Here’s why I’d buy them for my own portfolio if I had £5,000 to invest.

SSE

Electricity generator SSE’s (LSE: SSE) share price has tanked 20% over the past month. This has pumped its forward dividend yield up to 6.4% and cut its forward price-to-earnings growth (PEG) ratio to just 0.4

A stock is considered undervalued if its reading is below 1.

Worries over a multi-billion-pound windfall tax continue to weigh on the FTSE 100 business. Reports abound that the government is set to cap revenues on renewable energy companies and nuclear power generators, despite denials.

But I strongly believe that green energy producer SSE remains a top stock for long-term investors. It should deliver exceptional profits growth as the fight against climate change intensifies. Renewable energy capacity on these shores rose 6.5% year on year in the second quarter and is now six times higher than it was in 2010.

SSE is accelerating investment in low carbon to capitalise on soaring demand. It’s currently seeking to increase its own renewable energy output fivefold through to the end of the decade.

I also think buying the business is a great idea as electricity consumption steadily rises. Population growth and the transition towards net zero will drive this.

Analysts at McKinsey & Company have tipped electricity demand in Britain to soar 50% between now and 2035. They say this will be driven by “a shift from fossil fuels to electricity as the primary fuel in the transport and building sectors.”

B&M European Value Retail

The UK’s low-cost retail sector continues to grow rapidly. It’s a phenomenon that has propelled Aldi to become the country’s fourth-largest supermarket chain.

I think B&M European Value Retail (LSE: BME) is one of the best shares to buy to capitalise on this hot growth market.

Shoppers are becoming savvier with their cash and expecting more for their pennies. It’s why revenues at this FTSE 100 stock — supported by the company’s store expansion programme — have risen around 50% over the past five years.

And its why City analysts expect the business to keep growing sales over the next couple of years. B&M’s growing store estate is putting it in a strong position to grab customers from its more expensive rivals.

In June, there were 705 B&M-branded stores, up from 684 a year earlier. The number of cut-price Heron Foods grocery stores rose by three over the period, to 311.

Worries about soaring costs have driven the company’s share price 17% lower in the past month. This, in my opinion, represents a great dip-buying opportunity.

B&M trades on a forward price-to-earnings (P/E) ratio of 8.6 times. At 5.2%, its corresponding dividend yield is also impressive.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Greggs 

What it does: Greggs makes and sells sweet and savoury foods through more than 2,000 stores across the UK.

By Royston Wild. Morning-goods retailer Greggs (LSE: GRG) might not be suitable for risk-averse investors. Even food specialists are suffering from weakening demand during the cost-of-living crisis. At the same time, worsening inflation is putting growing pressure on the baker’s bottom line. 

Having said that, I think it has the tools to continue growing earnings even as recession approaches. So do City analysts, who think the business will report earnings rises of 1% and 4% in 2022 and 2023 respectively. 

Sausage rolls, coffee, doughnuts, and the other goods Greggs is famous for sell well at all points of the economic cycle. What’s more, the bakery chain sells its products at low price points, giving its revenues column extra resilience when consumers feel the pinch. 

This is why like-for-like sales rocketed 22.4% during the first six months of 2022. I’m expecting another impressive report when third-quarter trading numbers are released on Tuesday, 4 October. This could give the Greggs share price a lift following recent heavy weakness. 

Royston Wild does not own shares in Greggs. 

Associated British Foods

What it does: Associated British Foods is a diversified collection of businesses that includes retail, grocery, sugar and agriculture.

By Andrew Mackie: In a worsening economic environment, it might seem strange that I would choose a company whose revenue is so heavily reliant on retail. However, with Associated British Foods (LSE: ABF) share price languishing at a 10-year low, I believe the market is missing a trick here.

UK sales at Primark have been performing well and are nearly back to pre-Covid levels. However, the same cannot be said across continental Europe where like-for-like sales are down 18%. As the cost-of-living crisis intensifies, ABF is starting to see signs of a consumer spending slow down across all markets.

Whilst retail is struggling, other parts of the business are thriving. Surging sugar prices has meant that revenues are well ahead of last year. In addition, UK sugar production is up 14%. It’s a similar story in grocery, which is benefiting from price increases across a range of branded products.

ABF’s share price is now trading 17% lower than during the pandemic. That is despite all its Primark stores being open, a successful launch of its UK website earlier in the year and an expected Christmas launch of a trial click and collect.

Opportunities to pick up cheap shares in high-quality companies with proven business models don’t come along very often. The fact that ABF is a family-run business provides me with added reassurance. That is why I have been buying more of its shares recently.

Andrew Mackie owns shares in Associated British Foods.

IG Group

What it does:  IG Group Holdings is a UK-based financial technology company providing an online platform for traders.

By Paul Summers: Given concerns over rapidly rising interest rates and a prolonged recession, I suspect global markets could remain choppy for a while. Should this be the case, spread-betting supremo IG Group (LSE: IGG) might be a great place to park my cash. 

In contrast to most listed companies, this high-quality outfit actually benefits from volatility. This may be one reason why the share price has held up fairly well (albeit still down) over 2022.   

While never guaranteed, the dividend stream also looks enticing. IG shares currently boast a forecast yield of 6%. As inflation continues to bite, that’s worth grabbing in my opinion.

Sure, there are risks here. The industry it operates in is often targeted by regulators. Competition for clients also remains fierce.

With sky-high margins and a robust balance sheet, however, I can think of a lot worse places to be invested in these tricky times.

Paul Summers has no position in IG Group

B&M European Value Retail

What it does: B&M is a leading staple & discretionary discount retailer with over 1,100 stores across the UK and France.

By Zaven Boyrazian. B&M European Value Retail (LSE:BME) is one of the UK’s leading discount retailers for both staple and discretionary items. The group operates 1,016 stores across the country under the B&M and Heron Foods brands, with a further 109 locations popping up in France.

Lately, the tailwinds from the pandemic have started dying down, causing revenue growth to seemingly stagnate. Unsurprisingly, its share price has followed, falling by a massive 50% courtesy of the stock market volatility.

However, as consumers seek to cut spending, the popularity of discount retailers is rising. And suppose the worst comes to pass and the UK falls into a recession. This could create ample opportunities for B&M to steal market share from its larger competitors.

Being a discount retailer obviously means that pricing power is basically non-existent. But with positive trends already emerging in its latest results, paired with a P/E ratio of 7.6 and a dividend yield of 5.2%, I believe Now could be an excellent buying opportunity for my stocks and shares portfolio.

Zaven Boyrazian does not own shares in B&M European Value Retail.

Greggs

What it does: With around 2,300 outlets, Greggs is the UK’s leading fast food chain. It focuses primarily on baked goods.

By Stephen Wright. In an uncertain economic environment, I’m looking for something stable. That’s why Greggs is my Best British share to buy in October.

Peter Lynch famously said that his initial interest in Dunkin Donuts came from seeing the constant queues outside – even in a recession. I feel the same way about Greggs.

From what I can see, the current cost-of-living crisis appears to be making no difference to this company. It’s easy enough to see why. 

The company’s products are familiar and inexpensive. This means that they’re less likely to get cut from the budgets of price-conscious consumers.

At a price-to-earnings (P/E) ratio of under 16, I don’t think that the stock is particularly expensive. The company also generates solid returns on equity.

There’s a 3% dividend for investors looking for passive income and the company plans to expand to 3,000 stores in the future. I’d be willing to buy shares for my portfolio at today’s prices.

Stephen Wright does not own shares in Greggs.

BT 

What it does: BT is a UK-based telecommunications company with operations in over 180 countries.

By Charlie Keough. My top British stock for October is BT (LSE: BT-A). The BT share price has failed to take off in the last five years. And this decline has continued into 2022 due to inflationary pressures. However, I think its shares could be a strong long-term buy.  

Firstly, its attractive 5.7% dividend yield is a great way for me to put my money to work at a time when stagnant cash is losing value.  

Further, I like the large infrastructure that BT already has in place. This provides the firm with, to some extent, a higher degree of pricing power. It’s also on track with its Openreach rollout, while its 5G network now covers more than half of the UK.  

What does concern me is its £19bn of debt. With interest rates rising, this will only become more difficult to eradicate. 

However, I think its solid foundations will help BT overcome the challenges it will face in the foreseeable future. I’d buy some shares this month.  

Charlie Keough does not own shares in BT.  

BAE Systems

What it does: BAE Systems is a leading defence, aerospace, and security company that serves both the UK and US governments.

By Edward Sheldon, CFA. BAE Systems (LSE: BA) strikes me as a relatively safe pick in the current environment. Given the high level of geopolitical uncertainty arising from the Russia-Ukraine crisis and the tension between China and Taiwan, governments are unlikely to reduce their defence spending any time soon.

Aside from the supportive backdrop, one thing I like about BAE Systems is the attractive dividend yield on offer. At present, analysts expect the company to pay out 26.3p per share for 2022. That equates to a yield of over 3% at the current share price. The company is also buying back its own shares – an extra reward for shareholders.  

It’s worth pointing out that if the Russia-Ukraine crisis was to come to an abrupt end, sentiment towards defence stocks could deteriorate. This could have a negative impact on BAE Systems’ share price. Overall, however, I think BAE is a good stock to own right now.

Edward Sheldon has no position in BAE Systems.

InterContinental Hotels Group

What it does: InterContinental Hotels Group operates a number of different hotel brands across the globe, including Regent Hotels, Crowne Plaza, and Holiday Inn. 

By Andrew Woods. My top British share for October is InterContinental Group (LSE:IHG). This hotel operator was battered during the pandemic, as virtually all of its hotels were forced to close. As a result, it slumped to a $280m pre-tax loss for 2020. By 2021, however, when many restrictions subsided, the business reported a pre-tax profit of $361m.

For the six months to 30 June, the firm stated that operating profits doubled to $377m. Furthermore, it announced that it was reinstating its dividend for the first time since 2019. It paid an interim dividend of ¢43.9 per share, a 10% increase compared to the same period in 2019. Moreover, it’s embarking on a $500m share buyback scheme. This is a signal that the company is in a strong financial position, although I’m always aware of the threat of further pandemic variants.

The business also offers geographical diversity, with established operations in the US and Europe, and a growing presence in China.

Andrew Woods has no position in InterContinental Hotels Group.

Reckitt

What it does: Reckitt is a consumer goods company. It primarily produces health, hygiene, and nutritional products, and is famously known for brands such as Dettol, Strepsils, and Durex.

By John Choong. As the UK heads into a recession, discretionary spending is expected to decline. However, demand for products from Reckitt (LSE: RKT) isn’t likely to wane due to its inelasticity as consumer staples, thus making it a contender for a position in my portfolio this October.

Although inflation can’t be ignored, the superiority of its brand appeal is unmatched across many of its product categories. This has allowed the group to raise the prices of its products while maintaining healthy profit margins of 22.5% in its latest half-year results, with management expecting better growth in the second half of the year. The fact that Reckitt earns the bulk of its revenue from outside the UK also makes it a safer investment due to the geographical diversity of its income steam.

Nonetheless, it’s worth noting that Reckitt’s balance sheet isn’t the healthiest. Having quite a high debt-to-equity ratio (107%) isn’t ideal in a high interest rate environment, and is something I should definitely take note of.

John Choong has no position in Reckitt.

Some growth shares I see as having promising long-term prospects are now available to me at what I see as an attractive price. So if I had spare funds to invest in October, here are two I would happily add to my portfolio.

S4 Capital

The digital media agency S4 Capital (LSE: SFOR) has had a horrible 2022. The shares are down 50% since the start of the year.

But the outlook for these growth shares looks compelling to me. This month, S4 published its interim results. Net revenue grew 28% compared to the same period last year. The business says it expects full-year net revenue growth of 25%. It also expects to increase the number of accounts with annual billings of $20m or higher, from 6 to 20 by the end of 2024.

Growth shares with a digital focus

The cost of staffing up to service accounts is a threat to profitability, so I am glad the company is taking steps to control rising staff costs. A recession often leads advertisers to cut their budgets. I do see that as a risk to revenue growth at S4. However, the company seems to have done a good job so far building the size of its existing accounts, as well as winning new ones.

I expect digital advertising to slow down less than traditional media during a recession. That could be good news for S4 with its purely digital focus. Its heavy US presence means a strengthening dollar may actually help results at the business, which reports in pounds.

B&M

Is discount retailer B&M (LSE: BME) really a growth stock? After all, B&M saw both revenues and post-tax profits fall last year. In the first quarter of this year, sales again fell 2.2% compared to the same period last year, athough the trend improved during the quarter.

While the past year has shown business slowing, the longer-term trajectory at the company has been one of strong growth. Last year’s profits, for example, were still more than double what they had been just three years previously.

I see continued growth drivers for B&M. As the recession bites, I expect more shoppers to become increasingly cost conscious. That plays to the strengths of a discounter like B&M. I also expect a slowdown in eating out and costly entertainment, with more people opting to stay at home. With its range of homewares, food and drinks, I think that could boost sales at B&M.

Inflation remains a risk to profits. The company’s focus on sharp pricing can make it difficult for B&M to pass such increases on to customers in full.

But with the prospect of buoyant demand, possible growth in its customer base and a proven model, I expect the B&M growth story in coming years to be strong. Despite that, these growth shares have tumbled 50% in the past year.

Why is the FTSE 100 falling?

The Footsie usually rises when the pound sinks. This is due to the huge proportion of company profits on the index that are generated in US dollars and euros. When sterling falls against these currencies, earnings receive an extra boost.

But the index is currently falling as traders price in the possibility of emergency rate hikes. The Bank of England could intervene in the coming days to help sterling and to lower yields on government bonds. The benchmark interest rate might also remain higher for longer if the measures announced in last week’s mini budget are introduced.

2 top stocks to buy

Higher rates put economic growth and, in turn, corporate earnings under extra pressure. However, the profits outlook for many FTSE 100 stocks remains pretty bright even as the prospect of emergency Bank action rises. Here are two I’d buy for my portfolio following falls today.

SSE

At current prices, SSE carries excellent all-round value. It trades on a forward price-to-earnings growth (PEG) ratio of 0.5. And its dividend yield sits at a healthy 5.5%.

The renewable energy producer isn’t immune to the impact of higher rates. The business has a whopping amount of net debt on its books due to the capital-intensive nature of its operations.

But this threat is more than reflected in that low PEG ratio. In fact, I think SSE’s a great way to ride out this challenging economic period given that power demand remains broadly stable even during the darkest times. This in turn gives the company supreme earnings visibility.

City analysts actually think earnings here will rise 28% in the current financial year (to March 2023). Not many other FTSE 100 stocks carry such bright earnings forecasts today.

B&M

Discount retailer B&M European Value Retail (LSE: BME) has slipped on acount of the falling pound. Weaker sterling results in higher costs. But I believe buying the business could be a shrewd idea as consumers feel the pinch.

According to KPMG, a quarter of Britons are now shopping at low-cost retailers like B&M. People are desperately trying to stretch their shopping budgets as far as possible. And the number could grow rapidly too as inflation heads northwards in the months ahead.

Like-for-like sales here fell 2.2% in the quarter to June. But this reflected strong comparatives of a year earlier as Covid-19 restrictions ended. And the company reported “improving trends” during the quarter. This could mark the beginning of a sharp upturn.

Today B&M trades on a forward price-to-earnings (P/E) ratio of 8.8 times. It also carries a 5% dividend yield, comfortably beating the FTSE 100 average of 4%.

I hear investors lament missed market opportunities. Right now, some top-quality UK shares are down over 30%! Here are two companies I am watching closely to make an investment in the coming months. 

Reduce your bills

B&M European Value Retail (LSE:BME) is one UK share that has been on my watchlist for a few years. With inflation projected to hit 22% next year, I expect discount retail stores to see a spike in revenue. And B&M has quickly become a big player in this sector. 

While many grocers felt the brunt of rising raw material costs, B&M managed to maintain stable revenue and sales in the financial year (FY) 2022. The group recorded a pre-tax profit of £525m, exactly the same as in FY21. Two-year sales growth (compared to FY20) was at 13%, showing that the business managed to retain a large chunk of its customers gained during the pandemic. 

By focusing on in-demand products and avoiding overstuffing store stock, the company has managed to keep costs low and generate a profit. In fact, overall gross margins went up to 37.4% from 36.9% in FY21. 

Supply chain issues are a big concern for supermarkets right now and B&M is no different. Disruptions in Asia could affect operations in the coming months. Also, rising energy costs mean higher transportation costs that the company will have to deal with.

However, I am impressed by B&M’s frugal business model and its commitment to its dividend policy. Its yield stands at 4.3% and the board is confident about maintaining current levels.

Its shares are down 39.7% in 2022 and are trading at a price-to-earnings ratio of 8.9 times. Given the market share and business model, I think B&M is the best bargain option for my portfolio right now. 

Cheap UK defence share

The world is reeling from the war in Ukraine and defence budgets across the globe are shooting up. I think investing in the sector could be a good growth option moving forward. One UK share that has caught my eye is Babcock International Group (LSE:BAB). 

The firm specialises in electric systems for combat vehicles across land, air, and water. Along with engineering, the company also provides training, assistance, and data management services for militaries. 

In FY22, group revenue jumped 3% to £4.1bn with an underlying operating profit of £238m. The company recently signed defence contracts with Australia, France, Indonesia, and the UK. This has boosted its order book significantly.

There is always an underlying threat of trade restrictions when it comes to defence shares. A ban on sales could vastly impact Babcock’s revenue. The company is also dealing with rising metal prices, which is crucial to an engineering firm’s margins.

But I am still bullish on Babcock shares for my growth portfolio. It has fallen nearly 4% in the last month after a 50% rise since January 2021. I think this presents an attractive entry point at 328p. Currently, this UK share looks like a bargain to me given the high interest in defence, the company’s quality, and momentum. 

Property owners must first raise enough capital to afford a mortgage and then cover the cost of maintaining the property. Beyond these core expenses, there’s also the headache of dealing with tenants and estate agents. And if the property is sold, HRMC will be knocking at the door for capital gains tax.

Thankfully, this hassle can be avoided entirely when putting money in the stock market. And even taxes can be bypassed when using a Stocks and Shares ISA.

So, with that in mind, what are some of the best stocks to buy now?

Shares of this FTSE 100 retailer are heating up

A stock that hasn’t received much love so far this year is B&M European Value Retail (LSE:BME). Investors of this discount retailer have suffered an unpleasant 26% decline over the last 12 months.

During the 2020 lockdowns, management secured an ‘essential’ status. As a result, its stores remained open while most of its competitors had to close their doors. Pairing this with a surge in high-priced, high-margin home improvement product sales in 2021 sent the revenue stream and earnings to a new record of £4.8bn and £428.1m, respectively.

Sadly, these tailwinds haven’t lasted. And in its 2022 fiscal year ending in March, the new-found growth started to reverse, triggering the stock sell-off.

Yet despite what the surface level performance suggests, shares of this FTSE 100 business may be a hidden gem. In its 2022 full-year results, total revenue fell by 2.7%, with pre-tax profits remaining flat. However, its expansion into France seems to be paying off because sales were actually up by 14%.

Skip ahead to its 2023 first-quarter results and a similar pattern is emerging. Total revenue has still dropped but at a slower pace of 2.4%. Yet once again, France is putting on an impressive show with 34% growth!

The risks and reward

What does this all mean? Management seems to be offsetting the loss of its tailwinds by opening new stores. This isn’t currently enough to generate new growth, but it is mitigating the damage in the UK. Meanwhile, in France, B&M is making waves. And while international sales only make up around 7.8% of the revenue stream, that might soon change if current growth rates continue.

In other words, the recent sell-off may be a buying opportunity to secure promising long-term returns. But that doesn’t make it risk-free.

Expansion of the store count comes with higher costs, placing more pressure on margins, which are already tight. Total revenue growth might return. But restricted cash flows may compromise internal investments as well as shareholder dividends.

Furthermore, while France may be a terrific growth avenue, it comes with the risk of fluctuating foreign exchange rates that can adversely affect the bottom line.

Nevertheless, management seems to be making the right moves to get growth back on track. And at a P/E ratio of 10, these FTSE 100 shares look too cheap to pass up for my income portfolio.

Here are two FTSE 100 shares that no one is talking about that I think could offer explosive growth going forward. 

Top FTSE 100 growth shares for my portfolio

Irish betting firm Flutter Entertainment (LSE:FLTR) and discount retailer B&M (LSE:BME) are the shares I am looking at right now. Both operate in sectors that are gaining a lot of traction and are coming off historic bear runs.

The recent online gambling surge is a rarely talked about side effect of the pandemic. The lack of live sports and the cryptocurrency surge created the perfect storm for online betting growth. 

I think Flutter Entertainment stands to gain a lot from this growth. This FTSE 100 share owns and operates some of the largest names in the space like Betfair, Paddy Power, and Sky Bet. The company also operates six hundred betting shops in the UK and Ireland. 

In 2021, the company generated total revenue of £6bn, 17% higher than in 2020. The company also saw a 23% growth in monthly players across all its platforms, registering 7.6m unique users. 

Flutter shares are down 46% since March 2021. It is trading at 8,700p, close to its pre-pandemic high of 9,300p. This means that I could acquire shares in this thriving business at close to 2019 levels! 

The next company on my watchlist, B&M Value Retail is a discount supermarket chain operating in Europe. The company recently opened its 700th store in England, making it one of the largest chains in the region. In fact, the company’s revenue has increased every year since 2009, with a big jump coming in 2021 with £4.8bn in sales. 

With UK’s inflation projected to increase well into 2023, I think discount retail will become more popular. And this FTSE 100 firm is already eating into the market share of giants like Tesco and Sainsburys.

After the 2022 market crash, B&M shares are down a whopping 34%. But in the last month alone, they are up 8.4%. I think this momentum could continue given the relatively low price-to-earnings ratio of 9.4 times and the steady 3.4% yield. 

Concerns and verdict

But it is always mandatory to look at the negatives before making an investment. Gambling companies are always subject to tighter regulations that could drop profits quickly. And I think there will be a pullback as policymakers are recognising rampant gambling addiction among youngsters. 

Similarly, undercutting large grocery chains will prove tougher for B&M if this inflation persists. B&M’s major sourcing market is China, which is also witnessing an economic slowdown. This could increase costs and drop revenue. 

Also, I think now is the best time to invest in FTSE 100 shares. In 2022, businesses look more streamlined and better prepared to navigate choppy waters. In the US, hiring rates have remained high, which is a sign that businesses are not reading too much into recession concerns

Both FTSE 100 shares look like they are back on their way up. And I think I will make an investment in these shares if the recovery continues in August.

Netflix

The investor jury has been out on Netflix (NASDAQ: NFLX). The streaming service has spent heavily on expensive content, meaning it has a high cost base. But there are signs that consumers tightening their belts is leading to some cancelling their subscriptions. Could a recession badly hurt revenues and profitability?

I see a risk that it could. But things may go the other way too. As people cut back spending on nights out and restaurant dinners, the allure of home entertainment might actually grow.

I also think a recession could help Netflix sharpen its business model. One challenge it faces is how to price its service for markets where incomes are lower than in developed countries. Cracking that problem could open up huge new opportunities for the firm. A recession in existing markets will help the company understand the limits of its pricing power in minute detail. I reckon it could use that data to figure out the optimal pricing models to help boost sales globally.

I see Netflix as among the growth shares that could do well in a recession. I would consider adding more to my portfolio.

Begbies Traynor

A different logic applies to Begbies Traynor (LSE: BEG).

The restructuring specialist is already in growth mode. Revenues have more than doubled in the past four years. Unfortunately a recession would likely cause a lot of businesses to struggle. That could provide more opportunities for Begbies Traynor.

The company has been raising its dividend annually and yields 2.5%.

One risk here is profitability. Last year the company made a loss. In general, its profit margins are slim.

Yet I think this growth stock could do well in a recession as business would likely expand. But the profit margin is not consistently attractive enough for me to add the shares to my portfolio at the moment.

B&M

The growth story at discount retailer B&M (LSE: BME) has been very strong for the past few years. But has it now fizzled out? After all, both revenue and profits dipped slightly last year.

I see that as a pause for breath after the retail chain had grown so strongly over the previous few years. Discounters tend to do well when the economy does badly. Shoppers watching their pennies can mean they attract new customers. And existing shoppers may choose to spend a higher percentage of their weekly budget in stores like B&M than costlier rivals.

A change in management is a risk to profits though, if the new chief executive cannot keep a tight lid on costs. That has been a key part of the chain’s recipe for success so far. But B&M is now well-established and benefits from a strong customer following. I think its price focus could help it grow as a business in coming years.

This growth shares is down 28% in the past year. I see that as a buying opportunity for my portfolio.

Today I want to look at three cheap FTSE 100 stocks that have caught my eye, including one I’ve already bought.

A boxed-up bargain

My first choice is cardboard packaging specialist DS Smith (LSE: SMDS). I already hold this share in my portfolio, but I’d be very happy to buy more at the current share price.

DS Smith’s recent results showed sales rose by 21% to £7,241m last year, while operating profit rose by 45% to £443m.

When profits rise faster than sales it normally means profit margins have increased, and that’s what happened here. The company says it was able to pass on higher costs to customers by putting up its prices. Demand was strong too, with box volumes up by 5.4%.

I think consumer demand could fall in a widespread recession. But I’m reassured by progress last year and continued debt reduction.

DS Smith’s share price has fallen by 35% over the last 12 months. That’s left the stock trading on just eight times earnings, with a 6% dividend yield. That looks cheap to me.

A contrarian bargain?

My next pick is FTSE 100 advertising group WPP (LSE: WPP). Shares in this business have fallen by 35% since the invasion of Ukraine, but so far trading has been largely unaffected.

WPP’s underlying revenue rose by 9.5% to £2,574m during the first three months of 2022. This growth was driven by strong trading in top markets, including China and the USA

This strong start gave chief executive Mark Read enough confidence to upgrade his sales forecasts for the year, despite the uncertain economic outlook.

Big clients such as Unilever and Coca-Cola might cut their spending in a recession. But as with DS Smith, I think WPP is already priced for bad news. The shares trade on less than nine times forecast earnings, with a 5% dividend yield.

I’d be happy to add the shares to my long-term portfolio at this level.

This discount retailer looks cheap!

My final pick is value retailer B&M European Value (LSE: BME). B&M’s distinctive mix of food, household and seasonal products is popular with shoppers. The company’s core UK store estate has expanded from 400 shops in 2014 to over 700 today.

During the pandemic, B&M benefited from being able to stay open as an essential retailer. A post-Covid slowdown was inevitable, and we’re seeing that at the moment. Like-for-like UK store sales fell by 9% during the 12 weeks to 25 June, compared to the same period last year.

I’m not too concerned. I expect B&M to return to growth once the pandemic boost has faded. Rising costs are a potential concern, as they could put pressure on profit margins. However, I think the experienced management team should be able handle this.

B&M shares have fallen by nearly 30% over the last year. That’s left this FTSE 100 stock trading on 10 times forecast earnings, with a 5% dividend yield. I’d be very comfortable buying B&M at current prices.

But let’s be pessimistic and assume the economy is headed for a downturn. What are the best shares for me to buy under such conditions?

Catering to reduced spending

During a recession, consumer spending tends to fall off a cliff, because people are trying to save their money or because they may have lost their jobs. And now that inflation is at a historic high, this effect is only being amplified. However, B&M European Value Retail (LSE:BME) might benefit in this environment.

The retailer sells a collection of branded household, food and beverage products at significant discounts under the B&M and Heron Foods brands. While there’s a more limited choice than at a supermarket like Tesco, the drastically lower prices make it an ideal shopping location for those looking to save.

Over the last 12 months, shares of the FTSE 100 company have dropped by nearly 40% after it reported slowing like-for-like growth. The slowdown is mainly attributable to tough comparables versus pandemic tailwinds. But while UK revenues might be flat, top-line growth in France has surged by over 30%.

There are other discount retailers looking to capitalise on the shift in consumer spending. And it’s possible that B&M will fail to retain its lead. But given the group’s track record, I’m cautiously optimistic. That’s why I’m considering this business for my portfolio today.

Buying critical FTSE 100 shares

Despite the challenging growth environment a spending slowdown creates, some things simply can’t be ignored. For example, healthcare. After all, if someone becomes severely ill or is injured, the economic climate won’t affect the need for medical treatment.

Two FTSE 100 shares that have caught my eye in this space are AstraZeneca and Smith & Nephew. The former is well known leading pharmaceuticals group specialising in various diseases, including cancer. And the latter is a medical devices manufacturer with an industry-recognised reputation for wound management and orthopaedic reconstruction.

Both groups have been delivering solid performances for decades. And that’s despite having to navigate arguably one of the most complex regulatory environments. The cost of developing new medical products isn’t exactly low. And the probability of success is even more unfavourable. That’s always a risk, of course.

However, these two firms have established product portfolios used in hospitals and health clinics worldwide. And with a long history of delivering value to shareholders, the recent volatility in the stock market makes these FTSE 100 shares look like a smart addition to my portfolio. At least, that’s what I think.