October seems likely to be a month of uncertainty. We’ve already seen the FTSE 100 lurch 5% lower. And of course there’s Brexit on the horizon. Probably.
For most investors, I think the best approach now is to focus on good quality businesses that are unlikely to be affected by a UK downturn.
I recently highlighted one FTSE 100 share I’d buy before Brexit. For this article, I’ve selected five more stocks I’d be happy to buy in October.
Soft drinks are a traditional safe haven in a recession. We may cut back on holiday spending, but how many people will stop buying their favourite fizzy pop?
For UK investors, I think one of the top choices in this sector is Coca-Cola HBC. This firm bottles Coca-Cola and a wide range of other soft drinks in Europe for the US drinks giant.
The shares aren’t cheap, on 20 times forecast earnings. But profits have doubled since 2013 and are backed by strong cash generation. I see this as a recession-proof stock for defensive investors.
Every little helps
Tesco surprised investors this week with news that highly-rated chief executive Dave Lewis will leave next summer.
In his five years at the helm, Mr Lewis has been responsible for an impressive turnaround. His departure is a risk for investors. But replacement Ken Murphy is highly experienced and will have plenty of time to prepare.
The Tesco share price looks about right to me at the moment. But I rate the stock as a defensive pick in uncertain times. I’d expect the 3.5% dividend yield to be very safe, even in a recession.
A surprise pharma pick
Hikma Pharmaceuticals specialises in making good value generic medicines, most of which are sold in the US, Middle East and North Africa. Unlike its larger FTSE 100 rivals, Hikma has little debt and reports ‘clean’ profits with few adjustments.
Hikma reported an operating margin of 23% during the first half of 2019. Management upped its guidance for the second half of the year and the group seems likely to deliver continued growth in 2020. I rate the shares as a dividend growth buy.
I’d bet on oil
Oil stocks are out of fashion as investors look for greener opportunities. The market is also worried that companies such as Royal Dutch Shell might one day be stuck with millions of barrels of oil they can’t sell.
However, the reality is that the world still relies on oil, gas and petrochemicals.
In the meantime, Shell is starting to position itself for a different future. It’s investing in new areas and plans to return $125bn to shareholders between 2021 and 2025. With Shell shares trading on 12 times earnings and offering a 6.4% dividend yield, I remain a buyer.
A defensive buy
Brands such as Nurofen, Gaviscon, Dettol and Strepsils are part of everyday life. We don’t tend to swap them out for cheaper no-name alternatives. That’s one reason why I’d be happy to buy shares in Reckitt Benckiser, the consumer goods giant that makes these and many other such products.
Although growth has slowed in recent years, most of the issues troubling the firm have now been cleared up. I expect new boss Laxman Narasimhan to return the group to steady growth and see the shares as defensive a long-term buy.
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Roland Head owns shares of Royal Dutch Shell B and Tesco. The Motley Fool UK has recommended Hikma Pharmaceuticals and Tesco. 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.