Healthcare sector best performer in last recession

Heathcare was the best performing sector in the UK market in the last recession, according to analysis by Fidelity International.

The last recession in the UK was in the early 1990s when gross domestic product (GDP) was negative for five consecutive quarters between April 1990 and June 1991.

Looking back at the sectors represented in the FTSE at that time, pharma & biotech recorded the best returns rising more than 40%. The personal goods sector followed with a rise of 35% and beverages 27%.

The sector that fared the worst was real estate which saw its value fall by 19%. Media was the second worst at -17%, then industrial metals at -14%. In all, 18 sectors posted positive returns and 15 negative returns.

The official definition of a recession is two consecutive quarters of negative GDP growth. Last week, the Office for National Statistics confirmed that the UK economy shrank for the first time in 16 years between July and September. Output fell by 0.5% - the biggest drop since the first quarter of 1990. The UK will officially be classed as being in recession if the economy continues to slow in the next three months.

Markets tend to move ahead of the economy, however, and with the FTSE 100 having lost 32% since its peak in October last year, some commentators are indicating that we may be at, or near, the bottom of the market downturn. By the time the 1990 recession was announced the market had already troughed and it enjoyed an upward trend for more than half of the official recessionary period, returning a total of 14.5% throughout the economic downturn.

"While it is interesting to review how sectors have performed in aggregate in previous periods of economic slowdown, I am a firm believer that there are good individual stock opportunities to be found in many sectors, comments Sanjeev Shah, manager of the Fidelity Special Situations Fund.

"Markets have fallen by almost a third since their peak last year and good companies as well as bad have seen their share prices tumble. This means there are some attractive companies now available at very good valuations.

"In this type of environment one of the things I look for is growth at a reasonable price. A number of pharmaceutical companies were trading at very low valuations versus history and appeared more attractive than other defensives, such as food and beverages. They have done very well so far this year and I have started to take some profits.

"The media sector is one that is widely thought to suffer in recessionary periods, but again, market falls have provided me with opportunities to buy selective stocks at cheap valuations. Examples are Pearson and Reed Elsevier, which are not particularly dependent on advertising, and are in fact beneficiaries of the shift to online."