The FTSE 250 is a great place to look to diversify my portfolio. While the FTSE 100 is heavy on bankers, insurers, mining giants and oil majors, the FTSE 250 offers a more diverse array of firms, some of which may help recession-proof my portfolio.
While the UK is expected to return to its pre-pandemic GDP levels in mid-2022, some analysts are also forecasting a recession. There are several factors that could plunge the UK into a recession, including soaring inflation, and interest rate rises.
So here are three stocks I’ve recently bought or am looking at to help safeguard my portfolio against an economic downturn in the UK.
Bank of Georgia
Naturally, the Bank of Georgia‘s (LSE:BGEO) performance is closely aligned to economic data in Georgia and not the UK. The bank’s performance was good in 2021, buoyed by strong economic data. The economy grew by 14.6% year-on-year and the Bank of Georgia in turn posted a pre-tax profit of £192m, more than any year in the last five.
The Tbilisi-based bank’s share price fell following Russia’s invasion of Ukraine — both countries are major trading partners.
But I see BGEO as a good buy because I think the economic fallout from the war has been too heavily factored into the share price. For me, the Bank of Georgia looks very cheap with a price-to-earnings (P/E) ratio of just 3.4. The Georgian economy is still expected to grow this year, by 2.5% and in the long run, I see Georgia as a high-growth market.
Spire Healthcare
Historically, the healthcare sector, notably in the US, has been called recession-proof. However, that doesn’t always hold true as recessions cause job losses and people lose their private healthcare benefits.
But right now in the UK, there’s a massive backlog of patients waiting on elective treatments. I think Spire Healthcare (LSE:SPI) is in a good position to benefit from record waiting lists in the UK. In England alone, there are now more than 6.1 million people waiting on elective procedures and there’s political will to reduce this.
In March, Spire announced a big rise in annual profit, driven by “significant” demand for private treatment. Revenue also climbed above £1bn for the first time. Moreover, the pandemic seemingly drove more people to purchase private health insurance or pay for treatment as the NHS struggled, according to new research from the Institute for Public Policy Research.
National Express
National Express (LSE:NEX) has to be one of the cheapest ways to travel in the UK and that’s why I see it as a stock that will do well if the economy changes direction. From my own experience, the coach operator can get you from London to Bristol on a Friday evening for 10% of the price of a train. As fuel prices increase, it seems likely that some people will swap car journeys for the coach.
The firm struggled during the pandemic but appears to be through the worst. I also think it will benefit from the move towards greener options as people ditch car journeys. The UK Climate Change Committee actually predicts that between 9% and 12% of car journeys will switch to bus journeys by 2030.
National Express hedges fuel, so the current spike shouldn’t impact margins too heavily. Although a resurgent Covid could hurt demand.
