3 cheap UK shares I’d buy to help protect my portfolio in a recession

Many UK stocks have defensive qualities that make them good investments in a recession. In light of the new IMF forecast that the British economy will contract by 0.6% this year, I am eyeing up durable stocks that can do well in a difficult economic climate.

Now, I’m waiting a little longer to see if the gloomy predictions are true. But, looking ahead, here are three FTSE 100 Shares I would buy to protect my portfolio if the UK goes into recession.

AstraZeneca

I already own shares in pharmaceutical giants AstraZeneca (LSE: AZN). The biotech company is now the largest FTSE 100 constituent with a market capitalization of £179.3bn.

The health sector is not cyclical, driven by strong demand for medicines, regardless of the performance of the wider economy. Combined with the long-term demographics of an aging population, I think AstraZeneca stock is an excellent investment when the market is weak.

CEO Pascal Soriot has confirmed that the company will deliver at least 15 new drugs this decade. With multiple strengths in therapeutic areas including oncology, cardiovascular conditions, and respiratory disease, AstraZeneca’s future looks bright.

A drop in Covid vaccine sales is a risk to AstraZeneca’s share price. Excluding Covid drugs, the business expects a double-digit increase in revenue this year. However, this figure falls into a “low to mid single-digit percentages” if they are included.

However, the promising pipeline shows that there is potential for share price growth, even as the world moves on from the pandemic.

Centrist

At Centrist (LSE:CNA) share price today, boosted by the news that the total operating profit for 2022 will be 3.3 billion.

Following the good results, owner British Gas announced it would increase its share buyback program by £300m. This should continue to add value to shareholders as Centrica increases its stake to 10% of all shares currently in issue.

High energy prices may remain this year as the Russia-Ukraine war continues. Sanctions on Russia are unlikely to be lifted in the short term. This should continue to limit the supply of oil and gas to the international market, and Centrica is benefiting.

The possibility of government intervention of more than 45% of the windfall tax on electricity generators is a major risk. No doubt the company’s record profits will strengthen the political pressure to take additional measures.

However, I think Centrica shares could outperform if geopolitical uncertainty continues to weigh on other areas of the stock market.

Diageo

Producer of alcoholic beverages Diageo (LSE: DGE) is a Dividend Aristocrat with strong defensive credentials.

Currently, this FTSE 100 stock offers a dividend yield of 2.17%. The company’s investment in premium brands has supported its margins despite the inflationary environment. About 57% of the group’s sales come from these labels.

Diageo is also developing a share buyback program. An additional £500m of capital will be returned to shareholders in 2023/24. What’s more, strong pricing power gives companies a competitive advantage. This helps protect the company’s bottom line in tough economic times.

One risk is the price-to-earnings ratio, which may look high at 22.93. However, I still believe that Diageo’s share price is low. The range of premium products warrants a premium price in my view. If a recession comes, Diageo will be near the top of the list of stocks to buy.