Fears of inflation dominated the first part of 2022. UK stocks in the oil and gas and mining businesses did well. Now fears of a recession are starting to dominate. I think it’s about time I looked for stocks and shares that could offer some protection for my portfolio if a recession hits.

Recession-proof UK stocks don’t exist

There’s no such thing as a recession-proof stock, but some stocks are more sensitive than others to the peaks and troughs — or booms and busts — of the business cycle. Cyclical stocks tend to follow the ups and downs in an economy. When a recession hits, cyclical shares tend to perform poorly and fall in price. On the other hand, defensive stocks are less affected by the economy. There are also sensitive stocks that fall somewhere in between. 

Defensive stocks can be found in the following sectors:

• Consumer defensive
• Healthcare
• Utilities

There are hundreds, if not thousands, of UK stocks in the consumer defensive, healthcare, and utility sectors. I can’t buy them all but I could look for a fund that invests in these sectors. Yet I would prefer to pick my own stocks. So I need something to help me select companies with a recession in mind. That something is quality.

Quality UK stocks

Quality stocks tend to have higher margins, profitability, and cash flow than their peers. Strong balance sheets and stable or improved business operations are also hallmarks of quality stocks. These features are sought after by investors when a recession is looming and during one. In my opinion, quality is never out of fashion.

Key quality measures

Two stocks have caught my eye for quality and defensive sector membership: healthcare stock Bioventix and AG Barr from consumer defensives. One quality non-defensive sector name also struck me as worthwhile. Given that I was looking for stocks to add to my stocks and shares ISA for a recession, this company’s business model had immediate appeal. That stock was FTSE 100 member Experian. The company owns a database of millions of consumers’ and businesses’ credit activity and repayment histories. It sounds like the sort of outfit that might see demand for its services holding up when the economy sours.

Taking stock of recession risks

I’m intrigued by these three stocks. They look good on measures of quality. Two are from defensive sectors, and one has a business model that seems like it should hold up well in a recession. So, do I buy these three UK stocks for my Stocks and Shares ISA? Not without further research.

Although consumers will likely cut spending on food and beverages less severely than on, say, eating out and cinema visits during a recession, will they switch from AG Barr’s brands to cheaper alternatives?

Bioventrix makes antibodies for diagnostic procedures and drug and compound detection. I want to know what proportion of its sales goes to organisations less likely to cut spending dramatically in a recession (like, for example, the NHS).

For Experian, although checking credit seems to make sense when times are tough, in a prolonged and severe recession, would reduced spending render its services redundant? These are some questions I must mull over before pulling the trigger on any of these three UK stocks. 

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James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has recommended AG Barr, Bioventix, and Experian. 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.

Yesterday, the Bank of England announced it was hiking interest rates again, this time by 0.5%, the largest jump in over a quarter of a decade. The rise came after the months of red-hot inflation, which reached record highs of 12.7% in June, fuelling the cost-of-living crisis. The FTSE 100 dropped 0.77% on the news.

The Bank also warned that the UK could be headed towards a long recession, inflation could creep past 13%, and the UK economy would contract by a sizable 2.1% by the end of 2023. This all sounds pretty scary, but I’m using it as a chance to buy more shares in the stock market at bargain prices. Let’s take a closer look why.

The story so far

The UK economy has been seeing rising inflation for months now. Initially caused by the fiscal stimulus and supply bottlenecks of Covid-19, the tragic Russia-Ukraine conflict has magnified the issue, sending energy prices through the roof.  The way that central banks control inflation is to raise interest rates. This dents spending, slowing economic growth. When rates keep rising, eventually GDP growth turns negative, and the economy slips into recession. This is what we’re seeing with the UK economy.

When interest rates rise, stocks tend to fall. This is because people have less extra cash on hand to invest in the market and because they can earn a higher ‘safe’ return on their savings (1.75% from yesterday). It also makes it harder for companies to grow, as consumers tend to buy less and it’s more expensive to raise capital. Stocks have taken a hit across the board, with the FTSE 100 down 1% year to date, and almost 2% in the last six months. Across the pond, the situation is even bleaker, with the S&P 500 falling over 13% year to date, and 6% in the last 12 months.

Why I am buying shares

Such a climate may deter investors from buying shares. However, I think now could be a great time for me to build a dirt-cheap portfolio. Stock prices have taken a hit across the board, yet not a lot has actually changed within companies. This means I can buy some quality companies, at discounted prices.

The FTSE 100 average price-to-earnings (P/E) ratio is currently sitting at 14. A year ago, this figure was much higher, around the 22 mark. Even before the pandemic, the average P/E ratio was around 17. Quality UK stocks like BT, Lloyds, and Barclays are all trading comfortably below 14, looking like bargains to me. As stock prices fall, dividend yields rise, which is also good news.

Therefore, I’m currently on the hunt for undervalued companies to add to my portfolio. While some may be panicking about a recession, I’m using this time to grab cheap shares for long-term growth.

The post Recession is looming — is it time to invest in the stock market? appeared first on The Motley Fool UK.

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Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Barclays. 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.

A strong economy

The next US Federal Reserve meeting is expected to mean a 50 basis points hike in the Fed funds rate. This is equivalent of a 0.5% interest rate hike and has sparked fear of a still-bigger stock market correction. The Fed has a history of being too hawkish and spurring recessions, which affects markets globally, including here in the UK. Nonetheless, Moore thinks that the US economy is strong enough to handle multiple rate hikes this year. This is backed by strong employment numbers, heavy assets, and positive earnings results. He also believes inflation is close to reaching its peak. Nonetheless, oil remains the biggest issuing affecting consumer prices. The black gold could spark chaos again if it spikes above $100 per barrel.

Moore sees this year’s stock market correction as being short-lived due to the positive economic data coming in. He expects new market highs to come at some point next year. This should happen once inflation cools down and supply chain bottlenecks ease. Unfortunately, that’s where his bullishness ends. He thinks those new highs could be followed by a potential recession soon after, and into early 2024. This is most likely to happen once ‘stagflation’ (High inflation, but slow or no real economic growth) starts to take effect.

Time is my best friend

Will all that deter me from investing? No. There are four cycles in investing — accumulation, mark-up, distribution, and legacy. This was mentioned by Moore in my interview with him. As a young investor, I’m currently in the accumulation phase. This phase is where I see buying opportunities with attractive valuations during a bear market. Moore sees the current US market correction as a buy-the-dip opportunity for me, as I begin to pick up good discounts on mega-cap companies with healthy balance sheets, attractive margins, and pricing power. The tech-heavy Nasdaq in the US is down over 12% so far this year. That presents plenty of opportunities for me to buy shares in big US-listed tech companies such as Amazon, Alphabet, and Microsoft.

My buy the dip strategy

As Warren Buffett once said: “A diversified portfolio with exposure to different sectors is protection against ignorance.” This same advice was alluded to by Moore in our interview. The main takeaway was for me to invest more in a variety of value and dividend stocks. These can include commodities, insurance, and healthcare.

I was also pleasantly surprised to find out that Moore follows a similar buying strategy to mine. And he continued to encourage me to buy the dip. This means buying when I see around a 5% to 10% decline in a specific stock. When I asked him how much cash I should be leaving on the side to buy those dips, he mentioned 15-20% of my investment portfolio.

Ultimately, my purchases would be dependent on my risk assessment during any market fall, of course. But I will be buying the dip in mega-cap companies with excellent fundamentals for my portfolio.

The post Should I buy the dip in this stock market correction? appeared first on The Motley Fool UK.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. 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.

What does the yield curve have to do with a recession?

An economic recession is typically defined as two straight quarters of negative gross domestic product (GDP). This means that the economy is contracting. Many analysts point towards the yield curve inverting as an indicator of an impending economic decline. After all, it has ‘predicted’ seven of the past eight recessions. The yield curve is an indicator of returns from government bonds. These bonds have a maturity date that can range from 1 month to 30 years. Wall Street normally sounds the alarm whenever short-term bonds (2-year) yield a higher return than long-term bonds (10-year), thus inverting the typical yield curve. Investment banks such as Deutsche Bank and Goldman Sachs have even predicted a recession based on this.

Cherry picking

I believe the data surrounding the relationship between the yield curve and an economic recession has been cloudy. Among all the times the yield curve has inverted in the last 30 years, a recession only preceded it three times. As such, I do not believe that three, or even arguably two data points constitutes good statistics. It is worth noting that the 2020 recession was caused by a global pandemic. Going back further, the yield curve had also inverted in 1995, 1996, and 1998, with no recession following. While it is common for a recession to follow after the inversion of a yield curve, it is not absolutely indicative of it.

Current economic data remains healthy and robust. The unemployment rate continues to decline while labour participation heads back to pre-pandemic levels. In addition, PMI numbers continue to expand, and spending patterns continue to show that consumers are in good shape. Most importantly, GDP continues to grow despite high inflation. Therefore, I think the economy is in a strong enough position to absorb the impact of rate hikes by the Fed, although an overly aggressive Fed might spark a recession.

Investing in a safe bet

While I do not know whether a recession will or will not materialise, I do know that Warren Buffett’s investing philosophy has been effective in generating healthy returns over the long term. I will continue to invest in companies with solid fundamentals, strong earnings, and potential for growth. I believe Alphabet checks all these boxes. It has a hybrid nature of being a defensive and growth stock. Its monopoly in the search and advertising space means that although revenue will take a hit, its position in the market is unlikely to get compromised. It also has tremendous earnings potential in an increasingly inelastic service, cloud computing. So whether a recession happens or not, I will continue to invest in companies that have strong fundamentals, such as Alphabet.

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John Choong owns shares of Alphabet (Class A Shares) at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). 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.

Personally, I’d be more inclined to gravitate towards other UK stocks at the current time, particularly those lower down the market spectrum. Here’s why.

The trouble with Rolls-Royce shares

The problem with buying shares in a battered company like Rolls-Royce is two-fold.

First, you have to remember who your competition is. Here at the Fool UK, we encourage people to see investment as a long-term endeavour. Unfortunately, a lot of people aren’t capable of being patient. Look at the recent volatility in cinema chain Cineworld as an example of this. Thanks to day traders, I think Rolls-Royce shares could lurch up and down for a while.

Second, it needs to be remembered that people are buying shares in a business that was hardly firing on all cylinders before coronavirus reared its ugly head. Even with Covid-19 gone, there’s no guarantee Rolls-Royce will then thrive.

This isn’t to say investing now won’t work out well. News of a vaccine could turbocharge all UK share prices. Then again, no one should approach the £5bn-cap without appreciating the myriad of challenges it faces.

Taking this into account, I’m finding it difficult to muster any enthusiasm to buy Rolls-Royce shares right now. For me, there are better opportunities available elsewhere in the market. This is especially true in the small-cap space.

Top manager pulls IPO

Yesterday, it was announced the Buffettology Small Companies Investment Trust wouldn’t be listing on the market, having been unable to raise the £100m fund manager Keith Ashworth-Lord was looking for.

This news is significant because Ashworth-Lord is arguably one of the UK’s best stockpickers. Had one invested in his CFP SDL UK Buffettology Fund when it launched in 2011, that money would have grown by a little over 230%, according to its latest factsheet. The sector average? Just 59%! He certainly didn’t achieve this owning Rolls-Royce shares.

The shelving of the IPO suggests the UK market is utterly unloved at the moment. This is, to an extent, understandable. With Covid-19 infection rates rising, talk of another national lockdown in England won’t go away. Should further travel restrictions be put in place, it’ll be time for investors to hide behind their sofas. There’s also Brexit to ponder.

Nevertheless, this is exactly why I think now is a once-in-a-lifetime chance to buy UK small-cap stocks!

Go small

Unlike Rolls-Royce, many UK-listed minnows possess robust balance sheets with minimal/no debt. Many also operate in far more defensive sectors than the FTSE 100 engineering firm. Fewer working parts also allow small-caps to be far more nimble in grabbing market opportunities. Most importantly, small-cap shares have been shown to massively outperform the giants over the long term.

As investors, we’re taught to buy ‘when there’s blood on the streets‘. While this can be a path to riches, I’d argue it’s still very dependent on which ‘street’ you select.

For me, now’s the time to buy small-cap UK stocks with quality characteristics and solid outlooks. I’ll leave Rolls-Royce shares to the traders. 

The post Forget Rolls-Royce. I think this is a once-in-a-lifetime chance to get rich from UK small-cap shares! appeared first on The Motley Fool UK.

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Paul Summers 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.

Burberry

Luxury brand Burberry still takes up a little over 7% of  Train’s fund despite having endured a pretty awful 2020. National lockdowns and travel bans forced it to temporarily close much of its store estate earlier in the year.

As infection levels rise again, trading will likely remain tough. Nevertheless, Train remains confident that quality will out. The growth of wealth in countries such as China (where premium Western brands remain coveted) shows no signs of slowing down. Moreover, Burberry has a very strong cash position which should allow it to recover strongly in time.

Like Train, I continue to think the £6bn-cap is worth snapping up on current weakness.

RELX

Approaching 10%, RELX is Train’s fourth-biggest holding. The company specialises in data analystics and also operates a leading global events business. Unsurprisingly, it’s the latter that’s causing investors concern.

As you might expect from someone who rarely sells (or buys!), Train doesn’t seem overly phased. This could be because the exhibitions business only accounts for a small proportion of RELX’s annual revenue and profits.

Shares have struggled to recover their mojo since March’s market crash. At 18 times forecast FY21 earnings, however, this could be a great time to load up on this quality FTSE 100 company.

Diageo

Premium spirits giant Diageo takes up another near-10% of Train’s portfolio. The fact that he’s willing to retain such a big holding despite the ongoing threat of the coronavirus coupled with a big recession is a testament to how highly he rates the company.

We’ve seen a brief recovery in the share price recently but it would be foolhardy to suggest we’re through the worst. Expect another bout of volatility as more pubs and bars are required to close across the UK. 

At least investors can enjoy the dividends in the meantime.

Unilever

Another consumer goods favourite of Train’s is also one of the biggest UK-listed stocks: Unilever. In sharp contrast to companies already mentioned, the Marmite-maker’s share price has already recovered from March’s market sell-off. And then some.

Paying through the nose for any stock isn’t recommended. Then again, it’s hard to imagine this FTSE 100 giant suffering the same fate as other more discretionary stocks if the pandemic continues into 2021. 

It won’t double in value soon, but Unilever remains a great defensive FTSE 100 pick, in my view. 

London Stock Exchange

At 10% of his portfolio, London Stock Exchange is Train’s biggest holding. One reason for this is its superb performance over the last few years. Had one bought the stock five years ago, one would now be sitting on a gain of roughly 240%. Just owning LSE since mid-March would have grown one’s cash by almost 50%. 

Shares in the £31bn-cap trade on a frothy 41 times FY20 earnings. Nevertheless, Train appears reluctant to sell. This could be because he believes there’s more volatility ahead for markets — something that should do no harm to LSE’s revenue. 

LSE is due to release an update on trading over Q3 on October 23. 

The post Wow! Nick Train has almost 50% of his portfolio in these FTSE 100 stocks appeared first on The Motley Fool UK.

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Paul Summers owns shares of Burberry. The Motley Fool UK has recommended Burberry, Diageo, RELX, and Unilever. 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.

Cash ISA rates are staying low

The fact that things are so bad out there means that we’re unlikely to see a significant rise in interest rates for a long time. Indeed, there’s a possibility that rates could even turn negative if Covid-19 continues to wreak havoc across the globe.

Negative interest rates would be good news for UK borrowers, particularly those with variable-rate mortgages linked to the base rate. As odd as it sounds, such a scenario would effectively require mortgage providers to pay interest to those they lend to.

Having said this, negative interest rates are bad news for savers because it means that they are likely to be charged by banks for holding their cash. In ‘normal’ times, the complete opposite is the case.

And it’s not as if savers were doing well beforehand. This latest setback follows years of cripplingly low rates where Cash ISAs have struggled to keep up with, let alone beat, inflation. As things stand, the best instant access account pays just 1%! This really matters because it means the value of any cash you have is barely holding (and probably losing) its value as time goes by due to the impact of inflation. 

A better strategy

As long as any high-interest debt (like credit cards) has already been eliminated, having some savings in cash is never a bad idea. It can, after all, act as a buffer for dealing with life’s little emergencies.

Personal finance gurus argue over how much we should save. For me, however, the answer is simple: hold enough to allow you to sleep at night if you lost your job that morning. And don’t bother holding it in a Cash ISA. Thanks to the £1,000 Personal Savings Allowance, a bog-standard account will do. 

When it comes to managing any remaining money you have, however, the answer for me is equally straightforward. If you haven’t done so already, open a Stocks and Shares ISA and start buying stakes in quality companies that you can hold for decades. If single company stocks feel too risky, buy funds instead.

But what if markets crash?

The possibility of another market crash as we hobble into 2021 is real. Rising infection rates around the world make lockdowns more likely. When this last happened, in March, share prices tumbled. 

So yes, there’s always a chance that buying stocks now could lead to paper losses in the near term. Then again, there could be some great vaccine-related news around the corner and we might see a stonking recovery. The point is, we just don’t know.

Over a long enough timeline, however, we do know that the probability of making money from shares is high, especially if you reinvest any dividends. The return you get is also likely to beat other asset classes over the long term. That’s a vitally important fact for all retirement-focused savers to grasp. 

Don’t fear another market crash, embrace it. And steer clear of Cash ISAs.

The post Forget the market crash and recession. It’s the Cash ISA that will kill your retirement dreams! appeared first on The Motley Fool UK.

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Paul Summers 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.

Moreover, the government’s new measures to tackle Covid-19, announced on Tuesday, will place further restrictions on businesses, lowering earnings and profit forecasts.

The silver lining for savvy investors is this usually means stock prices drop too. But, markets often demonstrate volatility, synonymous with risk and the increased threat of losing your money.

Here’s how I’m going to mitigate this risk and make the most of UK recession share prices.

Use a margin of safety

Losing some money, even if only on paper, is all part of investing.

But, I like to try and ensure I don’t lose a lot of it. After all, “never lose money“ is a phrase legendary investor Warren Buffett lives by, and he doesn’t seem to do too badly from it!

So for me, investing in the UK recession, this means having a margin of safety in my stock purchases. A margin of safety is the difference between investment and speculation. In more practical terms, it’s crudely the difference between the earnings yield of the stock and the rate of interest on bonds.

Many UK bonds are currently selling with interest rates around 1%–2%. But, prices are high which means overall yields are low. So I don’t think it’s surprising many people are looking to the power of stocks to grow their wealth. 

The earnings yield is what the market expects the future earning power of the stock to be. It’s approximately the inverse of the price-to-earnings (P/E) ratio. But, in a recession, it’s important for the ratio to reflect the pressures on the individual firm.

Indeed, this often means choosing counter-cyclical stocks such as utilities and tobacco companies. With these types of stocks, business and revenues shouldn’t change significantly throughout the downturn, so you can be reasonably confident of the safety of your investment.

Needless to say, these companies should also be well managed, with good cash flow and a strong balance sheet. They then possess good earnings power.

The UK recession reduces your risk

In addition, the margin of safety depends on the price paid for the stock. So, this means it often increases in recessionary times, reducing the chance of my wealth being destroyed by volatile movements on the FTSE.

Buying shares after a stock market crash or in a recession, often means not overpaying for an investment. So, to some extent, I can control the consequences of being wrong.

When I buy shares at bargain prices, even if the earnings don’t turn out as promising as I expected, I may still receive a return, however small. And if the company survives into better times, the returns may well increase.  

A margin of safety means you reduce your risk of losing money. Just like Buffett.

So, a recession in the UK has a silver lining for investors. This is the prospect of buying cheap shares in quality companies, and with a margin of safety available for mistakes.

These will help mitigate the risk of market volatility and help to grow my wealth. Even in troubled times. Now, to find those shares… 

The post Stock market crash: How I’m investing through the UK recession appeared first on The Motley Fool UK.

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Rachael FitzGerald-Finch 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.

Unsurprisingly, the market always takes notice when he takes a new position. This is what happened last year when he bought soap maker and FTSE 250 member PZ Cussons (LSE: PZC).

Today, the shares are down over 6% following a trading update for the first quarter of its financial year. What on earth is wrong?

FTSE 250 recovery play

Actually, not all that much. Today, PZ reported a 23% rise in revenue to £158.1m in the three months to the end of August compared to the same period in 2019. Unsurprisingly, these results were partly driven by “strong demand” for its hygiene brands, such as Carex.

Growth in its European and the American markets was particularly strong. Collectively, revenue here grew by 49% to £61.5m, thanks to all that handwashing and sanitising we’ve been doing. That said, sales of its most recognisable brands, Imperial Leather and Original Source, declined. 

Elsewhere, revenue from PZ’s Asia Pacific and Africa regions rose 9% and 4% at constant currency respectively. Signs that sales in important markets such as Australia and Nigeria were recovering was particularly encouraging.

No, PZ’s share price tumble appears to be down to the cautious tone of CEO Jonathan Myers.

Cautious tone

Commenting on today’s numbers, Myers said that PZ’s operating landscape “remains highly volatile” for three reasons.

First, many of the economies in which the company operates are either in, or shortly to be in, recession. Clearly, this could impact on consumption of the company’s products as people tighten the purse strings.

Second, the trajectory of the virus remains uncertain, thereby making it hard for the business to provide guidance on earnings.

Third, the markets in which PZ operates — personal healthcare and consumer goods — will continue to be highly competitive. No surprise there.

Taking all this into account, Myers expects “some adverse headwinds for the rest of the year.” Perhaps the share price drop makes sense after all.

So, are the shares a buy?

PZ Cussons was trading on 19 times forecast earnings before markets opened this morning. Whether this represents good value or not is tricky to say. 

On the one hand, it’s possible that the psychological impact of the coronavirus will remain long after the bug is gone. This bodes well for the mid-cap given its self-proclaimed “clear leadership” of the UK hand sanitiser market.

I also like that PZ isn’t overly dependent on one region or country for sales and that it’s talked of making progress in reducing its debt burden.

On the other hand, you might argue that demand for its hygiene products is already reflected in the valuation and the emergence of a vaccine could mean a sharp reversal in sales.

Less committed, short-term traders may also be inclined to sell following news that the FTSE 250 member plans to increase investment in its brands over Q2.

Personally, I think there are far worse things to do with your money than buying PZ Cussons. However, if you don’t feel confident enough to do so right now, you could always opt for the LF Lindsell Train UK Equity Fund instead. 

The post Here’s why this Nick Train-backed FTSE 250 share is suffering today appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended PZ Cussons. 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.

A boring yet strong business

The first UK share that piques my interest is M&G (LSE:MNG). The savings and investment firm recently demerged from Prudential and has since entered the FTSE 100 in its own right. Despite the demerger, it still has more than five million retail customers and 800 institutional clients in 28 markets. There are also plans to launch its Prufund retail savings product in mainland Europe by the end of the year.

Of course, the pandemic has had a significant effect on the firm. In fact, underlying operating profits fell 57% to £309m. This reflected lower profits in the annuities and asset management businesses, as well as the higher costs following the demerger. Nevertheless, chief executive John Foley described the results as “resilient” and maintained the firm’s three-year capital generation target of £2.2bn.  

The group also announced an interim dividend of 6p per share. This gives the firm a dividend yield of around 10%, and there has been no indication of this being cut in the near future. As a result, such a high yield indicates that the UK share is still too cheap, and I’d buy at its currently discounted price.

A fairly unknown UK share

Airtel Africa (LSE: AAF) is a leading provider of telecoms and mobile money services in 14 countries in Africa. This is deemed an unpenetrated market, with a young population and rising smartphone ownership. As a result, there are significant growth opportunities for this UK share. This is highlighted by the fact that the current customer base stands at 111.5m, and this grew by 12% in the first half of 2020.

First-half profits were down 33% to £111m. This was mainly due to higher operating costs and a drop in revenue from the voice division. Nevertheless, the mobile operator was able to increase revenues by 6.9% from last year, and net debt-to-underlying EBITDA fell from 3x to 2.2x. As a result, I believe that the fallen profits were simply a slight blip, and further growth is on the horizon for this share.

The mobile operator also pays a mighty dividend of 10%. With the founding Bharti company owning 56% of the shares, shareholder returns should be very important for the company, and this means that the dividend seems safe. Consequently, I’d buy Airtel Africa shares for both income and growth opportunities.

The post Despite the recession, I’d buy these UK shares today appeared first on The Motley Fool UK.

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Stuart Blair owns shares in M&G and Airtel Africa. 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.