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October started with a jolt for inventory market traders. Rising bond yields and considerations concerning the UK economic system despatched the FTSE 100 sharply decrease, elevating recent fears {that a} inventory market crash might be simply not far away.
But virtually midway via the month, the temper has modified. The index has recovered floor, together with a powerful rise on Monday (12 October), and people early jitters seem to have pale.
However does that imply the hazard has handed? With the Autumn Funds approaching and uncertainty nonetheless hanging over the worldwide economic system, I’m taking a look at what might unsettle markets once more, and the way traders can put together with out making an attempt to foretell the subsequent crash.
Be ready
For me, making ready for a possible inventory market crash means conserving some dry powder able to take benefit if my favorite shares go on sale. But it surely doesn’t imply promoting every little thing. If a crash by no means comes, I might miss out on positive aspects whereas my money sits on the sidelines.
The second half is analysis. I’m in search of corporations with sturdy money flows and resilient steadiness sheets that might face up to more durable circumstances.
As Warren Buffett famously put it:
Solely when the tide goes out do you uncover who’s been swimming bare.
I need to know which companies are financially sound earlier than the market places them to the take a look at.
A defensive share for unsure instances?
Unilever (LSE: ULVR) owns on a regular basis manufacturers comparable to Dove, Vaseline and Domestos, giving it publicity to merchandise customers usually replenish. Its present dividend yield of three.5% is broadly in step with the FTSE 100 common.
Its newest half-year outcomes confirmed underlying gross sales development of 5.8% within the second quarter, with volumes up 5.5%, its strongest quarterly quantity efficiency since 2010. Its greatest manufacturers, which account for 78% of turnover, delivered even stronger development.
That implies Unilever is rising by promoting extra merchandise, fairly than relying solely on worth will increase.
Monetary power to climate a storm
One metric I at all times preserve a detailed eye on is money circulation. If instances get powerful, money can turn out to be extra essential than turnover or reported revenue.
The corporate’s free money circulation improved to €1.5bn within the first half of 2026, from €1.1bn a 12 months earlier, helped by increased working revenue and improved working capital. Administration expects money conversion of round 100% for the total 12 months.
A robust steadiness sheet can also be essential. Internet debt rose to €26bn within the first half, reflecting dividend funds and a €1.5bn share buyback. Internet debt stood at 2.3 instances underlying EBITDA. That appears manageable for a enterprise of Unilever’s dimension, and administration expects the ratio to fall to round two instances by year-end.
After all, none of this is able to stop Unilever’s share worth falling throughout a market crash. However its sturdy manufacturers, rising gross sales volumes and wholesome money technology might assist it climate the storm if financial circumstances deteriorate.
What’s the decision?
Unilever isn’t an explosive development story lately. Strategic missteps haven’t helped, and a P/E ratio of round 13 suggests the market isn’t anticipating speedy enlargement.
However that maturity appeals to me as I contemplate learn how to steadiness my very own Shares and Shares ISA forward of a possible market sell-off. For income-seeking traders in search of a enterprise with defensive qualities, Unilever might be one inventory to think about.
Do you have to make investments £5,000 in Unilever proper now?
When investing knowledgeable Mark Rogers and his group have a inventory tip, it may pay to hear. In spite of everything, the flagship Twelfth Magpie Share Advisor e-newsletter he has run for almost a decade has supplied 1000’s of paying members with high inventory suggestions from the UK and US markets.
And proper now, Mark thinks there are 6 standout shares that traders ought to contemplate shopping for. Wish to see if Unilever made the record?
Andrew Mackie owns shares in Unilever.
