The Motley Fool

1 defensive FTSE 100 stock I’d buy now, even with a UK recession

Image source: Getty Images

Yesterday we had a data release showing that the UK economy shrank by 20.4% in the second quarter this year. As the first quarter had already seen negative growth, the two consecutive quarters technically means that we’re in a recession here in the UK. That’s potentially an understatement, given that back in the 2008/09 recession, we were seeing GDP shrinking by single-digit percentages. We’re now talking double-digits in a single quarter. With this in mind, what stocks can we look to in order to provide returns despite the poor outlook?

Buy defensive in a recession

Traditionally, investors would now look to buy into defensive stocks. This is a broad term, but essentially refers to firms that operate in stable sectors that see limited correlation between demand and the broader economy. Usually this is down to the goods and services offered. For example, luxury goods makers and mid-market names tend not to perform well during a recession as demand falls significantly. Yet the stock of a cheap fashion retailer like Primark owner Associated British Foods could perform well. After all, demand for clothing still exists.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

You can differentiate between the pandemic in the first half of the year and the recession that’s now confirmed, of course. The two situations are very different. But it’s interesting that defensive stocks were a good both in the pandemic to hold for the long term and as we now move into the recession phase, they still are. Defensive stocks are still likely to do well.

A defensive FTSE 100 stock I like

First up is Coca-Cola HBC AG (LSE: CCH). In my opinion, this is a classic defensive stock. During a recession, consumers cut down on expensive purchases, but Coke still happily in may fridges as it’s a mainstream drink. The broad range of appeal that the brand and its other labels like Fanta have, along with the reputation it has built over many decades, allows it to weather any economic storm. The firm itself is not the parent company (this is listed in the US) but it bottles the drinks giant’s products and distributes them in around 28 countries. Therefore the demand of Coke itself is closely correlated to company performance.

I think now in particular is a good time to buy the stock given the recent trading update. The share price fell as revenue was reported to be down 14.7% in the first half of the year. This puts it down 22% from the start of the year. For investors wanting a defensive stock, buying one at a steep discount is perfect for the longer term.

Remember, the main cause of the revenue hit was lockdown. It hampered operations and the ability of clients to buy the product. Going forward, the UK recession we are now in doesn’t currently involve a lockdown. I think Coca-Cola HBC should be able to improve performance as the lockdown problems from the first half of the year are eased. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.