UK shares are very much on my radar right now, despite recession forecasts. There are several reason for this.
Firstly, with the pound getting weaker against the dollar, the US market is almost uninvestible right now, in my opinion. I’m confident that the pound will eventually appreciate, so any gains I could make on US stocks might be wiped out by sterling strengthening.
But the FTSE has also been unpopular with global investors for a while. And right now valuations are low and dividend yields are generally pretty high.
Amid recession forecasts, I’m buying UK-listed value stocks with defensive qualities to make my money work.
Unilever
In July, Unilever (LSE:ULVR) lifted its sales forecast after hiking its prices to offset higher costs and protect margins. The group owns brands such as Dove, Vaseline, Marmite, and Magnum ice cream, all synonymous with the product category. After all, I’ve never been shopping for a petroleum jelly-based moisturiser or a yeast extract savoury spread. But I’ve been to the shops for Vaseline and Marmite.
The company’s results highlighted its defensive qualities as it lifted its prices by 9.8% in H1, compared to the year-ago period. In fact, during the second quarter, prices were up 11.2% versus the previous year.
Sales volume fell 1.6% during the period, but sales revenue grew 8.1%. Unilever raised its guidance for the year as a whole. Management said it expects to beat its previous forecast of sales growth between 4.5% and 6.5%. The new guidance on sales growth will be “driven by price”, the company said.
I think the longer-term outlook is positive too, especially when you consider that Unilever has been able to grow revenue by selling less at a time when consumers are really starting to feel the pinch.
Long-lasting inflation won’t be good for any business, Unilever included. There is only so much you can pass to customers, because everyone has a price anchor, regardless of how much you may love a brand.
But, broadly speaking, I’m bullish on Unilever and I see now as good time to buy. It also sells products in 190 countries, so profits will be inflated with the weak pound.
Centamin
Centamin (LSE:CEY) is a UK-listed gold miner with its main asset in Egypt. Investors use gold as a safe haven when there are fears about inflation and the wider economy, and that’s one reason I’m buying more Centamin stock.
Last week, the company reported first half revenue of $382m in its interim report on Thursday. That’s up 4% year-on-year, from gold sales of 203,587 ounces at an average realised gold price of $1,872 per ounce.
The gold price is generally up from 2021. For example, the company achieved $1,778 per ounce in Q1 of 2021.
Costs are going up, and that’s clearly a challenge. The cash cost of production in H1 was $931 per ounce produced, up 15% year-on-year, and its all-in sustaining costs were $1,446 per ounce sold, 22% higher than the same period last year.
But I’m backing this company to succeed as gold rises on the back of economic concerns and as the firm improves its operating position. Centamin recently transitioned to owner-operator mining in Sukari underground, a move which could save it $19m a year.
