Worried about the global economy? 4 cheap UK shares I’d buy in an ISA for the downturn

I’m not worried about the uncertain global economic outlook. I reckon these top UK shares could still make me a fortune. And they’re pretty cheap too!

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Rising Covid-19 infection rates across the globe means the economic outlook remains pretty grim. But it doesn’t mean I’ll stop investing in UK shares for the time being. There are still plenty of top stocks that should deliver excellent returns in these tough times.

2 top UK shares for uncertain times

Here are a couple of top-quality UK shares I’m thinking of adding to my own Stocks and Shares ISA:

  • Food producers are among some of the best picks for nervous investors, for obvious reasons. And share investors can double their protection by adding companies whose products boast considerable brand power too (because shoppers are prepared to stretch their budgets a little bit further to buy their favourites even in tough times like these). This is where Premier Foods comes in. Labels like Mr Kipling cakes and Ambrosia custard command supreme customer loyalty in their respective fields. Another reason why I, as an investor, think Premier Foods is a tasty treat is its low price. For the year ending March 2021 it trades on a rock-bottom price-to-earnings (P/E) ratio of 10 times.

Young woman with face mask using mobile phone and buying groceries in the supermarket during virus pandemic.

  • Fellow FTSE 250 stock ConvaTec Group illustrated its own exceptional defensive qualities just this week. This UK share manufactures a broad range of medical products, from colostomy bags and wound dressings to insulin pumps. And it saw revenues rise 6.5% in the three months to September, a result that was much better than expected. Healthcare providers can rely on the essential nature of their goods and services to drive revenues during both economic downturns and upturns. Yet it’s a quality I don’t think is represented by ConvaTec’s cheap price. For 2021, the business trades on a rock-bottom price-to-earnings growth (PEG) ratio of just 1.

8% dividend yields!

The beauty of investing in defensive stocks like these is that their supreme profits stability gives them the confidence to keep raising dividends and/or paying market-beating shareholder rewards, year after year. The following couple of UK shares not only look cheap from an earnings perspective at current prices. They also carry enormous dividend yields too.

  • Our need to keep the lights on, our kettles boiled and the radiators warm makes Drax Group an obvious selection for worried investors. Yet it trades on a P/E ratio of just 10 times for the year to March 2021. I don’t think this reading reflects the huge long-term profits potential of its switch to low-carbon power sources like biomass either. There’s one final reason Drax has caught my eye. At current prices this FTSE 250 stock carries a mighty 6.1% dividend yield.
  • I believe general insurance provider Direct Line Insurance Group’s another great pick for these testing times. Sales of home, car and pet insurance tend to be quite resilient during economic crises. This is why City analysts reckon this FTSE 250 stock will keep paying big dividends in the near term. Today, Direct Line carries a mighty 8% dividend yield for 2020. Combined with a P/E ratio of 10 times, I reckon this UK share is too cheap to miss.

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.

Royston Wild 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.

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