It’s a rare bit of good geopolitical news for the embattled Donald Trump administration. After threatening to impose tariffs on goods from Mexico due to the migration crisis, the White House announced a deal. In return for our southern neighbor taking more responsibility in curbing illegal immigration, the U.S. will cease economically punitive threats. Still, I wouldn’t stop seeking protective stocks to buy.
As The Wall Street Journal stated, Mexico has only temporarily avoided tariffs. Under the terms of the agreement, the U.S. will review Mexico’s effectiveness in stemming the flow of Central American migrants. Technically in 90 days, the U.S. reserves the right to slap tariffs on if it feels the performance is inadequate.
Plus, we all know how volatile and unpredictable President Trump is. It was just a few months back that political analysts voiced optimism for a U.S.-China trade deal. Now that situation quickly devolved from bad to worse, causing people to scramble for the best stocks to buy against a likely downturn.
This segues into the ongoing trade war with the world’s second-biggest economy. Trump is scheduled to meet his counterpart in the battle, Chinese President Xi Jinping, at the G-20 summit. Any hopes for a rapprochement was tempered when Trump declared that he would be “perfectly happy” to hit China with fresh tariffs.
If these tensions weren’t bad enough, our economy has other headwinds to consider. Recently, the dollar has weakened relative to other currencies. The yield curve inverted, which in the past signaled a recession. And of course, we have our own contentious political environment.
At the very least, we’re facing choppy waters. But if the worst-case scenario of a recession occurs, here are the best stocks to buy:
Stocks to Buy: Kimberly Clark (KMB)
For most Americans, a recession necessitates budgeting down to the essentials. While data suggests that consumers won’t abandon all discretionary purchases such as cheap entertainment, the secular segment is where you want to aim. With that context, one of your best stocks to buy for a coming downturn is Kimberly Clark (NYSE:KMB).
You may not immediately recognize the Kimberly Clark name, but you’ve certainly used their products. We’re talking about brands like Kleenex, Huggies, and Cottonelle. No matter how volatile the markets get, or if the trade war takes an unexpectedly negative turn, you’re still going to wipe yourself after you use the facilities. At least I hope you do, and that’s what drives KMB stock.
The other great point about the company is that its fundamentals match our assumptions. In other words, KMB stock levers recession-proof products, and the financials prove it. For instance, net income slipped in 2008, but the metric moved positively the following year.
This just shows that when a recession strikes, the best stocks to buy are often the most obvious.
Duke Energy (DUK)
I’ve been involved in a few blackout incidents. Certainly, they’re not the biggest problems you encounter in life. At the same time, few inconveniences make you feel so useless and inadequate, especially in this digital age. That’s why if we suffer a recession, you should peg Duke Energy (NYSE:DUK) among your list of stocks to buy.
The case for DUK stock is very straightforward: we all need energy to power our digitally connected lives. Even the most rural communities cannot afford to be cut off from vital energy sources. Sure, in a downturn, most folks skimp on purchases. But they absolutely cannot skimp on their utility bills. Doing so would be catastrophic in their journey to get back on their feet.
Similar to Kimberly Clark, DUK stock has the fundamental data to prove it belongs among the best stocks to buy for a coming recession. Back in 2008 through 2010, net income slipped badly against 2007’s annual tally. However, in 2011, Duke decisively hit the recovery track, significantly exceeding 2007 figures.
RCI Hospitality (RICK)
If you want to pick out the best stocks to buy against a possible recession, you should keep it simple. That means going with names that have a proven track record, even when times are tough. With that context, I can’t think of many better names than RCI Hospitality (NASDAQ:RICK).
I get it: RICK stock generates controversy for its underlying hospitality business. But the stark reality is that the intimacy industry is at least recession-resilient, if not outright recession-proof. During the 2008 market crisis — the worst such calamity since the October 1929 crash — The New York Times reported on the phenomenon of $1,000 lap dances.
Another factor that makes RICK stock an interesting idea is that shares haven’t done so well this year. In fact, they’re down more than 19% since January’s opening price. Right now, the volatility is keeping conservative investors away. However, if a recession hits, RCI can easily make a case for its spot among the best stocks to buy.
Anheuser Busch Inbev (BUD)
A common entry among vice stocks to buy, Anheuser Busch (NYSE:BUD) owns several popular beer brands. These include Michelob Ultra, Budweiser and, of course, Bud Light.
The latter is highly regarded for its usually hilarious commercials and not much else. I’ve said it before and I’ll say it again: Bud Light is an abomination.
But two interesting points make BUD stock an appealing proposition. In a recent beer survey, Bud Light ranked as America’s favorite beer. Consumers apparently called it “drinkable and refreshing,” two words I would never use to describe Bud Light. But setting that aside, Anheuser Busch-branded beers represented the majority of America’s top 10.
My second point is that BUD stock could weather a recessionary storm better than most. Some scientific studies suggest that contrary to popular belief, troubled economic times could correlate with heavier drinking. If so, I’d keep a close eye on Anheuser Busch.
AMC Entertainment (AMC)
I have to admit that when AMC Entertainment (NYSE:AMC) reported its disappointing first-quarter earnings report, it hit me hard. In fact, it was a double-whammy. Not only did I buy into AMC stock, but I suggested that contrarian investors do the same. Boy, do I have egg on my face for this one.
And what exactly was my reasoning for getting involved with this loser? I believed that despite streaming services taking over the entertainment landscape, a viable place existed for the box office. Sure, streaming offers conveniences, but the cineplex provides a social experience that’s still relevant to all demographics.
Unfortunately, the timing just didn’t work out for AMC stock.
However, I’m not hitting the panic button despite the sharp losses. Here’s why: back in the Great Recession, high-profile entertainment options such as professional sports experienced a noticeable decline in attendance. During the same period, consumers flocked to the movie theaters.
In a recession, people want cheap entertainment to forget their troubles. That’s what AMC provides, which is why I think it’s one of the best stocks to buy if troubles hit.
Waste Management (WM)
Author and financial guru Robert Kiyosaki once said that “cash is trash.” Waste disposal and solutions expert Waste Management (NYSE:WM) may want to adopt a similar statement as their marketing pitch: trash is cash.
However, buying WM stock may seem counterintuitive if you’re anticipating an economic correction. After all, people tend to buy less stuff during a recession. Moreover, cash-strapped folks tend to fix products that don’t work or buy cheap hand-me-downs. Whatever the specifics, the result is fewer opportunities for Waste Management to advantage.
But it’s also fair to point out that WM stock is a secular investment. Even if the volume of trash decreases in a potential recession, it doesn’t disappear altogether. The garbage truck will still come and perform their weekly ritual.
More importantly, Waste Management recently acquired a rival in the space, Advanced Disposal, for $3 billion. With a major competitor out of the picture, WM utterly dominates the secular trash-disposal industry. This makes the equity a counterintuitive but viable candidate among stocks to buy for an economic slowdown.
Barrick Gold (GOLD)
While we’re on the topic of cash being trash, let’s talk about gold. The yellow metal is perhaps the only thing we all agree with President Trump on: gold is good. Having more gold is better. I’ll let you complete the logical sequence.
The spot price for the monetary commodity spiked in late May, to no real surprise. The only shocking thing is that it took so long. We’re mired in a deeply contentious political environment, both here and abroad. Furthermore, the dollar has weakened against a basket of international currencies, setting the stage for a stunning recovery.
But if you don’t want to own physical bullion, consider Barrick Gold (NYSE:GOLD) stock.
Barrick Gold consistently ranks at the top among commodity producers. Therefore, if you’re going to take a shot in this always-risky segment, you should go with the best.
Second, because Barrick is the leading producer, the GOLD stock price will likely have a strong correlation with the metal’s spot price. In past years, that correlation was a liability. But with conditions ripe for a turnaround, Barrick stands to benefit substantially.
As of this writing, Josh Enomoto is long AMC stock and gold bullion.