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“The last FTSE 100 stock I’d sell in a recession is…”

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Image source: Getty Images

While the current recession in Britain isn’t expected to last much more than a few years in total, it’s still worth considering which stocks might be resiliant to one in the future. Often in similar scenarios, investors turn to stalwarts — many of which reside in the FTSE 100 — for safety.

GSK

What it does: GSK has three global businesses that research, develop and manufacture medicines, vaccines and consumer healthcare products.

By Harvey Jones. My portfolio isn’t notably recession proof. I’m optimistic about the economy and have been buying stocks that I expect to do well in the recovery.

That includes my most recent purchase, FTSE 100 pharmaceutical stock GSK (LSE: GSK).

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In recent years, CEO Emma Walmsley has prioritised building a healthy pipeline of treatments over rewarding shareholders.

GSK is no longer the 5% or 6% yielder of yore, with a forecast yield of just 3.65% in 2024 and 3.93% in 2025. It’s pointing in the right direction, but there’s a way to go.

I think the £68bn stock looks good value trading at 11.03 times earnings, while revenues are forecast to rise and net debt fall.

The big risk is that new drug trials don’t come fast enough to replace old ones going off patent. No guarantees on that front.

People still fall ill in recession – possibly more so – and that gives me some protection if my optimism improves misplaced. If I’m right, GSK could do even better.

Harvey Jones owns shares in GSK.

Lloyds Banking Group

What it does: Lloyds Banking Group is a UK high street bank, and the country’s biggest mortgage lender.

By Alan Oscroft. Hold on to a volatile bank stock like Lloyds Banking Group (LSE: LLOY) in a recession?

The Lloyds share price crashed heavily in the Covid crisis. And before that, it slumped after Brexit. And that’s not even mentioning the great 2008 financial crisis.

Well, when it comes to recession, investors often turn to stocks providing essentials like food, energy and medicines. And they can be great for a long-term stocks portfolio.

But I think it can be a much bigger mistake to sell volatile stocks in a recession.

Recessions don’t last long. And stock market bull runs have lasted a good bit longer, on average, over the past century and more.

So I don’t care if the economy is growing or shrinking. Lloyds would be the last stock I’d sell, whatever the conditions.

And if the next recession knocks the price down, I’ll buy some more.

Alan Oscroft owns shares in Lloyds Banking Group.

Unilever

What it does: Unilever is one of the world’s leading consumer-goods groups, with 3.4bn people worldwide using its products daily.

By Cliff D’Arcy. Currently trading at 3,872p, Unilever (LSE:ULVR) shares have dropped 9.7% in the past 12 months. They are also 12% lower over five years.

This has sent the group’s market value below £97bn. However, the above figures exclude cash dividends, which Unilever has grown strongly over the decades.

The trailing dividend yield is 3.8% a year – slightly less than the FTSE 100’s 4% cash yield. But analysts expect 2024’s dividend to be higher than the €1.73 (148p) paid for 2023.

History teaches me that owning shares in businesses with powerful, established brands is one way to ride out recessions. However, even Unilever has seen its sales growth slow or turn negative in recent times.

Even so, I see Unilever shares as undervalued right now. Hence, my wife and I will hold tightly onto our stake for dividend income and future capital gains!

Cliff D’Arcy has an economic interest in Unilever.

Unilever

What it does: Unilever has a range of brands offering personal care, home care, and packaged food products.

By Oliver Rodzianko. If I wanted to bolster my portfolio from the adverse effects of a recession, Unilever (LSE:ULVR) is one of the top ones I’d choose.

The business sells essential consumer products. Therefore, these items remain in demand during economic downturns. After all, people cut the necessities last when budgeting.

I also like that the company has no typical debt on its books right now. Additionally, it has strong profitability, with a net margin in the top 20% of businesses in the industry.

An investment in Unilever comes with one big risk. A recession could occur that includes the disruption of global supply chains, like during the pandemic. That would affect Unilever significantly, as it would struggle to get its goods to market.

Overall, I like the shares. If the economy got much worse, I’d park some cash in Unilever and don’t think I’d be compelled to sell my stake.

Oliver Rodzianko does not own shares in Unilever.

The post “The last FTSE 100 stock I’d sell in a recession is…” appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended GSK, Lloyds Banking Group Plc, and Unilever Plc. 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 2024