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3 Stocks That Will Weather a 2012 Recession

Defensive picks for riding out an increasingly likely slump

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You have to love oil in this market. Crude can’t lose. Lack of supply and sufficient demand even in the face of global recession will force prices higher. And if the economy sidesteps a slowdown and demand soars, oil prices will go only higher.

In a defensive posture, it makes sense to own a large integrated oil company like Chevron (NYSE:CVX). These businesses are printing money and paying out huge dividends to investors. Plus, oil company stocks aren’t expensive.

The dislocation in the market this summer also knocked down oil stocks. I view that action as an anomaly and an opportunity to acquire shares at a discount. Even since recovering this summer’s swoon, at $100 per share Chevron is about $10 below its 2011 top.

From an operating perspective, all Chevron does is impress. It has exceeded Wall Street estimates for profits in each of the last four quarters. For the current year, it’s expected to make $13.77 per share. In 2012, profits are forecast to slip to $12.83.

Those estimates for 2012 are heavily weighted to the recession scenario, but they fail to take into account oil prices steadily above $100 per barrel. Even with the slight drop in profits, shares of Chevron trade for just eight times 2012 estimated earnings. There’s no danger of a reduction in the dividend yield, which now stands at just over 3%.

Don’t expect huge returns here, but preservation of capital during in a recession is worth the trade-off.

Campbell Soup

Fortunately, we’re a long way from a soup-kitchen Depression. While many Americans are struggling, most can still keep food on the table. But low-cost food like soup will surely withstand even a worse-then-expected downturn much better than gourmet fare.

That makes Campbell Soup (NYSE:CPB) a great selection for any defensive portfolio. In fact, as more and more consumers eat on the cheap one could argue that Campbell will increase earnings during a recession. At a minimum, it’s likely to generate cash flow sufficient to pay a very healthy dividend yield, currently at 3.4%.

Campbell has exceeded Wall Street estimates for earnings in each of the last two quarters. For the current year, it’s expected to make $2.37 per share. That number improves by 7% in 2012 to $2.53 per share. At current prices, Campbell Soup trades for 14 times current year estimated earnings.

I would buy Campbell to weather any 2012 recession.

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