The FTSE 100 is back on an upward march as the latest UK inflation data saw investors uttering a sigh of relief. British inflation in October fell to 4.6%, putting aside fears that a recession may still be on the horizon. However, not everyone is convinced that the worst is over. So, with that in mind, let’s take a look at three leading enterprises that might be recession-resistant.
A UK healthcare titan
AstraZeneca (LSE:AZN) is one of the largest companies on the London Stock Exchange. And it didn’t get there by chance. The pharmaceutical giant already has a vast portfolio of life-saving drugs on the market, with an impressive line-up of new medicines in the pipeline.
Being a successful drug developer can be exceptionally lucrative, both in good and bad economic conditions. After all, regardless of where inflation or interest rates are sitting, people will always need their medication and treatments. And while generics businesses like Hikma Pharmaceuticals eventually gobble up profit margins on blockbuster drugs that come off patent, there are a good number of years when the cash is flooding onto the balance sheet.
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This is what makes AstraZeneca an attractive recession-resistant stock in my mind. Of course, it’s not without its risks. Gigantic profits mean endless competition. This often turns drug development into a race, and not a cheap one either.
Even if other companies aren’t targeting the same illness, developing a working treatment or cure that regulators globally will approve is notoriously difficult, with most drug candidates failing along the way. AstraZeneca has had its fair share of losers over the years, and no doubt many currently in development won’t make it to market.
But the few that do could easily propel this business to new heights in the future. At least, that’s what I think.
Catering to penny pinchers
Not all categories of inflation have cooled down. For example, food prices are still rising by over 10%. And when paired with higher mortgage costs, many households have started searching for ways to cut unnecessary spending. One FTSE 100 business that’s capitalising on this is B&M European Value Retail (LSE:BME).
The stock price is already up 33% over the last 12 months as the discount retailer continues to rake in higher sales and earnings. Looking at its latest interim results, revenues grew by over 10%, with underlying earnings up 16.1% year on year.
A closer inspection of these results shows that most of the growth stems from its Heron Foods brand, demonstrating that the hunt for lower prices is pushing consumers away from mainstream retailers like Tesco and into the arms of B&M.
Management has since revised its guidance and now expects full-year adjusted EBITDA to be up to £57m higher compared to 2022. And has subsequently hiked shareholder dividends as well as increased its total UK target store count from 950 to 1,200.
So far, this business is clearly demonstrating its ability to navigate uncertain economic conditions. And that certainly bodes well for its potential performance during a recession, to my mind. However, it’s not the only game in town, with other discount retailers looking to capitalise on opportunities as well. If rampant price undercutting begins, the firm’s industry-leading profit margins will likely start to contract.
Nevertheless, I remain optimistic about the long-term potential of this enterprise. So much so that I’m considering adding it to my portfolio once I have more capital at hand.
