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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.

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

Residential Secure Income REIT 

What it does: Residential Secure Income REIT invests in residential rental properties and shared ownership homes.

By Royston Wild. The economic outlook remains extremely uncertain right now. It’s why I think buying classic defensive stocks, like residential property rentals business Residential Secure Income REIT (LSE: RESI), is still an attractive idea. 

But don’t think of this UK share as simply a reliable share to own in difficult times. A widening supply and demand imbalance means that rental income at the real estate investment trust (REIT) looks set to soar. 

This explains why City analysts expect earnings to rise 20% this fiscal year (to September 2022). They predict an 8% bottom-line increase for next year, too. 

Data from Hamptons shows that rent growth in the UK remains super strong despite deteriorating economic conditions. Average rents rose 8.3% year on year in August. Last month’s increase was also the sixth largest yearly increase over the past decade. 

Rising interest rates pose a threat to Residential Secure Income’s shared ownership operations. However, I believe the prospect of a long-running shortage of rental homes still makes these shares a top buy for investors. 

Royston Wild does not own shares in Residential Secure Income REIT. 

Scottish Mortgage Investment Trust 

What it does: SMT is an investment manager primarily trading consumer, healthcare and technology stocks.

By Hamish Cassidy. The Scottish Mortgage share price has had a rough year so far, falling 32% since January. However, the stock has been steadily rising since June, and I think it’s set to climb higher this September. 

The company’s FY22 results reported £12.5bn in total assets. Exposure to the tech sector increased, now accounting for 25% of SMT’s portfolio. With tech giants such as Tesla and Nvidia gaining strong momentum last month, I think September looks hopeful.

Consumer spending has dropped due to the cost-of-living crisis. SMT has felt the effects of this, given that consumer discretionary stocks hold the majority of its portfolio at 33.5%. However, a strong turnaround in cash inflows from financing (increasing £1.2bn) suggests SMT can excel through the remainder of this year. 

I think the fund is very cheap at 880p. The stock looks like a great long-term addition to my September portfolio.

Hamish Cassidy owns shares in Scottish Mortgage Investment Trust.

Imperial Brands

What it does: Imperial Brands is a consumer goods company selling a range of cigarettes, fine cut and smokeless tobaccos and papers

By Paul Summers: Imperial Brands (LSE:IMB) has had a stellar year relative to most UK stocks. Not that this is all that surprising. Thanks to the addictive nature of what it sells, it was only a matter of time before even growth-focused investors saw it as a great option for parking their cash while the economic clouds pass.

I wonder if there could be more gains ahead. After all, the shares still look cheap at seven times forecast earnings. A 7.4% dividend yield is also enticing considering just how high inflation is expected to rise over the next few months.

There’s clearly still risk here. Cigarette volumes are in decline and regulators are never far away. We could also see some profit taking at some point. 

So long as I spread my cash around other sectors, however, I reckon Imperial will remain one of the best defensive shares around to buy.

Paul Summers has no position in Imperial Brands.

Diploma

What it does: Diploma is a distributor of industrial parts specialising in seals, controls, and healthcare equipment.

By Stephen Wright. In my view, Diploma (LSE:DPML) is one of the best UK stocks to buy at any time. The underlying business generates strong returns and has a significant advantage over its competitors.

One of the things I love about Diploma is the fact that it doesn’t have factories and expensive plants to maintain. This is because it distributes industrial components, rather than manufacturing them.

As a result, the business generates significant amounts of cash. 92% of the cash the business brings in becomes free cash available to the company.

This is an attractive business, but it can’t be easily emulated. Diploma’s scale and the size of its inventory give it an advantage over the competition.

Its customers know that Diploma can likely get parts to them quickly and more efficiently than anyone else. That’s what sets the business apart and means that its cash flows are — in my view — likely to prove durable.

Stephen Wright does not own shares in Diploma.

BT

What it does: BT is a UK-based multinational telecoms company operating in over 180 countries.

By Dylan Hood. Rising inflation and interest rates have weighed down on stock market valuations. BT (LSE:BT-A) shares have fallen 9% year to date, and over 20% in the past six months because of this. However, when I look at BT’s underlying business, not much has changed.

The group reported a small drop in profits in its Q1 FY23 results, however, in my opinion investors overreacted to this news. The firm is still on track with its Openreach roll out, which is now in over 7m homes, and its 5G network now covers over half the UK. In addition to this, the stock trades at a much lower price-to-earnings ratio (12 compared to 20) than its biggest competitor, Vodafone. BT’s asset-rich nature also means that it can act as a hedge against inflation.

Considering all of these factors, I think that BT shares looks like they could be a solid buy for my portfolio in September.

Dylan Hood does not own shares in BT

InterContinental Hotels Group

What it does: IHG is a hospitality company that owns a number of hotel brands including InterContinental, Holiday Inn, and Kimpton.

By Edward Sheldon, CFA. There are two main reasons I’ve chosen InterContinental Hotels Group (LSE: IHG) — a travel stock — as my top pick this month.

The first is that right now, we’re seeing a massive shift in the way consumers spend their money. Instead of buying goods, like they did during the pandemic, consumers are now spending their money on services. And the travel industry is benefitting. This is illustrated by IHG’s recent H1 results. For the six months to 30 June, revenue was up 53% year on year.

The second is that the company has pricing power due to its strong brands. The ability to raise prices should help it offset inflation.

The big risk to my investment thesis is that consumer spending slows down significantly due to the cost-of-living crisis. This could have a negative impact on sales.

However, with the shares trading at just 18 times next year’s earnings forecast, I think the risk/reward proposition here to buy into is quite attractive at present.

Edward Sheldon has no position in InterContinental Hotels Group.

Hikma Pharmaceuticals

What it does: Hikma Pharmaceuticals focuses on manufacturing and selling generic, branded, injectable, and in-licensed medicines.

By Zaven Boyrazian. Hikma Pharmaceuticals (LSE:HIK) is a world-leading generics pharmaceutical business. The firm focuses on recreating existing drugs and treatments that have come off-patent to improve availability and affordability for patients.

Lately, the stock has taken a bit of beating on fears of rising competition in the United States, causing profitability to suffer. In fact, over the last 12 months, the share price has fallen by almost 50%.

However, management is in the process of ramping up investments into its high-margin injectables business. And with its branded products continuing to deliver double-digit profit growth offsetting the recent losses, I feel investors may have overreacted.

Demand for healthcare isn’t likely to disappear any time soon. Even during a recession, when consumer spending is dropping, access to medicine is still a top priority for most patients. Therefore, I feel the recent drop in the share price presents my portfolio with a lucrative buying opportunity this month.

Zaven Boyrazian does not own shares in Hikma Pharmaceuticals.

Lloyds Banking Group

What it does: Lloyds is a FTSE 100 banking group and one of the UK’s largest mortgage lenders. 

By Charlie Keough. My top British stock for September is Lloyds (LSE: LLOY). The stock has been pushed down this year as inflationary pressures have weighed on investor sentiment. And trading for below 50p, I see real value in the Lloyds share price.  

Firstly, a hike in interest rates will benefit the business. With the Bank of England recently setting rates at 1.75%, the firm will be able to charge customers more when borrowing. With the Bank looking like they could hike rates further, this is good news for Lloyds. 

On top of this, the stock also offers a higher-than-average dividend yield when compared to the FTSE 100. 

Lloyds could suffer from a slowdown in the housing market. After surging in recent times, the market has hit the brakes. As a mortgage lender, this could spell trouble. 

However, the business has made moves to diversify such as through its rental venture, Citra Living. And with a strong dividend and long-term outlook, I’d buy some shares today.  

Charlie Keough does not own shares in Lloyds.

Persimmon

What it does: Persimmon is engaged in the homebuilding business. It operates under three different brands across the entire United Kingdom.

By Andrew Woods. The shares in Persimmon (LSE:PSN) have been volatile of late, down 31% in the last three months.

In a report for the six months to 30 June, the firm reiterated that it was targeting completions between 14,500 and 15,000 for 2022. In addition, it stated that there was still strong demand for houses, reporting a forward-sales rate of 90%.

However, first-half revenue and underlying operating profit declined by 8.2% and 8.8%, respectively.

There’s also the issue of rising interest rates. This is currently set at 1.75% in the UK and may climb higher. What this potentially means is that it becomes more expensive for customers to take out mortgages. This may lead to a slowdown in the housing market and that could be bad news for Persimmon.

Nevertheless, the company has total cash of £660m and debt of just £8.3m. This gives me hope that it could easily weather any storm that comes its way in the short term.

Andrew Woods has no position in Persimmon.

ITV

What it does: ITV makes and distributes content across television and digital platforms, as well as providing facilities for third party content creators.

By Christopher Ruane. I thought the interim results released by ITV (LSE: ITV) in July made for good reading. Total revenue grew 16% compared to the same period the prior year, while external revenue was up 8% and statutory earnings per share doubled. The company affirmed its commitment to an annual dividend of at least 5p per share, which means the prospective dividend yield is now around 7.8%.

Despite that, the ITV share price has continued to drift. It now sits 45% below where it was a year ago.

Long-term structural decline in television audiences remains a threat to both revenues and profits at the business. However, ITV is in growth mode and the digital world offers lots of room for expansion. It continues to generate substantial free cash flows and I expect that to continue in coming years. I would happily buy more ITV shares to my portfolio in September.

Christopher Ruane owns shares in ITV.

Unilever

What it does: Unilever is a fast-moving consumer goods conglomerate that produces beauty products, personal care, foods, and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more.

By John Choong. Consumers are always going to need household products, even when prices are at an all-time high. This is why I think Unilever (LSE: ULVR) is a healthy choice for my portfolio. The demand inelasticity surrounding the majority of its products means that sales figures are unlikely to get hit too badly.

This was reflected in its most recent earnings report where CEO Alan Jope revised the company’s earnings guidance upwards. The FTSE 100 giant now expects underlying sales growth for 2022 to top 6.5%, which is excellent news given the decline in retail sales data. Additionally, the conglomerate’s geographical diversity should protect its top line from declining British and European sales figures.

Therefore, Unilever shares would serve my portfolio as a defensive play as the UK enters into a recession. Its price target of £40.81 doesn’t provide much of an upside. However, it brings me a little bit more security knowing that the likelihood of my money declining by double-digit percentages is low.

John Choong has no position in Unilever