Global markets remain in panic mode and economies are most likely already in recession, which is why you should know about these four recession-proof stocks to buy now.
The coronavirus spread has thrown markets into turmoil as stocks fall and companies continue to lay off workers at an alarming rate.
All three major U.S. stock indexes are in a bear market and, in April, the United Nations projected the world economy will go into a recession this year.
As an investor, it’s important to know how to not only safeguard your portfolio but even expand on it when economies start shrinking.
To find companies that can weather a recession, you first have to look at what they are selling. Do people need their products or services no matter what?
When we researched potential recession-proof stocks to buy now, that’s exactly what we looked for. We also factored in their performance during the 2008 recession.
Here are the four recession-proof stocks to buy now.
4 Recession-Proof Stocks to Buy Now
1. Walmart
Market Capitalization: $323 billion
Annual Sales (2019): $523 billion
Annual Dividend Yield: 1.89%
The last recession started in December 2007 and lasted approximately 18 months. At the start, Walmart Inc. (NYSE: WMT) stock actually jumped almost 50%.
In September 2008, it started to recede but bounced back in January 2009.
Consider the fact that the S&P 500 had total returns of minus-37% in 2008, including dividends. Walmart, on the other hand, delivered total returns of 20%.
Walmart weathered the last recession better than a lot of companies.
That’s because people will still need the merchandise Walmart sells. And because Walmart sells those items at a discount, that makes the retail chain that much more attractive.
With a strong e-commerce business and expansion into the grocery market, Walmart stands ready to withstand whatever a global recession can throw at it.
Because it offers what everyone needs at discount prices, Walmart is one of our four recession-proof stocks to buy now.
2. AutoZone
Market Capitalization: $18 billion
Annual Sales (2019): $11 billion
Annual Dividend Yield: 0.00%
When finances are tight, people will save money in any way they can think of. This even extends to how people fix their cars.
This is where AutoZone Inc. (NYSE: AZO) comes into the picture.
If you are pinching pennies and your vehicle breaks down or needs routine maintenance, it’s likely you’ll forgo a repair shop and attempt to fix the issue on your own.
You’ll need parts and supplies to do that and AutoZone is one of the largest suppliers of auto parts in the U.S.
The company’s performance in the last recession gives a solid indication of what it can do when another recession hits the economy. In 2008, AutoZone shares trended fairly flat, even up. In September 2008, the shares actually reached an all-time high.
It did suffer a drop in late 2008 but quickly rebounded in January 2009.
After the recession was over, AutoZone exploded. At one point, it reached $1,250 per share. It has since backed down to under $800. That’s still expensive, but with solid growth potential.
If a recession takes hold, people are more apt to take on more do-it-yourself auto repairs. That’s what makes AutoZone one of our four recession-proof stocks to buy now.
3. Bristol-Myers Squibb
Market Capitalization: $123 billion
Annual Sales (2019): $26 billion
Annual Dividend Yield: 3.28%
Biopharmaceutical company Bristol-Myers Squibb Co. (NYSE: BMY) did lose during the 2008 recession, but it thrived in 2010 and 2011.
It specializes in making prescription drugs that treat a variety of illnesses and conditions — including different forms of cancer.
That gives BMY an extremely diversified portfolio of medications that people won’t go without, even when economic times become tough.
In the last recession, the company shed about 22% off its share price, but from January 2010 to December 2011, the stock rose by nearly 52%.
Bristol-Myers went a step further to add to its portfolio by acquiring Celgene Corp. in November 2019, following government approval of the merger. The company also recently sold its psoriasis drug Otezla to Amgen for $13.4 billion.
Currently, Bristol-Myers is in a good cash position with the sale of Otezla and the proceeds from the marketing of its drugs.
Americans won’t stop taking medication, even in an economic recession. Because it offers such a wide array of treatments, Bristol-Myers Squibb is one of our four recession-proof stocks to buy now.
4. Kellogg Co.
Market Capitalization: $20 billion
Annual Sales (2019): $13 billion
Annual Dividend Yield: 3.73%
They say breakfast is the most important meal of the day. That’s not likely to change in a recession.
Kellogg Co. (NYSE: K) makes food of all kinds, but its cereal is likely what it’s most known for. In addition, the company produces other breakfast items like cereal bars and frozen waffles.
All of these products will still be consumed by Americans in a recession.
The last time the U.S. went through a recession, Kellogg’s stock actually climbed — by about 23% in 2008. It suffered a sharp pull-back in early 2009 but has moved up ever since.
But another intriguing part of Kellogg is its Morningstar Farms subsidiary. Morningstar produces Incogmeato — a plant-based protein substitute — which includes veggie burgers. It also makes plant-based chicken nuggets and tenders.
That’s interesting because more and more Americans are shifting away from actual meat.
While that doesn’t really factor in if the U.S. economy enters a recession, it does make Kellogg Co. an interesting company that has diversified across a lot of food items.
It’s the breakfast food that will carry Kellogg through a recession as Americans will continue eating the most important meal of the day.
For that reason, Kellogg Co. is one of our four recession-proof stocks to buy now.
As you can see, the products and services each of these companies provide vary, but the underlying factor is that they are all essential. Consumers will really tighten their spending when the economy is down. They won’t, however, scrimp on what they offer.
Each of these companies may not make a lot of money during a recession, but they aren’t prone to lose much either. Their past performance shows they can see their way through a downtrodden economy and come up even better on the other side.
That’s the main reason why they are on the list of the four recession-proof stocks to buy now.
Editor’s note: Looking for stocks to buy not on our list or have some good suggestions? Let us know in the comments section below.
