[Editor’s Note: “9 Stocks to Buy to Weather the Recession” was originally published on April 1, 2020. It is regularly updated to include the most relevant information.]
Although the novel coronavirus devastated virtually every segment of the economy, many analysts debated whether we would enjoy a quick V-shaped recovery or slog it out through treacherous waters. If I’m reading Federal Reserve Board Chair Jerome Powell’s stark warnings correctly, the latter is the more likely scenario. Therefore, it’s time to start thinking about recession-proof stocks.
To add further context, Powell’s message comes after the Bureau of Labor Statistics revealed that 20.5 million Americans lost their jobs. As well, nearly 39 million Americans have filed for unemployment benefits over a nine-week period. If you think that portends rough waters ahead, you’re not alone. According to Dr. Zachary Cohle, assistant teaching professor of economics at Quinnipiac University:
“The U.S. was likely to slip into a recession before the first Covid-19 cases appeared within its borders. The disruption in East Asian markets, where many supply lines are integrated, caused one of the biggest markets for exports in the world to suddenly demand less consumer goods. The recent reaction to the virus has expedited our slip into recession.”
In other words, you should align your stocks to buy with options that will perform reasonably well during a downturn. If Dr. Cohle’s warning wasn’t enough, consider the sobering words of Osman Kilic, Quinnipiac University’s finance department chair and director of the Global Asset Management (GAME) Forum, who stated:
“What we are facing is a potential economic depression like scenario that we have not seen since the Great Depression. … What we are experiencing today is a sudden, vast drop in economic activity from both sides of supply and demand, which is contagiously spreading to our financial markets.”
Again, the message is clear: Recession-proof stocks to buy are your best bet for beating the coronavirus.
Recession-Proof Stocks to Buy: Clorox (CLX)
When the coronavirus first reached our country, I knew that the greatest threat wasn’t the virus itself. Instead, it was the widespread panic that would afflict Americans, causing unnecessary supply chain disruptions and social upheaval. If you want proof, just look at Clorox (NYSE:CLX) and CLX stock.
As a secular investment, Clorox is virtually guaranteed demand no matter what. Whether we’re in a bull or bear market, people need to clean up after themselves. But with Covid-19 spreading throughout the U.S., it was inevitable that CLX stock would move higher.
And don’t think that the company is a one-trick pony. Based on our reaction to the coronavirus, the next infectious disease could spark similar chaos. From what White House health advisor Dr. Anthony Fauci has recently suggested, that disease could again be the coronavirus.
Finally, as evidence of Clorox’s resilience, shares continue to rise higher. This pandemic was a paradigm-shattering event for every American, forever changing how we view mundane recession-proof stocks to buy.
Johnson & Johnson (JNJ)
As the Centers for Disease Control and Prevention have noted, no vaccine exists for preventing Covid-19. Therefore, if you get the disease, your best bet is to stay at home and rest. Further, you should mitigate your symptoms with over-the-counter medicines for the “regular” flu. Therefore, I like Johnson & Johnson (NYSE:JNJ) and JNJ stock, despite its turbulent trading this year.
First, you have the extreme hoarding behavior of panicked consumers. As coronavirus statistics ticked higher, folks began emptying shelves of over-the-counter meds. From an investment perspective, that benefits stocks to buy in the general pharmaceutical sector. But it also put many Americans in a moral quandary. Still, you got to do what you got to do, which cynically but invariably bolsters Johnson & Johnson’s sales.
Second, those folks who missed out on buying medication will remember a stark lesson. When things normalize, they’ll buy meds, just in case. I believe this transformative experience makes JNJ stock one of the most compelling stocks to buy for a possible recession.
Lastly, President Trump stated that he will not shut down the U.S. should we suffer a second wave of the coronavirus. In other words, you’re on your own. While that’s not necessarily comforting, having a (reasonable) stash of Johnson & Johnson products is.
Recession-Proof Stocks: Rite Aid (RAD)
Prior to the coronavirus, Rite Aid (NYSE:RAD) was on a very difficult recovery path. With the pharmacy retail landscape changing due to demographic shifts and the rise in competition, RAD stock has been speculative. Further, developments in retail technology were threatening to make Rite Aid irrelevant.
Today? Because of the coronavirus, RAD has quickly become one of the more intriguing stocks to buy. I’m not suggesting that shares don’t have problems, because they do. But Covid-19 has suddenly made the embattled organization more relevant.
Of course, the key question is, can it build off this momentum? If this virus changes social behaviors like I think it will, the answer may be yes. With access to medication and other key supplies becoming a top priority, RAD stock may enjoy longer-term gains.
Also, Rite Aid has stronger appeal to older demographics, along with communities of color. As multiple reports have indicated, these demos have been disproportionately hit harder from the Covid-19 pandemic. Thus, any effort to serve the underserved should generate at least some positive momentum.
Dollar General (DG)
Given the pandemic combined with the economic crisis, one of your best bets for stocks to buy in a recession are grocery stores. Therefore, I’m very bullish on names like Kroger (NYSE:KR). and Sprouts Farmers Market (NASDAQ:SFM). But because the fundamental landscape appears to be worsening, you may want to add Dollar General (NYSE:DG) to this list.
So far, most of the job losses have impacted entry-level positions, which is to be expected. With non-essential services and retailers denied operations for months, these workers had nowhere to go but the unemployment line. However, they still need to buy stuff, which would likely see stimulus dollars going to discount stores, bolstering the case for DG stock.
Moreover, the next batch of the unemployed could see white-collar workers joining the ranks of the unemployed. If that happens, we’re all going to be shopping at places like Dollar General, which is net positive for DG stock.
Recession-Proof Stocks: 3M (MMM)
Perhaps one of the lasting images of this pandemic is the N95 face mask. Once the staple of painters and other blue-collar occupations, 3M’s (NYSE:MMM) masks have become this year’s golden commodity. Indeed, if we weren’t in a state of emergency, you could easily mark up these masks for a 500% premium. But that’s not the only reason why I’m pegging 3M stock in my gallery of stocks to buy.
Rather, the knowledge that so much of our industrial supply chains are dependent on China has been a wake-up call. To be fair, it was a wake-up call decades ago. But shameless hypocrisy and an election year dictate that we must be serious about this now.
Plus, the government has raised eyebrows for flip-flopping on guidance regarding the wearing of protective masks. With such glaring contradictions, people will likely buy masks for future infectious disease outbreaks. Besides, many stores now require masks or mouth coverings to receive service. Therefore, I like MMM stock as a long-term idea.
Altria Group (MO)
I don’t want to sound cynical but I also think it’s fair to point out that when seeking stocks to buy for a recession, one them is likely to carry you through some very rough waters: vice.
As you might have suspected, the coronavirus and its associated disruptions such as high unemployment and forced quarantines have led people toward many dubious activities, such as excessive eating and alcohol consumption. In this environment, Altria Group (NYSE:MO) should find increased favor, at least from an investment perspective.
While the broader decline in smoking has caused MO stock to fall in lockstep, the pandemic may have positively disrupted this narrative. Today, people are looking for coping mechanisms. One of the oldest and most reliable, if I can use that word, are cigarettes.
Of course, a risk factor exists in that Covid-19 may convince many smokers to quit the habit for good. But with an unprecedented crisis on our hands, I like my chances with MO stock.
Recession-Proof Stocks: Axon Enterprise (AAXN)
Although controversial, firearms companies like American Outdoor Brands (NASDAQ:AOBC) tend to be a good idea for stocks to buy. With Covid-19 turning many people into “Covidiots,” the emotional barriers toward purchasing firearms have substantially lessened.
However, I completely understand why someone may not want to own a gun or be directly involved in the industry. For such investors, my second-best idea would be Axon Enterprise (NASDAQ:AAXN). Known for its non-lethal but debilitating Tasers, Axon delivers self-defense for both civilians and law enforcement. Also, users can defend themselves should the situation arise but without the personal and legal overhangs (relative to shooting someone with a gun) that can result from it.
If we enter a recession — which leading economists suggest we will — violence will only increase in the U.S. So if you’re here, buy a gun. But if you don’t want to buy a gun, buy a Taser. While you’re at it, you can also pick up AAXN stock because self-defense is a hot topic right now.
Shotspotter (SSTI)
Speaking of firearms, this is a great time to consider Shotspotter (NASDAQ:SSTI). According to the company’s website, 80% of gunshot incidents are never reported to 911. Utilizing advanced technologies, Shotspotter helps pinpoint firearm discharges, providing a valuable tool for law enforcement.
In any economic or market environment, SSTI stock is a relevant investment. Prior to the pandemic, several law enforcement agencies’ budgets were already stretched. With Shotspotter’s technology, this enables greater efficiencies for police to handle high-profile crimes.
Further, if the coronavirus leads to a prolonged recession – which appears a likely event – crime rates may rise. With so many people losing their jobs, many on a permanent basis, the probability of unrest is very high. Therefore, you should keep close tabs on SSTI stock.
Recession-Proof Stocks: Lockheed Martin (LMT)
With Covid-19 dominating headlines, it’s natural to think that this is the only problem we have. Unfortunately, other problems threaten to turn global affairs into a chaotic mess. Therefore, even in a recession, defense names like Lockheed Martin (NYSE:LMT) belong on your list of stocks to buy.
First, locust swarms in the Middle East, Africa and South Asia threaten to destroy critical crops. According to Robert Rotberg, founding director of the Harvard Kennedy School’s Program on Intrastate Conflict, this could cause millions to starve. Obviously, this may lead to armed conflicts, necessitating a strong defense profile. In turn, this would help lift LMT stock.
Second, the oil price war between Saudi Arabia and Russia once threatened to disrupt politically and economically vulnerable countries. While OPEC+ nations agreed to an unprecedented production cut, that doesn’t change the narrative much, with oil prices recently falling below zero at one point.
That tells me that the global economy is far worse than the headlines suggest, which bodes poorly for geopolitical stability. Cynically, though, such circumstances will bolster LMT stock.
Booz Allen Hamilton (BAH)
Because the coronavirus badly disrupted daily life for virtually all Americans, most folks are only focused on the bare essentials. But in the digital age, cybersecurity and other protection mechanisms cannot be ignored. Therefore, I like Booz Allen Hamilton (NYSE:BAH) not only as a play on the Covid-19 disruption but also as a long-term opportunity.
Unsurprisingly, while many bright acts of humanity have occurred during this pandemic, some have chosen to advantage the crisis. One consequence of a highly advanced society is that a lone wolf can render exponential damage. As The Hill reported, cyber crimes have increased dramatically during this compromised period. Still, because this falls under Booz Allen Hamilton’s specialty, I view this as a positive for BAH stock.
That said, cyber crimes will only get more advanced as technology improves. Therefore, I see BAH stock growing in relevance accordingly.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long MO stock.