Check Out These Stocks That Are Set to Outperform in a Recession
If the market is truly a forward-looking mechanism, then investors should certainly take notice of the fact that recession-proof stocks have been showing serious strength in recent trading sessions. These are companies that operate in industries like consumer staples and utilities, which are known to hold up well during economic downturns. They can also offer investors reliable earnings, fortified balance sheets, and dividend payouts, which are all very attractive qualities in a market chalked full of uncertainty.
With the Federal Reserve tightening its monetary policy to combat inflation and equity markets exhibiting plenty of volatility, there’s certainly a chance that a recession might be on the horizon. Bank of America chief investment strategist Michael Hartnett recently wrote to clients that a “recession shock” could be coming, which certainly doesn’t sound like a good thing for many areas of the market. That’s why it might be a good idea to focus on investing in companies that have a reputation for being resilient during a weak economy, particularly since these stocks are seeing such strong demand from buyers at this time.
Without further ado, here are 3 great recession-proof stocks to buy now:
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Walmart might just be the quintessential recession-proof stock, and with shares breaking out to new all-time highs after almost an entire year of consolidation it’s one to definitely keep an eye on. As the largest retailer in the world, there are so many things for investors to love about this business. Walmart operates a chain of more than 11,000 discount department stores, wholesale clubs, supermarkets, and supercenters that should see steady sales during a recession as consumers look to save money on their everyday purchases. The company has also been investing big in its omnichannel retail experience, which should pay off in a big way over the years.
Investors should note that Walmart recently posted Q4 adjusted EPS of $1.53, up 10% year-over-year, and guided for 4%-plus sales growth for next year, another reason to consider adding shares. Finally, Walmart has a very reliable history of dividend increases and is a dividend aristocrat, which tells investors that they can rely on the company to help generate income over the years. The stock currently offers a 1.43% dividend yield and is a great buy-the-dip candidate to consider going forward.
Johnson & Johnson (NYSE: JNJ)
The healthcare sector is another great place to look for recession-proof stocks, as these companies see steady demand for their products regardless of what’s going on in the economy. Johnson & Johnson stands out as one of the top options in the sector given its blue-chip status, dividend aristocrat status, and strong year-to-date outperformance versus the S&P 500. It’s a global leader in the pharmaceutical, medical device, and consumer health care products industries and a company that is clearly in favor with investors at the moment. The company generates the majority of its revenue from its pharmaceutical segment, which offers a nice combination of best-selling drugs like Stelara and Imbruvica along with a strong drug pipeline.
If one of the company’s future drugs is a success, it could mean massive earnings growth is on the horizon, which is a big reason why biopharma stocks like this one are so attractive. Hospital visits and elective surgeries should also be on the uptick as the impacts of the pandemic wane, which is another positive for Johnson & Johnson going forward. In Q4, total sales for the company increased by 10.4% year-over-year to nearly $25 billion, which means that more good results could be on the horizon for this recession-proof stock.
Procter & Gamble Co (NYSE: PG)
Think about the daily-use household, personal care, and food and paper products. These are items that every single consumer in the world needs to buy consistently, which is why a stock like Procter & Gamble is so intriguing. It’s a consumer staples company that has developed major brands like Tide, Gillette, Pampers, Bounty, Crest, Ivory, Oral-B, Tampax, Charmin, and more. Since this company’s products benefit from inelastic demand, investors can count on Procter & Gamble to put up decent earnings even in a recession. What’s even more important, it’s a company that will be able to cover its dividend payouts in almost any economic cycle.
Procter & Gamble has been benefitting from the pandemic in recent quarters as more consumers purchased cleaning products, while the company posted its 14th consecutive quarter of mid-single-digit revenue growth last February. With a 2.19% dividend yield and a diversified operating model, this is perhaps the strongest consumer staples stock in the market to consider adding at this time.
Walmart is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.