Four stocks investors should own this Christmas

This year has been a brutal year for the stock market, but December could bring investors some seasonal cheer.

Historically December has the strongest track period for stocks. Analysis by investment platform Bestinvest showed there was a 75pc chance share prices of global companies would rise in December, as measured over a 50-year period.

This was higher than in any other month. Experts attribute the so-called “Santa rally” to increased spending during the holidays and investors moving their money in anticipation of a better year ahead.

As investors look to benefit from the seasonal uplift in the markets, Telegraph Money asked experts for their top stocks this festive season.

Diageo

With households counting every penny, convincing shoppers to part with their money is a challenge many companies face this Christmas.

David Henry of wealth manager Quilter said this is why a strong brand is crucial, and why he recommends Diageo, the owner of one of the broadest and most recognised collection of premium drinks brands in the world, which includes Smirnoff vodka, Johnnie Walker whisky, Gordon's gin and Don Julio tequila.

“Despite the worsening economic outlook, industry data shows little evidence of consumers downgrading their preferences when it comes to spirits,” Mr Henry said, “and Diageo has a healthy exposure to the US consumer who seem to be more resilient in the current environment than their Chinese equivalent, for example.”

Diageo also owns 34pc of the Moet Hennessy drinks division of the French luxury goods company LVMH, which includes brands such as Moët & Chandon, Dom Pérignon and Hennessy.

Mr Henry said while a luxury group selling champagne and designer fashion may not be an obvious stock pick in a recession, LVMH has “established a track record of being an outperformer during bad and good times for the consumer.” It posted a 19pc year-on-year jump in sales in the latest third quarter.

The performance of luxury goods is also not usually a proxy for the wider economy. Mr Henry said the spending behaviours of their affluent clients “do not fully align with the wider macro economic environment, and purchases are often emotional, driven by the desirability of the brand”. The luxury goods sector is expected to grow by 3 to 8pc next year, analysts at Bain & Co and Altagamma recently forecast, despite the risk of a global recession.

Disney

Rob Burgeman of Brewin Dolphin, a wealth management firm, said for him Disney is “the ultimate Christmas stock”.

During the festive period the film company profits from everything from cinema showings to video games to princess dresses – and “shrewd acquisitions” of LucasArts, Pixar and Marvel in recent years have further expanded their reach across consumer brands.

However, despite posting record sales of $83bn (£68bn) in its latest fiscal year, its profits fell below analysts’ expectations. Mr Burgegman said the pandemic “had quite an effect on Disney, with delays to their film business and the closure of their parks and resorts” but this was a great opportunity to buy “a portfolio of fabulous brands” at a huge discount. “Over five years, the shares are down 8pc in dollar terms and, over one year, have fallen by 30pc.”

Rentokil

A pest control business might not fill investors with Christmas cheer. However, Rentokil – which deals with infestations of rats, mice, fleas, and also offers damp proofing and woodworm treatment – is well-positioned to withstand any economic downturn that could follow next year, according to Garry White of wealth manager Charles Stanley.

The group’s total revenues are up double digits year-on-year, by 19pc, and Mr White said there were several opportunities for the company to surprise the market in 2021. “The company has always had a knack for making good bolt-on acquisitions in the fragmented market in which it operates,” he said.

“It completed its acquisition of Terminix during the quarter, a transformational purchase that has propelled the company to be the US market leader in its sector. Terminix has just reported its best quarter since 2016 and delivery on cost synergies is off to a good start.”

Experian

Experian might seem an unlikely stock pick going into 2023. If the UK faces a long recession as the Bank of England predicts, then it is likely that lower mortgage demand will also hit demand for the company’s credit reporting services.

But even with a downturn on the horizon, Mr White said he believes the company can weather the storm. “The company continues to expand and diversify, particularly in emerging markets such as Brazil, and with the introduction of new products like decisioning tools,” he said.

The development of analytical tools for businesses mean the company is much more than a credit checker, Mr White said, and puts the company in a strong position. In the first half, its business-to-business revenue grew 7pc, driven mainly by the data and decisioning parts of the business.

“This area seems countercyclical as it focuses on allowing businesses to make decisions rapidly and cheaply using data analysis – and help them cut costs. Its future earnings are underpinned by the increasingly important and expanded use of data and data analytics.”