Looking for Recession-Proof Stocks? Find the Outperformers

It’s cutting edge investment technology that implements strategies usually only the wealthiest people can afford. AT&T, Verizon and Comcast are all solid examples of the telecommunications industry that have held steady in the last year, despite the bear market. Anything that involves selling an essential product is a safe bet during a recession. Whether it’s deodorant, pantry staples or baby products, these goods will always be in demand.

• They’ll also continue to pay for running water, electricity, and gas to heat their homes no matter where we are in the economic cycle.
• That means including some of the sectors mentioned above, but it also means making sure your portfolio is broadly diversified across industries.
• Despite this, WalMart’s stock is expected to achieve 8.6 percent growth in 2018.

Merck has seen steady growth over the last decade, and analysts expect that growth to continue. The earnings and cash flow growth from these drivers should enable the company to steadily increase its dividend. It could deliver low-to-mid single-digit annual dividend growth in the future, matching the rate Johnson & Johnson has achieved in recent years. Its prior owner had increased its payout for 61 straight years, partly powered by its former consumer health business’ reliably strong cash flows. Delving into the details, the company’s second-quarter results dazzled many. Surpassing analysts’ predictions on revenue and profit fronts while lifting its financial outlook for the year, Coca-Cola once again asserted its market dominance.

Rivian Stock Price Prediction: 2023-2030

It also has a strong balance sheet, which should get even better in the future. The company’s financial strength and earnings growth should allow it to follow in the footsteps of its former owner by steadily increasing its payout. Those features make it look like a great dividend stock for income-seeking investors to consider adding to their portfolios. We studied different industries that have the best odds of stable demand during an economic downturn and then selected the top players in these sectors. The firms were then briefly analyzed through their financials and market performance, following which they were ranked through hedge fund holdings courtesy of Insider Monkey’s Q survey of 895 funds. These stocks are defensive plays which can weather the current recession.

Federal Reserve’s chess moves aim for a stable economic touchdown, even if interest rate cuts seem off the table. Hence, for those looking to navigate these uncertain tides, there lies an anchor in the best consumer stocks to buy on the dip. However, the report said that inflation in Europe would take some time to recede. Bonds, like stocks, are subject to the laws of supply and demand, and that is what governs their price. So while bonds may be a good investment in a recession, don’t assume that will always be true.

As a result, ORLY should hold its own and earn its place among stocks to invest in during a recession. In the three months ended Sept. 30, 2022, O’Reilly had a 7.6% increase in same-store sales – up 31.2% compared to Q – and a 14% increase in earnings to $9.17 per share. For all of 2022, it expects same-store sales growth of 5.0% at the midpoint of its guidance with total revenue of $14.2 billion and $32.60 a share in earnings. The company’s pivot away from cigarettes should pay dividends in good times and bad, making it one of the best recession-proof stocks to own. The company’s dividend game doesn’t quite match its share performance, unfortunately.

For some stocks and funds, the primary returns lie in their income yield, not their growth. Utilities and real estate investment trusts (REITs) — including mortgage REITs — offer common examples. Johnson & Johnson (JNJ 0.34%) stood out as this kind of stock during the recession letter of indemnity meaning of 2001. The healthcare giant continued to deliver revenue and earnings growth throughout the period. It completed the $10.5 billion acquisition of ALZA Corporation. The blue-chip stock was also viewed as a safe haven for investors worried about the dot-com bubble bursting.

How To Choose Recession-Proof Stocks To Fortify Your Portfolio In 2023

That’s because its cereal division, as well as other quick breakfast items such as Nutri-Grain bars and Eggo frozen waffles, could benefit from consumers who need to spend less on food. During the 2008 recession, then-CEO David Mackay, who retired in 2011, suggested that the entire packaged-food industry benefited from frugal customers dining at home. One of the largest medical device companies focused on therapeutic medical devices for chronic diseases, Medtronic (like Zimmer) enjoys high switching costs. Its intellectual property and relationship with physicians also contribute to its wide moat, says Morningstar senior analyst Debbie Wang.

On the one hand, their top line has slowed because their former top drug, Embrel, has seen its revenue slow. However, the drug is still on pace to generate $4.2 billion in sales in 2018. Furthermore, Amgen projects that it will maintain exclusivity with Embrel through 2029.

Piper Jaffray analyst Michael Lavery suggested in August that MorningStar Farms could be worth as much as $3 billion. Further, he speculated that Kellogg could spin off the division at some point in the future, although the company’s made no indication it is considering such a move. In July, Barron’s Brett Arends wrote that MorningStar Farms could be worth between $5 billion and $10 billion in an initial public offering (IPO). Kellogg is high on the “flexitarian” lifestyle – those people who eat meat but are opting to also have plant-based alternatives on a regular basis. A 2018 study found that 31% of Americans follow a flexitarian dietary lifestyle. That’s a much bigger market than the 13% identifying with vegan, vegetarian, or paleo diets.

Are Any Stocks ‘Recession Proof’?

Ross Stores pays an annual dividend of $0.90 per share with a current dividend yield of 1.04 percent. The company has increased its dividend every year for the last 11 years at an average of 17% each year, making it a great potential source of income during the next downturn. We scanned Insider Monkey’s database of 920 hedge funds and picked the top 14 stocks that are recession proof. These stocks belong to defensive sectors like alcohol, consumer staples, healthcare, and finance. Many of these companies have solid dividend histories and enjoy a stable market position. The list is arranged according to the number of hedge fund holders in each firm.

Bristol-Myers plans to use the proceeds of the sale to repurchase shares, repay debt and increase its annual dividend. Intuit’s self-service software, including TurboTax, which allows Americans to e-file simple tax returns online for free, will look attractive to consumers when times are tight. Rollins services more than 2.4 million customers across more than 800 locations worldwide. And it has delivered 21 consecutive years of earnings growth, which includes two recessions, while also increasing its annual dividend by 12% or more for 17 consecutive years. Some of the best recession-resistant stocks come from boring, mundane products and services that are nonetheless necessary, no matter your financial situation. If a recession is impending, consumer staple Kellogg (K, $62.68) could be among the best stocks to buy.

Cramer is bullish on these stocks, and we have mentioned his thesis for each of these stocks. She also said that China’s economic growth will be equal to or below the global economic growth for the first time in 40 years. Over the past few decades, China has been posting record economic growth and has stunned the world with its economic performance.

Understanding Recession Proof

An example of the former is retailing behemoth Walmart Inc. (WMT). The Arkansas-based giant reported growth in profits and revenues in the three years following the Great Recession. Consumers cut back on their spending and shopped at discount retailers, who upped their game by using their economies of scale to drive lower prices for products. As we enter what feels like a looming recession, a few strategies exist to consider.

The company has sustained earnings growth of more than 15% a year over the last five years. Analysts expect this rate of earnings growth to decelerate to about 8% over the next five years. Steady growth has meant lower volatility for PEP, with the biggest decline over the last decade being 30%. Becton offers a decent dividend yield, and the company has been growing the dividend payout by almost 4% a year over the last five years.

This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all available deposit, investment, loan or credit products. First, he explained that prior to the Silicon Valley Bank’s collapse, Goldman Sachs’ recession multiple had been 25%.

Gold bulls have been rewarded recently, with recession fears driving gold prices to levels not seen in at least five years. Nothing has put a dent in Visa’s business model despite rapid growth from upstart fintech competitors. In fact, Visa is embracing emerging financial technologies to maintain its leadership position. That, as well as a focus on cost-cutting initiatives, sets McCormick nicely among the most recession-resistant stocks to buy now.

It has the lowest dividend on the list at 0.3%, although it has delivered the highest dividend growth rate. Dividend payments have increased an average of nearly 15% per year over the last five years. Where Thermo Fisher Scientific excels is its stock performance. TMO is the best-performing recession stock on our list, outperforming all the others.

At the same time, its store coverage of 18,818 locations across 47 states provides unparalleled convenience and time savings. The hottest stocks in recent years have been in the technology and communications industries. Recessions are inevitable, so investors should construct truly diversified portfolios to weather downturns. The key to creating a diversified portfolio is investing in companies across multiple sectors, including recession-resistant ones. With an ROIC consistently above its most similar peers, the company offers top-tier profitability.

Cyclical stocks — companies in industries highly sensitive to the economic cycle — are often the hardest hit during a recession. It’s hard not to love a stock that’s quadrupled in value over the last decade. Still, Dollar Tree (DLTR) has been taking it on the chin lately. This is indicative of companies like Dollar Tree that have a business model that caters to value-conscious consumers.

It’s almost too easy to talk about Johnson & Johnson’s (JNJ) status as a Dividend Aristocrat as a reason this stock should be in your portfolio during a recession, but it’s hard to overstate. J&J is one of only 19 companies that can say they have offered 50 consecutive years of dividend growth. This is because of a well-diversified portfolio both in terms of the products they provide and the markets in which those products are sold.

Understanding those, and keeping an eye on your portfolio’s overall diversification, may be a solid approach to investing in a recession. The iShares Gold Trust (IAU, $14.28) is the second-largest gold ETF at $16.7 billion in assets under management. The fund holds more than 11 million ounces of gold in trust for its unitholders.

On the surface, these sectors could look like uncertain investments, bur peeking into them tells a different story and provides investment ideas. But ultimately, preparing your portfolio for a recession is a matter of not putting all of your eggs in one basket. A diversified portfolio may not be fully recession-proof either — but it’s the good bet for most investors.

However, the coronavirus outbreak, real estate crisis and severe regulatory pressures spooking the technology companies in the country have wreaked havoc on the country’s growth trajectory. Costco (COST) is the largest wholesale club in the U.S. with over 800 stores. Costco stock closed at $471.43 on Oct. 19 and has a one-year target estimate of $564.86. Beyond those who can’t handle a downturn emotionally, other investors can’t handle downturns financially.

Warren Buffet once quipped about investing in a down market, “Only when the tide goes out do you see who’s been swimming naked.” Keep your suit on with these few recession-proofing ideas. On the other hand, there are stocks you do not want to own https://1investing.in/ during a recession. For example, leisure stocks might be something to stay away from when the economy slows. If people struggle to pay their bills, chances are they won’t be booking a cruise or a long weekend at the spa for a little while.