The companies best suited to survive, if not thrive, in this kind of environment, are defensive stocks that provide products and services people simply can't live without. Here, then, are 20 best stocks to invest in during a recession. Some of these might not be the greatest stocks to hold once the U. But all of them have loads of worth — to investors and consumers alike — as long as times are tight. First, consumers ordered food and other consumables.
Then, they turned to entertainment items such as jigsaw puzzles and board games. Now, they're ordering hair coloring and beard trimmers. All of these are things that you can buy at Walmart. Thus while many companies have suffered tremendous financial hardship during this crisis, Walmart was among the major U.
Specifically, WMT plans on hiring , new workers, and it might need to expand past that. However, that still means as many as 22, people could stay with Walmart on a permanent basis once the crisis ends.
Back in , Slate magazine wondered why Walmart was thriving while the economy was tanking. The answer: Consumers could no longer afford to trade up; they were forced to survive by trading down. The recession could spark a similar trend, putting more money in the Walton family's bank accounts.
It looks like WMT might be one of the best stocks to invest in this time around, too. Since the bull market peaked Feb. There could be plenty more where that came from. Although many of the 50, jobs will be temporary, the discount retailer has added net new jobs of 35, over the past five years — an indication that some of the temporary workers might stay beyond the coronavirus. As far back as August, investment professionals began to tout Dollar General as a stock to own during a recession.
The idea that dollar stores might be some of the best stocks to invest in amid a recession isn't just a lazy assumption. It's abundantly clear these companies are tailor-made for tough economic times. Consumer staples plays have been among the best stocks of this bear market. However, the company hasn't ignored the changing tastes of consumers. In addition to its legacy soft drinks, it also sells Gatorade, Lipton iced teas, Tropicana juices, Bubly sparkling water, Naked smoothies, Aquafina water and Starbucks SBUX bottled drinks via a partnership with the coffee giant.
But really, Pepsi's strength is its Frito-Lay snacks division, which enjoys much higher margins than its beverages arm. PepsiCo grew overall earnings by 3.
A big driver of that growth was the company's Frito-Lay North America division, which grew revenues by 4. Without snacks, would have looked a lot different.
These investments include a new upbeat 'Optimism' ad campaign, new packaging, and new point-of-purchase materials. PepsiCo also plans to increase activity in digital media specifically to target the youthful live-for-today segment.
That could educate what Pepsi does in the months ahead. While a CEO's first instinct is to cut costs across the board, it's vital that PepsiCo ensure that Frito-Lay, its extremely profitable business, remains in the good graces of consumers. So investors might expect the company to pour significant resources into its snack business during this recession while finding places to cut costs elsewhere.
In a recession, there are guilty pleasures you can live without — year-old Scotch, while wonderful, might need to wait when money's tight — and there are those you can't, like a good candy bar.
Interestingly, Hershey increased its advertising in , similar to what Pepsi did with its soft drinks. In times of difficulty, you have to stay front of mind with the consumer because if you don't, someone else will grab your customers.
Equally important, HSY upped prices for its products, helping to offset higher input costs. As a result, HSY might catch up from its current underperformance during this bear market. But it's doing considerably better than its defense peers, as Boeing BA and a few others have led the iShares U.
The company weathered the economic downturn in in fact, that's when it was founded , and the recession. So, how did the brand survive and thrive during a recession? Well, the company was founded during the crisis and was able to do well because of it. In , the company survived because they changed their entire business model. They became a freemium business, and their revenue soared after that. Many customers wanted to use Mailchimp during an economic crisis because it was free.
By adjusting to the times and offering a free product, the brand was able to grow and they've maintained that business model ever since. Warby Parker is another example of a brand that was founded during the Great Recession. The reason they were able to succeed during this time? They filled an enormous gap in the marketplace. While you might think that you shouldn't start a business during an economic crisis, it's actually a good time to notice gaps and pain points in the marketplace and fill the need.
Warby Parker did that when they realized it was hard to purchase an affordable pair of fashionable glasses online. They filled a need and customers showed up even though they weren't spending a lot of money. The company was marketed as affordable which was necessary during a recession and customers needed an affordable glassware solution. Even if your company isn't as big as these examples, remember that a lot of enterprise companies today started during a recession. As another example, Microsoft started after the recession in the 70s.
The global economy is resilient and uncertainty has always passed. The economy will recover, but it's important for your company to be prepared for when a financial crisis happens. These companies succeeded because they looked for new opportunities, expanded into new markets, adjusted their offers, developed new products, and gave folks a cost-efficient alternative.
Innovation and creativity can help you succeed in the next economic downturn. Want to learn more about business growth? Check out our ultimate guide. Originally published Jul 7, AM, updated May 28 From to , a span that covers the Great Recession and early recovery, health care spending in the U.
Compare that to the 8. Analysts believe there is a direct connection between the stagnant overall economy and lower spending on medical services. But health care employment during the Great Recession was one of the few bright spots in an otherwise dreadful job market. While other industries shrunk from to , health care employment grew by 6.
Overall, health care was one of the fastest-growing job sectors from to , a period spanning two recessions. Health care employment increased by According to Bureau of Labor Statistics , jobs in the health care sector will grow by 14 percent from to , "much faster than average" for all occupations.
The BLS predicts a 36 percent growth in demand for both home health aides and personal health aides to serve the aging baby boomer population. If you're looking for a truly recession-proof business, then there are a few old standards that might not be sexy, but they sure are reliable.
These noncyclical businesses survive through good times and bad because they provide basic, necessary services. Funeral services are a good example. Funeral homes see a steady stream of business no matter how the stock market is performing, although funeral directors in every state reported a significant rise in cremation requests — a far less expensive procedure than burial — during the Great Recession [source: Sack ].
And since we're on the subject of death , we might as well mention the other of life's guarantees: taxes. As long as the IRS keeps things confusing, there will be plenty of work for accountants.
During the Great Recession, fees collected by accounting firms grew only 0. Many other industries experienced double-digit decreases. One group that struggled during the Great Recession, however, were small, one-man accounting firms that mostly served small businesses. The big national chains were fine [source: Byrt ]. Other industries that fall under the non-cyclical banner are religious organizations, the military, pharmaceuticals, veterinary services and repair technicians.
So if you lose your job as a hedge fund manager, you might consider a career as a vacuum-repairing priest. Sign up for our Newsletter! Mobile Newsletter banner close. Mobile Newsletter chat close. Mobile Newsletter chat dots.
Mobile Newsletter chat avatar. Mobile Newsletter chat subscribe. Business Operations. The old saw about consumers spending more on vices during recessions is not true.
People tend to cut back on their cigarette and alcohol purchases, though they spend on other vices. Something about a recession makes a sweet treat more appealing. Many of today's most popular candy bars were invented during the Great Depression.
Models pose during a photocall to launch the Louis Vuitton Townhouse, a 10,square-foot store inside Selfridges department store, on Nov. Ben A. People eat out less and buy more groceries during a recession.
The federal government is a very secure place to work, even in recessionary periods. During times of recession, people are more likely to go to college. Surprisingly, tattoo parlors do well whether or not a recession is going on. A woman shops for clothes outside of a dollar store in Brooklyn, N. One reason IT continues to be an in-demand job sector is because of an overall lack of qualified workers. The technical term for this is price inelasticity.
Not all health care companies are created equal, and recessions are likely to hurt those companies with more debt and less cash flow. These enterprises have less ability to absorb losses and service their debt at the same time. Therefore, it may be prudent to stick to health care stocks that have low debt-to-equity ratios and avoid biotech startups that are still in their early phases.
Healthcare, food, consumer staples, and basic transportation are examples of relatively inelastic industries that can perform well in recessions. They may also benefit from being considered essential industries during the public health emergency. Similar to health care, people need food and can only cut spending on it by so much.
Besides discount stores like Dollar Tree and Walmart, which are major grocers, several other companies that make or sell food also made the list. They include packaged food company General Mills, Inc. KR , and also restaurant chains McDonalds Corp. DRI owners of Olive Garden and other casual dining chains. All of these are relatively inexpensive food options, as people tend to purchase inexpensive items like cereal and switch to less expensive restaurants when they order out or dine out.
Goods need to be moved, recession or no. While personal travel for vacations declines during recessions, there is still a need to move goods to stock store shelves. All of these companies either move freight or make products that help move freight, in the case of Westinghouse.
So freight companies are often safe bets during recessions. When times are tight, one way to cut costs is to repair what you own rather than replace it, and to do routine maintenance yourself. That may be the reason for the strong performance from auto parts retailer AutoZone Inc. During a recession, consumers are more likely to repair their cars rather than buy a new one, as well as do home improvement and garden work themselves. Because of the unique economic shock that the COVID pandemic and public health related lockdowns present, the companies that do well in the current environment will be somewhat different than a typical recession.
For example, in the food and beverage industry, restaurants in particular have already seen massive closures and will struggle in the near-term, but this also might present an opportunity for them to outperform once restrictions are lifted. On the other hand companies that specialize in online and remote services, including many tech companies, or companies that produce at-home alternatives to traditional goods and services, like home gym and exercise equipment in the DIY category, have seen business boom during this time and may continue to benefit.
Businesses and consumers may be hesitant to re-adopt their pre-social distancing patterns of work, shopping, and lifestyle, and some may find that they simply prefer new ways of doing these things.
Companies that supply services that support online shopping, work arrangements, teleconferencing, and at-home substitutes for traditional services have huge opportunities right now.
Another thing to keep in mind is that due to the emergency nature of the current situation, public policy choices will have an enormous impact on which businesses and industries do better or worse. Industries that can directly benefit from the epidemic response or can successfully exert influence to get themselves declared essential will do better than others.
Lastly there is also a possible threat to consider in the form of proposed excess profits taxes ; businesses that outperform in the near-term may also end up facing punitive taxes on the profits that the make off of the current situation. The above list isn't exhaustive, as investing during an economic downturn is an enormous topic.
Other areas that are traditional defensive investments are utilities people always need water and heat , and personal storage a place to put things when downsizing. That said, this should give you a good place to start looking for how to invest during a recession.
Good things to keep in mind are what goods and services people and business can easily live without and what ones are essential. In addition, keep in mind what businesses people may patronize more if their income decreases. As mentioned, it's important to remember that each recession is different, and so will the stocks that do well during them. For example, a lot of biotech companies are rising at the moment due to the widespread COVID crisis.
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