Investor uncertainty is quite high right now. I should know, I’m one of those uncertain shareholders! It’s tricky to know what the next year holds for the stock market, given the current economic backdrop. However, this isn’t stopping me from investing. Rather, I’m looking for stocks to buy that should give me resilient performance during a potential crash. Here’s a selection of stocks on my watchlist
Big pharma
The first area I’m keen on is the pharmaceutical space. I don’t see any reason to try to go very niche and find some small penny stock. Rather, I’d park my spare cash in GlaxoSmithKline and AstraZeneca. These titans of the industry have survived many recessions in the past.
One reason why this area should help me is the fact that our ageing population has growing healthcare needs. Demand from the national health service and private clinics means that pharmaceutical firms have good repeat revenue sources.
I accept the risk that the industry is competitive, and new drug approvals are far from guaranteed. But I feel that if I invest in the largest and most established companies in this area, I should be fairly insulated from that risk.
Boring but good
Another sector containing stocks I want to buy is industrials. This is a fairly broad term, covering a range of companies. The two I’m focusing on are DS Smith and Melrose Industries.
DS Smith is involved in packaging and recycling. Melrose is an engineering umbrella company that buys underperforming businesses in this area and tries to improve their finances over time.
In both cases, I think revenue should be fairly constant even during an economic downturn. I accept that cost pressures are already being felt. This pushes up the cost of production, squeezing profit margins for the finished goods.
However, goods will always need to be packaged. Machinery will always need to be engineered. These services are not luxuries that can be cut back on, they’re necessities for businesses around the world.
Stocks to buy from the world of banking
Finally, I’ve got some banking stocks on my watchlist. I recently wrote about Lloyds Banking Group and how higher interest rates from the Bank of England could make it more profitable. We could be in a situation where the central bank is forced to raise interest rates to support the British pound, even if it’s not the best move for the overall economy.
I don’t think this beneficial move is limited to just Lloyds. Rather, any FTSE 100 or FTSE 250 bank with a large exposure to the UK should also get a boost. In this regard, the sixth stock on my list is NatWest Group.
As a disclaimer, I’m not saying that during a market crash my six picks would definitely soar higher. But I do feel that the ideas could outperform the FTSE 100 benchmark. So if the index falls by 10% in the next year, these might only fall by 5%.
I’m keeping all of them on my watchlist. I don’t have the cash to buy them all right now but will buy when I do!
