In a climate of rising inflation and tightening monetary policy, investors are on the hunt for stocks that can withstand economic turbulence. Mark Nelson, senior equity analyst at Killik & Co, offers a curated list of five stocks that stand as bastions of resilience: RELX, SSE, Diageo, TJX, and Universal Music Group.
According to Nelson, RELX PLC (LSE:REL), a global powerhouse in information-based analytics, is strategically transforming its traditional information products into advanced decision-making tools. This transformation leverages broader data sets and cutting-edge technology, including generative AI.
Nelson highlights RELX's diversified revenue streams, which are not directly exposed to economic growth, and its high level of subscription-based revenues as factors contributing to its defensive posture.
SSE PLC (LSE:SSE), a utility company with operations across the United Kingdom and Ireland, is another stock Nelson considers resilient. He views SSE as a play on the UK's ambitious decarbonisation targets.
Despite facing short-term challenges from elevated costs and supply chain disruptions, Nelson believes that SSE's networks business will remain resilient. He points to the company's plans to invest £9 billion in its electricity networks over the next four years as a sign of its commitment to long-term growth.
In the consumer goods sector, Nelson turns his attention to Diageo, one of the world's largest drinks companies.
He notes that Diageo is set to benefit from long-term trends, such as a growing consumer preference for spirits over beer. Nelson also mentions that the company's premium positioning targets a more affluent consumer base, which is generally less affected by economic downturns.
TJX Companies Inc (NYSE:TJX), the world's largest off-price retailer, also makes Nelson's list. He believes that TJX is well-positioned to navigate a challenging economic landscape due to its lean inventory levels and value proposition.
Nelson suggests that the company could benefit from the difficulties faced by other retailers, providing TJX with attractive buying opportunities.
Lastly, Universal Music Group (UMG) is highlighted by Nelson for its enduring competitive advantages, including its scale and extensive music catalogue.
He believes that UMG can outperform other media companies in a weaker macro environment due to the resilient and defensible nature of its revenue streams.