The top recession-proof investments
This month saw BSkyB deliver a solid (but dull) set of results, with revenues up 5% to £5.1 billion in the nine months to March, despite the company freezing customer prices. Broadband and telephony are booming, with the strongest ever quarter for new customers.
It goes to show that a company does not have to be an exciting growth story to be a good investment. What other 'recession-proof' investments are out there?
Louise Cooper, markets analyst at BGC Partners, says: "What is extraordinary is that churn – the rate at which customers leave Sky - is actually down on last year at 10.1% which given the UK is back in a recession is an impressive performance and again highlights the defensive nature of the business - consumer spending is being squeezed but the monthly direct debit to Sky is sacrosanct."
BSkyB generates a lot of cash, which enables it to pay good dividends and buy back a planned £750 million of its own stock, which will provide support to the share price. Two of Sky's largest institutional shareholders have been adding to their already large shareholdings in BSkyB recently and two research houses have become more positive on the stock in the last few days.
"BSkyB is regarded as a safe investment in these troubled times - Britons seem keen to continue to pay for their sport and films, even in a recession," concludes Cooper.
Other defensive stocks
Pharmaceutical companies like GlaxoSmithKline tend to do ok even during economic downturns, and usually pay big dividends (as does telecoms giant Vodafone, Britain's top dividend payer). AstraZeneca is in trouble though due to a lack of new drugs to fill its pipeline as its bestselling medicines come off patent, and is without a permanent CEO. But with the shares down sharply, a bet on new management to turn the ship around could pay off. Astra might also become a takeover target, although it's hard to see who would bid for it. In fact, just after writing this I discovered that UBS analyst Gbola Amusa says there is now an increasing "likelihood of strategic announcements in 2012 that would unleash value in Astra's shares."
Meanwhile, Shire, which specialises in drugs for hyperactivity and rare genetic diseases, is performing well and is also seen as an M&A target, so the shares should benefit from that. Analysts at Deutsche Bank say: "We see strong earnings delivery as key to the outlook for the share price over the remainder of 2012 and expect the shares to perform well as long as Shire successfully navigates certain patent challenges."
Property is generally regarded as a relatively safe investment. As many would-be buyers struggle to get a mortgage at the moment, and are forced to rent, rents have shot up. If you can afford it, you could cash in on the rental boom by buying your own place and renting out a room.
Inflation proof investments
City veteran David Buik says: "Bearing in mind what has happened - 'Those that have, have even more and those that have only a little have even less' - there can be only three investments that are inflation proof and likely to increase in value, but patience is the name of the game."
No quick returns, but the chances of making decent money over two to five years are pretty good with these investments –
1) Gold – a great hedge to vulnerable other asset classes like stocks, and demand always outstrips supply with many reserve or central banks backing the truck up
2) Fine wines – with Asia, Russia and China now strong buyers, the price – particularly Bordeaux – should go up. Check out Bordeauxindex.com for more information.
3) Art and collectibles – the same idiosyncrasies apply to art as to wine. Go to an art gallery in London's Mayfair such as Richard Green (Fine Arts) for advice, or frequent contemporary art fairs like Frieze (in October) to get an idea of what's hot. Munch's Scream fetched £74 million at auction last week! Collectibles like classic cars and jewellery also tend to hold their value well, and go up over time regardless of turmoil in financial markets.
Artist Bob and Roberta Smith wrote in the Guardian last week: "In this recession, art is still seen as a good investment: everything else may be in flux, but Picasso will always be Picasso."