Markets around the world have recovered strongly from the stock market crash in March 2020. But this recovery has been fuelled by significant amounts of government support, which is set to start ending. As such, there are fears that without this government support, many companies will struggle. Speculation has also led to extremely large valuations of multiple companies, especially among US tech stocks. This can cause a bubble, which also opens up the risk of another stock market crash. So, in the face of this major risk, I’m buying these two UK stocks for my portfolio.
A gold miner
In the face of great uncertainty, the price of gold soared last year to over $2,000 per ounce for the first time. But the past few months have not been so favourable, with the price of gold falling to around $1,700 recently. There are also fears that there is further to fall.
But this does not deter me from gold mining stocks, and the one I’m particularly keen on is Pan African Resources (LSE: PAF). Firstly, this UK stock has managed to see significant increases in production in recent years, and it’s expected to produce over 200,000 ounces of gold in 2021. This is 12% higher than last year. Secondly, it has a dividend yield of over 4%, which is also well-covered by earnings. These two factors combined makes PAF shares an extremely attractive buy for my portfolio.
This stock also looks fairly resistant to a stock market crash. In fact, uncertainty is often beneficial for the price of gold. Furthermore, current factors, such as inflation and huge amounts of government debt, indicate that the price of gold should have upside potential. So, even though the PAF share price may currently be struggling due to the price of gold faltering, I still feel it’s an excellent defensive stock to buy.
This UK stock has a ton of cash
Aviva (LSE: AV) is the other UK stock that I feel is fairly resistant to a stock market crash. Indeed, in today’s half-year trading update, it announced that the disposals it has made over the past year, have reached £7.5bn. This means that the insurer is currently sitting on a ton of cash. In addition, £4bn will be returned to shareholders by the end of next year.
A large amount of cash is extremely beneficial in the case of a stock market crash. This is because Aviva would hopefully be able to absorb any losses without too much difficulty. In addition, a significant amount of money is also being used to pay down debt. This improves the financial position of the company, which should help it withstand any future uncertainties. As such, while a stock market crash would still have severe adverse effects on the Aviva share price, I feel that it is in a stronger position than most companies to cope with it. Accordingly, I’m tempted to add more Aviva shares to my portfolio. Â