With a recession seemingly getting closer by the day, I have been thinking about how to turn the threat it poses to my share portfolio into an opportunity. Here are three recession shares I would consider buying today.
Tesco
In a recession, people still need to eat, drink, and brush their teeth. So I expect demand to remain high for grocery shops. Some shoppers may turn to discounters such as B&M. But supermarket giant Tesco (LSE: TSCO) is a much larger operation and has spent years focussing on its own price messaging. That is a defensive quality I like about the company.
A recession could change what people buy, threatening revenues and profits. But if they switch from premium brands to the supermarket’s own label products that may actually be positive for profits at Tesco. Its large branch network and vast digital sales make it the leader among supermarkets when it comes to sales. That can help it benefit from economies of scale, providing a competitive advantage in a recession.
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Tesco has a dividend yield of 4.2%. I would happily buy Tesco shares to hold in my portfolio.
Victrex
The specialist industrial manufacturer Victrex (LSE: VCT) is another share I would happily own in a recession. It makes polymers that are used in things like cars and planes. So, even when the economy contracts, its customers should still be willing to pay for the right quality of product. On top of that, as Victrex has patents on some polymer technologies it uses, competition is limited.
A recession could bring challenges, especially if soaring energy costs eat into profit margins. But that is where the sort of pricing power offered by Victrex’s business model should come into its own. Over time, I think the firm could raise prices to help sustain its profit margins.
The shares have tumbled 32% in a year, so apparently investors reckon that the coming period could be a tough one for Victrex. But I see the long-term investment case here as robust and would consider buying the shares for my portfolio. The fall in share price has pushed Victrex’s dividend yield up to 3.4%.
Carr’s Group
The agricultural supplier Carr’s Group is another company I would consider as the economic storm clouds gather. Farmers are old hands at dealing with all sorts of conditions, and to do that they need things like animal feed and fuels year in and year out. Carr’s has deep relationships in many farming communities and I expect it to maintain robust sales no matter what happens to the economy.
There are still risks. Stiff cost inflation on items like fertiliser might be hard to pass on fully to customers, so the company may either see some revenues fall or have to settle for thinner profit margins. But I expect the business to maintain healthy sales. Its 1.8% dividend yield is modest but still attractive to me.
