UK stocks to buy amid a cost-of-living crisis!

Dr James Fox takes a closer look at UK stocks investors should buy during the cost-of-living crisis as inflation fears persist.

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UK stocks are well represented within my portfolio. There are several reasons for this, including attractive valuations relative to US peers and the weakness of the pound, which makes investments in US stocks potentially higher risk.

Today I’m looking at UK stocks to buy amid the cost-of-living crisis. As we all know, inflation is putting pressure on households. And, in many cases, Britons have had to change their spending habits.

It’s worth noting, however, that spending hasn’t fallen as much as anticipated because Britons have a lot of savings — as much as £1.7trn.

Anyway, let’s take a closer look at these stocks.

Haleon

GSK spinoff Haleon (LSE:HLN) delivered on first full-year forecasts on Thursday. The world’s biggest standalone consumer health business reported that revenue rose 14% to £10.86bn. Organic growth accounted for 9%, with 4.3% from price increases and 4.7% from volume and product mix.

 Adjusted operating profits grew 14% to £2.5bn, or 5.9% at constant currency, despite battling “significant” inflation in costs.

These figures demonstrate the defensive qualities of the company that owns brands such as Sensodyne toothpaste and Advil painkillers. Brands tend to provide companies with defensive qualities as people stick with the names they know and love even when times are tough.

But consumer healthcare is an area in which customers are even less likely to drop their favourite brand. And simply that’s because health matters. If Advil works for you, you’re unlikely to swap it for a generic just because prices have gone up 30p.

Free cash flow of £1.6bn allowed the firm to declare a 2.4p dividend — representing roughly 30% of adjusted earnings — and reduce net debt to £9.9bn from £10.7bn at the time of the demerger.

There are ongoing concerns about the size of the company’s debt burden, and maintaining margins, but with the share price falling 4%, I’m buying more.

Spire Healthcare

I’m sticking with healthcare for my second pick. This time it’s private hospital operator Spire Healthcare (LSE:SPI). Investors were disappointed this week despite the firm returning to profit. The stock fell around 6% on Thursday morning. But I see this as something of an opportunity, and I’m buying more.

The FTSE 250-listed firm said it had delivered a pre-tax profit of £3.9m. That doesn’t sound like much for a firm with a £960m market cap, but a marked improvement on the prior year’s £1.9m pre-tax loss. It also declared its first dividend since the pandemic.

Demand for elective operations remains strong. It said admissions increased by 7.8% to 262,801 and average revenue per case climbed 10% to £3,179. With sizeable NHS backlogs and deals with Bupa, Vitality, and Aviva, demand should continue to tick upwards.

Focusing on the cost-of-living crisis again, we can also hypothesise that Britons will still prioritise elective operations and healthcare despite the economic environment.

Margins are expected to improve throughout 2023, but the firm warned that margin growth could slow amid staffing pressures and agency costs, in addition to illness in the workforce.

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.

James Fox has positions in Aviva Plc, GSK, Haleon Plc, and Spire Healthcare Group Plc. The Motley Fool UK has recommended GSK and Haleon Plc. 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.

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