The global economy faces a period of significant upheaval following the Covid-19 outbreak. But it hasn’t discouraged me from buying UK shares in my Stocks and Shares ISA.
There remains a galaxy of great stocks that investors can expect to make a fortune from in the near term and beyond. Even the most pessimistic of share pickers can be confident when buying UK shares.
They can buy healthcare providers like drugs makers and surgery developers, utilities providers and electricity generators, food producers and drink manufacturers, to give just a few examples. The list of sectors which enjoy stable earnings during economic upturns and downturns is vast.
Defence stocks are also some of the best stress-free options for nervous investors. History shows us that even if arms budgets suffer during tough economic times, weapons spending always comes roaring back. It’s an unfortunate by-product of man’s everlasting desire to do wreak war with itself.
That said, I don’t expect defence spending to suffer nearly as badly as during previous economic downturns, if at all. Why? The geopolitical landscape is the most febrile it’s been for decades, and Western nations particularly fear increasingly-hawkish foreign policy from China and Russia in particular.
There’s also significant economic upheaval in the Middle East, the growing threat of global terrorism, and the rising fight against state-sponsored cyber attacks to contend with.
A news story that caught my eye this week perfectly illustrates my opinion. Despite the economic upheaval caused by Covid-19, the Japanese defence ministry has applied for a ninth straight yearly increase for its arms budget. At a proposed $52bn this would be the biggest bill on record. It has been put forward as Japan grapples with a growing perceived threat from China and North Korea.
Top UK shares that could make you rich
Total worldwide weapons spend rose at its fastest for around a decade in 2019, according to the Stockholm International Peace Research Institute. Japan’s fresh plans suggest the global arms race isn’t about to cool down any time soon either.
This is why defence stocks remain top buys for those nervous of the social, macroeconomic and geopolitical implications of the Covid-19 pandemic. And UK share investors have plenty of manufacturers to choose from. Diversified players like FTSE 100 giants BAE Systems and Babcock International Group are terrific buys for share pickers, I believe. And particularly at current prices as these UK shares trade on forward price-to-earnings (P/E) ratios of 10 times or below.
There’s also other great niche players to pick from right now. Companies like Avon Rubber, a major maskbuilder for militaries and security forces, or countermeasures and sensors manufacturer Chemring Group. UK shares like these show that investors can still expect to make terrific returns despite the severe global downturn. And The Motley Fool’s huge catalogue of exclusive reports can help you to dig out even more.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Avon Rubber. 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.