3 FTSE 100, FTSE 250 and AIM shares to own as the UK economy sinks

I’m looking for the best stocks to buy for these tough times. Here are a few contenders — including one from the FTSE — on my watchlist today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young Black woman looking concerned while in front of her laptop

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The UK economy looks poised for a prolonged period of weakness. So I’m building a list of FTSE 100, FTSE 250 and Alternative Investment Market (AIM) shares that could protect my wealth in this tough landscape.

The National Institute of Economic and Social Research (NIESR) has in recent days warned of “even chances that GDP growth will contract by the end of 2023 and a roughly 60% risk of a recession at the end of 2024”. The think tank has also said Britain faces five years of “lost” economic growth.

Here are three stocks I think could prove useful additions to my portfolio in this tough climate.

Grainger

Buying build-to-rent businesses like Grainger (LSE:GRI) is a good idea right now, I feel. This is despite the impact of higher-than-usual construction costs on profits.

Not only is this because rent collections stay relatively stable during economic booms and busts. It’s because a chronic shortage of rental properties is driving rental income through the roof. Like-for-like rent growth at FTSE 250-listed Grainger came in at 7.1% during the eight months to May.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), has said that “rents are likely to continue rising sharply” amid a lack of supply. Weak housebuilding rates and a steady departure of buy-to-let investors look set to persist too.

B&M

Value retailers are likely to be in high demand as consumers continue to feel the pinch. This makes B&M European Value Retail (LSE:BME) a top buy, despite the problem of rising labour costs.

Latest financials showed like-for-like sales at its flagship B&M stores rose 9.2% between April and June. The company is rapidly expanding to capitalise on the favourable trading environment too. It plans to eventually have 950 B&M stores up and running, up from just over 700 today.

The plunge of fellow value chain Wilko and its 400 stores into administration provides the FTSE 100 firm with an added boost. I’m confident it will thrive despite its lack of online presence that could see it lose business to supermarkets and general retailers like Amazon.

H&T Group

Pawnbrokers like H&T Group (LSE:HAT) are also trading strongly as people try to raise a little extra cash. Profits at Britain’s largest operator soared 31% in the first half of 2023, data last week showed. This was driven by a 14% increase in its pledge book (which includes short-term loans linked to customers’ belongings).

Through its jewellery retail and gold scrap business, the AIM company also provides investors with handy exposure to the precious metals markets. Should the global economy struggle and inflationary pressures persist, prices of gold (which are currently perched near record highs) might head even higher.

I’m also impressed by the company’s travel money division where foreign currency transaction volumes sit at record levels. I’d buy H&T shares, even though it faces high competition from money lenders.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon.com and B&M European Value. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Here’s the best-performing FTSE 100 stock of the last 10 years

Private equity firm 3i has outperformed the rest of the FTSE 100 over the last 10 years. And its big…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

Here’s why Warren Buffett is selling shares (and why I’m not)

Warren Buffett cited tax considerations as his reason for selling shares in Apple. But this isn’t something most UK investors…

Read more »

Investing Articles

What on earth is going on with the AstraZeneca share price?

The AstraZeneca share price has fallen 30% from its peak in August. Dr James Fox explains what’s going on with…

Read more »

Investing Articles

2 high-yield FTSE 100 shares I’d consider buying for passive income…and one I’d avoid

Some FTSE 100 stocks have eye-popping dividend yields. But will the passive income actually be dished out? Paul Summers takes…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

These 2 former stock market darlings are trying my patience! Time to sell?

Harvey Jones thought he was getting a bargain when he snapped up these too much-loved FTSE 100 dividend growth stocks.…

Read more »

Investing Articles

Here’s how I’d use £3,000 to target a second income that grows each year

Our writer explains the approach he'd take to trying to build a second income that gets bigger over time, by…

Read more »

Elevated view over city of London skyline
Investing Articles

Is it time to buy this incredible FTSE dividend share?

Christopher Ruane examines one FTSE 100 share with a phenomenal dividend history. Does a steep share price fall this year…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

This FTSE 100 share has just crashed another 20%. Its P/E is now just 9.9 so should I buy?

Harvey Jones was tempted to buy this FTSE 100 share after it crashed in October. Now it's crashed again, it…

Read more »