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3 stocks I’d buy in December, including Vodafone

Kirsteen Mackay
Piggy bank next to a financial report

December is a hectic month for many, with Christmas shopping, parties, preparing for the holidays and commitments galore. With many people strapped for cash at this time of the year, buying stocks is often low on the priority list.

Election effect

Since 2001, the FTSE 100 has seen positive returns in 14 out of 18 years during December. Considering three of those four negative years were in the past half-decade and we also have a general election this December, it is very much a shot in the dark trying to guess how this December’s stock market returns will play out.

Date Price Change %
Dec-18 6,728.13 -3.61%
Dec-17 7,687.77 4.93%
Dec-16 7,142.83 5.29%
Dec-15 6,242.32 -1.79%
Dec-14 6,566.09 -2.33%
Dec-13 6,749.09 1.48%
Dec-12 5,897.81 0.53%
Dec-11 5,572.28 1.21%
Dec-10 5,899.94 6.72%
Dec-09 5,412.88 4.28%
Dec-08 4,434.17 3.41%
Dec-07 6,456.91 0.38%
Dec-06 6,220.81 2.84%
Dec-05 5,618.76 3.61%
Dec-04 4,814.30 2.36%
Dec-03 4,476.87 3.09%
Dec-02 3,940.40 -5.49%
Dec-01 5,217.40 0.27%

One good thing is that historically, whichever government has been in power, there is no distinct pattern in how the UK stock market has performed after previous general elections.

Predictions seem to conclude that if Labour wins, the stock market will suffer, and if the Conservatives win, the stock market will continue much as it has in recent months. And if there is a coalition? Then the stock market will rally if the pound does. There really are a multitude of factors to consider and unknowns at play.

I think it’s important to look at the bigger picture. I don’t think the stock market is about to go into freefall and die and neither will all of its constituents. If you do your homework, then the companies you invest in should be able to ride out the storm.

Personally, I’m looking for a mixture of value and potential and like these three stocks:

Vodafone share price

The Vodafone (LSE:VOD) share price has enjoyed a bullish run of late and I can see why. After a dismal time resulting in a dividend cut at the beginning of the year, it has streamlined its business, gained telecoms assets throughout Europe and is working to pay down its debt. In the summer, it announced plans to sell off its European mobile mast business in a $20bn deal that helped boost the share price.

Last week Virgin Media announced it was replacing its BT contract for a five-year agreement with Vodafone instead. This is a bonus for the group and helps confirm it is heading in the right direction. Its current dividend yield is a reasonably attractive 4.8%, which I think gives it appeal as an income investment. Unfortunately, because of its acquisition of Liberty Global, it has negative earnings per share and its debt ratio is 46%.

Recession-proof stocks

Reckitt Benckiser, is a consumer goods group best known for household brands such as Gaviscon, Airwick and Nurofen. These are all popular and even during a recession, people will still purchase their favourite go-to items such as air freshener, painkillers and washing powders. It is a long-established and trusted company with a dividend yield of 2.9% and cover of 1.8. Its price-to-earnings ratio (P/E) is 19 and earnings per share are £3.06.

I think Tesco is another good long-term share to buy this December. It is the biggest supermarket in the UK and somewhere people will continue to shop, even if a recession rears its ugly head. It offers a dividend yield of 3.4% with cover of 2.4. Earnings per share are 14p and its P/E ratio is 17. I consider all three of these companies a Buy.

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Kirsteen 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.

Motley Fool UK 2019