Recessions typically indicate a sharp fall in economic activity. As a result, stock prices often plummet, as will the value of my portfolio in all likelihood. While I wasn’t investing at the time of the last recession between 2007-2009, I know it is prudent to plan for the worst scenario. So, in the event one is impending, I have my eye on three potentially recession-resistant FTSE 100 shares that can not only help my portfolio play defence if a bear market does occur, but can also offer me growth potential amid falling markets.
It has been said before that the last two things to ‘go’ in a recession are the monthly sneaker allowance, and the dog. I can vouch for this wisdom having recently added some new trainers to my collection from JD Sports Fashion over the past weekend.
The sports retailer has a younger demographic of customer than most other companies in the FTSE 100 and I believe that will prove helpful to its sales. The shares are trading at nearly half the value they were worth at the start of the year, so it certainly has the potential to provide my portfolio with capital growth over the long term.
Alternatively, the consumer staples sector is of interest to me too as it represents companies that sell the everyday products and services people rely on in the good times and bad. Tobacco stocks are a prime example. There is some reluctance to include it my portfolio because smoking is a persistent bad habit of mine. However, I am also aware that it is a persistent habit for many others too, hence why tobacco stocks are often resilient during times of economic stress.
I am seriously considering buying one of the cheapest in the FTSE 100, Imperial Brands (LSE:IMB). The shares trade around 7.8 times projected 2022 earnings, much lower than the sector average of 11.4 times. As a value-focused investor, it heightens the stock’s attractiveness. And what’s even more appealing is that it is one of the highest-yielding in the FTSE 100, with a forward yield of 8.92%.
A third consideration for me currently is Britvic. The drinks maker has a strong portfolio of brand leaders, and in the last major UK recession its core revenue grew 4.8% while the UK soft drinks market fell 0.8%. The stock has lost more than 10% of its value since the New Year, and this looks unjustified considering recent revenues as well as profitability grew across the company’s key markets for the six months running up to 31 March 2022.
As a long-term investor, an impending recession is not of great concern to me. But at the same time, anticipating bearish conditions before they occur, and making ever so slight defensive tweaks to my portfolio to combat this, has often proved a positive move for me.
The addition of these three stocks could provide my portfolio with a defensive buffer should the worst conditions arrive. My portfolio might even see some upside too.
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Henry Adefope has no position in the shares mentioned. The Motley Fool UK has recommended Britvic and Imperial Brands. 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.