As much of the UK enters a second lockdown, it looks as if the dangers to the economic recovery are growing by the day. However, I don’t think we should stop buying UK shares.
The beauty of investing is the wide choice on offer. This means I can invest in companies that should thrive and avoid those that may struggle in the weeks and months ahead.
With that in mind, here are two UK shares I’d buy right now for an economic downturn.
UK shares to buy in an ISA
The first company I’d buy for a downturn is insurance group RSA (LSE: RSA). For many consumers, insurance is an essential item. For products such as home insurance or pet insurance, users have little choice but to shell out for these essentials. If they don’t, they’re running the risk of a potential hefty bill in the future.
That’s why I think RSA is well-positioned for a prolonged economic downturn. The firm has registered some impact from the pandemic, but these losses have been contained. So far, management is optimistic that costs won’t exceed initial projections.
As such, the firm recently announced it would be resuming dividend payouts to investors. Analysts have pegged a total dividend for this financial year of 28p. That implies the stock could provide a yield of 6.2%.
Based on RSA’s defensive nature, I think it’s likely the firm will be able to maintain this level of income for the foreseeable future. Therefore, based on all of the above, I’d buy this business as part of a basket of UK shares in an ISA.
Investing in the home
The other company I’ve my eye on right now is HomeServe (LSE: HSV). I think most readers would agree that when we’re confined to our homes, we want to be as comfortable as possible. That’s where this outfit comes in handy. The group provides home emergency, repair and heating installation services to the UK, US and European markets.
Firm profits are expected to surge this year. Analysts have pencilled in a 44% increase in earnings for the current fiscal period. I think that makes HomeServe one of the fastest-growing companies on the London market.
And as we settle into a second lockdown, I reckon this trend can continue particularly as we approach winter. There could be a rush in demand for the group’s services as customers, who are confined to their homes, request improvements.
What’s more, HomeServe has a good record of acquiring other businesses to boost growth. I believe 2020’s influx in profits will provide additional firepower for the group to pursue this strategy in the years ahead, further improving the company’s growth trajectory. That’s why I’d buy the business as part of a portfolio of UK shares to weather the current economic turbulence.
Rupert Hargreaves owns RSA Insurance. The Motley Fool UK has recommended Homeserve. 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.