2 recession-resistant UK shares investors should consider buying

Our writer details two UK shares she feels could withstand some of the ill-effects of the current malaise to provide growth and 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.

Young black man looking at phone while on the London Overground

Image source: Getty Images

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.

When the news that we’re in a recession broke last week, I instantly started thinking of UK shares that might not be impacted as much as others and could be shrewd buys.

Two stocks I reckon investors should be taking a closer look at are Associated British Foods (LSE: ABF) and Premier Foods (LSE: PFD). Here’s why!

Associated British Foods

Associated British Foods is a multinational food production business. It is also the owner of the burgeoning Primark brand.

The shares are up 17% over a 12-month period. At this time last year, they were trading for 1,958p and they’re currently trading for 2,300p.

The business has been around for nearly a century. It has an excellent track record of growth, performance, investor returns, and crucially, navigating tough economic backdrops. However, I’m conscious that past performance is not a guarantee of the future.

Next, as the core of the business is food production and it possesses a great footprint and brand power, I reckon it has defensive traits. After all, everyone needs to eat. Plus, when you add into the mix the surging popularity of Primark and the revenue that adds, ABF is primed for continued growth and returns, in my view.

However, inflationary pressures are a worry. Rising costs could take a bite out of profit margins, which underpin returns and growth plans. Plus, consumers conscious of tighter budgets may turn to unbranded products as opposed to branded premium items.

The company’s valuation is attractive, on a price-to-earnings ratio of 17. Although not the cheapest, sometimes paying a fair price for a wonderful company is fine. Plus, a dividend yield of 2.6% would boost passive income. However, it’s worth noting that dividends are never guaranteed.

Premier Foods

Operating in the same sector, Premier Foods is a smaller operation but also possesses defensive traits and brand power.

Premier shares have been bucking the recent downward trend across the FTSE to perform well over a 12-month period. They’re up 26% during this time, from 111p at this time last year to current levels of 140p.

The similarities don’t stop there, as the risks are also similar. Continued rising costs could hurt its bottom line. In addition to this, the rise of supermarket disruptors such as Aldi and Lidl gaining market share and attracting customers with cheaper alternatives compared to branded products is an ongoing risk.

Moving on, the shares look decent value for money on a P/E ratio of 12. The passive income opportunity is minimal, with a dividend yield of just over 1%. However, during times of a recession many firms may cancel dividends due to an uncertain outlook. However, with Premier’s defensive operations, I can’t see this happening.

Economic headwinds shouldn’t hurt Premier Foods too much in my opinion. I think the shares, performance, and returns should climb once volatility subsides.

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.

Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods 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.

More on Investing Articles

Investing Articles

1 no-brainer pick I’d love to buy for my Stocks & Shares ISA!

A Stocks & Shares ISA is a great investment vehicle for our writer. Here she explains why, and one stock…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Just released: our 3 best dividend-focused stocks to buy before May [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Will the Rolls-Royce share price keep rising in 2024?

With the Rolls-Royce share price going on a surge, this Fool wants to look forward to where it could potentially…

Read more »

Investing Articles

£10k in an ISA? Here’s how I’d target a regular £30k+ second income stream

Reliable dividends can help provide a lot more financial freedom. Here's how I'd aim for a substantial second income inside…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Lloyds share price hanging on to 50p ahead of Wednesday’s Q1 earnings report. Where to now?

Down in April and with low earnings expected this week, Mark David Hartley investigates where the Lloyds share price might…

Read more »

artificial intelligence investing algorithms
Investing Articles

Everyone’s talking about AI! Here’s 1 FTSE stock to consider buying for exposure

A hot topic right now is artificial intelligence (AI). This Fool explains how this FTSE stock could offer investors an…

Read more »

British Pennies on a Pound Note
Investing Articles

1 penny stock I’d buy today while it is 99p

Ben McPoland highlights Windward (AIM:WNWD), a fast-growing penny stock that could benefit from the artificial intelligence revolution.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This forgotten FTSE 100 gem could be the best bargain on the stock market

The FTSE 100 is full to the brim of high-quality businesses. But this Fool has his eye on this 'forgotten'…

Read more »