- Lowe’s Companies (LOW): An intriguing hedge, LOW stock features relevance in a down or up economy.
- Target (TGT): A big-box retailer catering to a more affluent consumer base, TGT should be interesting.
- Coca-Cola (KO): Historically one of the top recession-resistant stocks, Coca-Cola provides cheap distractions.
- Apple (AAPL): Having a smartphone is now critical in modern society so AAPL is a surprising idea.
- Dollar General (DG): An intuitive name among recession-resistant stocks, DG will benefit from belt tightening.
- Church & Dwight (CHD): Specializing in household goods, CHD is always relevant during rough times.
- Carparts.com (PRTS): Although speculative, we may see an increase in car repairs over car purchases.
Several years ago, a reality TV show called “Doomsday Preppers” hit the airwaves, drawing people into the wild narrative of those making serious plans to protect themselves against a future apocalypse. While people in the real world don’t need to go to extremes, it’s best to apply the same spirit of readiness with recession-resistant stocks to buy.
Sure, the major indices may be turning up following a rough start to the new year. Nevertheless, the initial negative catalysts that helped spark the downturn — such as soaring consumer inflation — have yet to be resolved. If anything, problems are worsening, especially as the Russian invasion of Ukraine exposed multiple geopolitical vulnerabilities that have cynically given recession-resistant stocks a shot of relevance.
But even without that worrying headwind, investors have plenty to be anxious about, such as the unprecedented expansion of the M2 money stock while counterintuitively suffering from extremely low money velocity. This oddball combination implies that the so-called economic recovery has left much to be desired, meaning that recession-resistant stocks should still be on your radar.
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Lowe’s Companies (LOW)
If you want utility out of your recession-resistant stocks to buy, Lowe’s Companies (NYSE:LOW) might offer just that. In many cases, an investment category requires a certain thesis to pan out in the broader market or economy. But with Lowe’s, it may not matter much whether we suffer a slowdown or fly into a renaissance.
Should the naysayers be proven wrong and business continues to march forward, LOW stock should benefit from a rising housing market. Indeed, the enormous demand for residential real estate saw extra incentives for companies like Lowe’s as home sellers renovated their properties to secure maximum value from their transactions.
However, if bearish prognostications turn out to be accurate, you’ll be glad you stuck LOW in your list of recession-resistant stocks to buy. True, home ownership is pricey, especially when things go wrong (which they do). But unlike other expenses, you can’t put off home repair.
Yes, it’s cynical but tough times call for tough measures.
Big-box retailers can provide an excellent arena to search for recession-resistant stocks to buy and Target (NYSE:TGT) is arguably among the best. According to a Business Insider analysis, Target commands higher-than-average customer loyalty, ranking behind Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN). But here’s the thing: the average shopper at Target is better off financially than many of its rivals.
As BI put it, “Target’s average customer is a woman who is 39 years old, white, married, with a household income of $80,000.” To be fair, the same publication states that the average Walmart shopper is a “59-year-old white suburban woman earning $80,000 a year.”
Now, I’ve seen studies that show Walmart shoppers on average making conspicuously less money than Target shoppers. But even taking the above statistics, the younger Target consumer implies that the company’s core base is growing into their peak earning years. Therefore, TGT should have higher resilience during a downturn, making it one of the recession-resistant stocks to buy.
Should we suffer a pronounced slump in economic performance, Coca-Cola (NYSE:KO) should be one of the ideas to consider for recession-resistant stocks. The reason? For starters, market analysts have long suggested KO due to favorable financial attributes such as a solid dividend yield and plenty of cash on hand.
Those factors more or less remain true today. As I write this, KO provides a yield of just under 3%. While the cash-to-debt situation could use a little work, Coca-Cola is very profitable and according to Gurufocus.com it is fairly valued.
However, I personally like KO as one of the recession-resistant stocks to buy due to the underlying product. Providing iconic sugary (read addictive) beverages and snacks across the world — well, maybe not Russia — the company offers a respite during hard times.
As the collective weight gain from the coronavirus pandemic demonstrated, people may be prone to consuming unhealthy products during stressful cycles. Again, it’s cynical but you have to do what you have to do.
Emblematic of American excess and consumerism, Apple (NASDAQ:AAPL) doesn’t seem like an intuitive idea for recession-resistant stocks to buy. After all, its products are very expensive — some might say way overpriced. Such a dynamic leaves AAPL exposed to competition, making it a challenging prospect.
Still, the contrarian argument is that cellphones and increasingly smartphones are vital to upward mobility. And while I don’t want to come off as ghoulish but even unsheltered individuals through various mechanisms have access to personal mobile devices. In my opinion, it’s nothing to be worked up about because again, smartphones are crucial to connect with necessary resources.
On the less-extreme side of the spectrum, sheltered households may be initially tempted to skimp out on Apple-branded products for lower-priced competitors. But the problem with that is Apple features arguably the best software ecosystem in the world. Just being connected to this ecosystem may be well worth it for struggling folks, making AAPL a counterintuitive but viable idea.
Dollar General (DG)
With Dollar General (NYSE:DG), we’re exploring the traditional side of recession-resistant stocks to buy. Here, the concept is all about not throwing any curveballs just for the sake of throwing curveballs. The thesis is straightforward. Under an economic slump, people will naturally belt tighten. That means eschewing quality for the lowest upfront price possible.
In many situations, consumers may find no reason to buy a name-brand product when a generic one will do just fine. For that, Dollar General provides an important service.
It’s also interesting to note that compared to other publicly traded firms, Dollar General didn’t suffer that steep of a decline during the spring doldrums of 2020. If a recession hits, it’s reasonable to expect a similar magnitude of resilience.
Church & Dwight (CHD)
Another no-brainer idea that commonly makes up the ranks of recession-resistant stocks to buy, Church & Dwight (NYSE:CHD) is a powerhouse name in the households goods industry. You might not know the name Church & Dwight itself. However, you’ve surely used its brands, such as Arm & Hammer and OxiClean.
Given the possibility of a recession and our already stagnating population growth — possibly attributed to an array of economic pressures — the appeal of its health and wellness products in particular should continue to gain traction.
Thus, Church & Dwight might provide a cynical (and personal) impact to consumers suffering from a possible recession. Simply put, people might be less interested in starting a family.
Easily the riskiest idea among recession-resistant stocks to buy, I stuck Carparts.com (NASDAQ:PRTS) in last place. And no, this is not one of those cases where it’s last but not least. You probably should consider the other ideas I mentioned before venturing into PRTS.
Of course, the eyesore regarding Carparts.com is its stock’s 39% loss on a year-to-date basis through the March 23 session. As well, the company is a capital gains play, currently featuring no dividends. Thus, if the bullish thesis for PRTS doesn’t pan out, you don’t have passive income to cushion the blow.
But what is the aforementioned thesis? Basically, if the economy slumps into a recession, consumers will be much more incentivized to repair their vehicles as opposed to buying a new one (or new to them). Logically, then, PRTS could be an important beneficiary though the volatility is something you must acknowledge before making your move.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.