Global stock markets have enjoyed a solid rebound in recent weeks. But the outlook for UK shares in the short-to-medium term remains highly uncertain as recession approaches.
This week, the National Institute of Economic and Social Research (NIESR) warned that the global economy is “fraying at the edges“. It reduced its global growth forecasts for the next two years — which stood at 3.3% and 3.2% for 2022 and 2023 respectively — to 2.8%.
The NIESR added that “there are increased recession risks in a number of countries” as inflation continues to soar.
Pleasingly however, there are many stocks on the London Stock Exchange where trading should remain robust — or perhaps even thrive — in the event of a recession.
Here are three I think cautious investors like me should buy this August:
1. Begbies Traynor Group
Begbies Traynor (LSE: BEG) is a stock which thrives in tough times like these. It’s an insolvency practitioner and provides other services for companies in distress.
In fact, the business is already performing strongly as the United Kingdom economy flatlines. It’s why it said last month it already expects full-year trading to be towards the top end of expectations for the financial year beginning May.
Fresh Insolvency Service data this week suggests that profits forecasts could be steadily upgraded too. This showed the number of corporate insolvencies in England and Wales hit a seasonally-adjusted 5,629 in quarter two. This was up a whopping 81% year-on-year.
My only concern with Begbies Traynor is how a lack of suitable acquisitions could hit its long-term growth strategy.
2. Greggs
Greggs (LSE: GRG) is another top stock to buy for when times get tough. This is because Britons’ love of a hot drink and a sausage roll remains undimmed at all points of the economic cycle.
It’s also because the baker’s large ranges of low-cost foods are perfect products to sell when consumers feel the pinch. This explains why sales jumped 27.1% year-on-year in the first half of 2022.
There are other reasons why, as an investor, I like Greggs. Steps like introducing meat-free and healthier options to its menu have proved highly successful. So has its decision to embrace e-commerce and introduce services like click & collect and delivery.
I’d buy Greggs shares despite the rising threat of cost inflation to its profits.
3. Premier Foods
Finally, I’d also snap up shares in Premier Foods (LSE: PFD) today. That’s even though it operates in a highly-competitive marketplace.
Like Greggs, this stock benefits from the fact that our need for food remains constant, irrespective of broader conditions. And just like the baker, Premier Foods has a broad stable of foods that are cheap to buy and prepare. Products such as its Batchelors Super Noodles and Cup a Soup.
The strength of its popular brands like Mr Kipling also help profits remain stable during recessions. As robust recent results from Unilever and Reckitt show, shoppers continue to buy the brands they love in massive volumes, even when their purses are lighter. This enables companies like this to keep raising prices.