shares 5 years ago here’s what I’d have today

BAE Systems shares have smashed the FTSE 100 for years and Harvey Jones is keen to buy more as they…

Read more »

Investing Articles

How I’d aim to earn £16,100 in passive income a year by investing £20k in a Stocks and Shares ISA

Harvey Jones is building a portfolio of high-yielding FTSE 100 dividend stocks that should give him a high and rising…

Read more »

Investing Articles

Down 8% in a month! The BP share price is screaming ‘buy, buy, buy’ at me right now 

When crude oil falls, the BP share price invariably follows. Harvey Jones is wondering whether this is the right point…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Could the 9.8% M&G dividend yield get even bigger?

Christopher Ruane reckons that, although the M&G dividend yield is already close to a double-digit percentage, it could get better…

Read more »

Investing Articles

How much passive income could I earn by putting £380 a month into a Stocks and Shares ISA?

Christopher Ruane explains how he'd aim to turn a Stocks and Shares ISA into four-figure passive income streams each year.

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 passive income stocks I’m buying before an interest rate cut

With the market expecting interest rates to fall in August, time might be running out for investors looking to buy…

Read more »