have been burned.
And the reality is that we are still not out of the woods.
So is it time to give up?
Not at all!
There are companies operating in this environment that are actually growing their business despite the recession. And
these stocks should hold their own in this bear market, even if we retest the recent lows.
Here are the five best recession-proof stocks to own now…
Recession-Proof Stock #1: ITT Educational Services (ESI)
One group of stocks to own during a recession is the education space, and my favorite name is ITT Educational Services (ESI).
With unemployment rising, workers having difficulty finding jobs turn to education as a way to improve prospects. With the growth
of the Internet, the educational space has changed over the years. Brick and mortar schools have fallen behind the online degree
providers. With a cost-effective and flexible program, online schools have been experiencing solid growth during this recession.
Recently these stocks have come under fire as investors question the availability of student loans. Shares are also suffering
as momentum buyers speculate that the bull-run in the group is due to stall.
I would use the weakness to acquire shares of ESI at these prices. The unemployment numbers are likely to get worse before they
get better, and that is a positive for online education.
Get 2 more
names in the online education space to consider here.
Recession-Proof Stock #2: Tesoro Corp. (TSO)
Oil prices have dropped like a rock, and Americans are driving more as a result. So much for $4 gasoline changing the world.
The green wave has run into a brick wall of lower crude prices.
In 2008, oil refiners like Tesoro Corp. (TSO)
had trouble making money due to intense volatility of prices. This year, it’s a different story. Refiners make money by buying
crude, processing and then selling gasoline and other by-products.
If crude is flying all over the place, margins decline. Now with prices stable, relatively speaking, and demand for gas increasing,
owning a refiner is a great recession-buster stock for any portfolio. In fact, I view TSO as a stock that can grow in this environment
offering investors the potential to double their money. I’ve done so before with Tesoro in 2002.
Today is another great buying opportunity in TSO no matter what is happening in the short term.
Tesoro is one of my Top 10 Stocks for 2009. See
the complete list here.
Recession-Proof Stock #3: Apple (AAPL)
Apple (AAPL) is an absolute must-own stock, recession or not. The
company is growing its business at a time when others are retrenching. It’s the best of the best, and there is more growth to
come.
Apple continues to see penetration in the personal computer market as its products are more desirable to former PC users. Its
innovations with iTunes and iPhone have changed markets entirely.
What investors fail to realize is that a recession is not the death of innovation. In fact, one could argue that out of difficult
times come the best innovations. I fully expect more unique products from AAPL as time goes by. This recession will not slow them
down in the least. Not even the health issues of founder Steve Jobs will prevent this company from doing well. AAPL is a recession-proof
stock to own no matter who is at the helm.
Recession-Proof Stock #4: Potash (POT)
In a recession, most professionals suggest that investors take a defensive posture. That theory states that buying stocks with
great balance sheets and stable cash flow is a way to withstand the downdraft of a bear market. If you own stocks of things that
consumers have to buy, you can expect to beat the market performance-wise.
Again this bear market has been different in many ways. Even the most defensive stocks are losing value in a big way. None of
it makes sense.
One sector that should be insulated during a recession is the food space. We have to buy food, right? Specifically, I want to
own stocks of companies that are leveraged to the agriculture space. That means fertilizer, and names like Potash (POT).
As hedge funds were forced to liquidate, shares of POT dropped at a time when they should have done well relative to the rest
of the market. The selling creates an opportunity for investors looking for recession-proof stocks.
Buy Potash, and let others worry about the recession.
Potash is one of five stocks set to thrive for the long term. Get
the complete list here.
Recession-Proof Stock #5: Johnson & Johnson (JNJ)
Health care is the Holy Grail for investors in this horrible market. I’m not so convinced.
When everyone jumps on a bandwagon, I usually like to jump off. It seems like everyone is preaching the merits of owning health
care stocks. And when I say everyone, I mean everyone. Even the barber is touting this sector as a place to be during this recession
and beyond. We shall see about that.
Instead of focusing on the space, how about looking at a specific name?
I love Johnson & Johnson (JNJ). At current prices, the stock trades
for just 11 times trailing earnings and 10 times forward earnings. Those levels are historically low for a leader in the industry.
Add in a nice dividend, and JNJ makes for a great recession-proof stock.
The only caution is with respect to Washington and policies moving the country to universal health care. But at the end of the
day, that regulatory risk is worth taking in my opinion.
