A recession isn’t guaranteed. With each passing day, however, an economic downturn becomes increasingly likely. At the very least, we should expect some broader correction in the markets due to timing issues. After all, we’re on a record-breaking bull run. That alone should help adjust how we approach which stocks to buy.
Moreover, evidence exists all around us that we’ll incur a recession. Obviously, the biggest factor here is the U.S.-China trade war. President Donald Trump has aggressively prosecuted his economic rivalry with China, but his efforts have yielded almost nothing fruitful. And while he has succeeded in damaging the world’s second-biggest economy, domestic stability is starting to fracture.
This might lead to both sides inking a deal, thereby rendering moot the demand for recession-proof stocks to buy. However, the trade war may have accelerated certain vulnerabilities past the tipping point. More significantly, the trade war has impacted other nations including Germany. Due to uncertainties over the U.K. leaving the European Union, export-dependent Germany risks falling into a recession.
And if that happens, it will send a ripple effect throughout the world. Therefore, it doesn’t hurt to be prepared. Here are 10 recession-proof stocks to buy:
Waste Management (WM)
This is perhaps the ultimate irony. In an article about recession-proof stocks to buy, I’m here talking about Waste Management (NYSE:WM). Although seemingly an illogical idea, it’s actually not. You see, Americans produce a massive amount of waste, or roughly 230 million tons of it every year. Right there you have a legitimate bullish argument for WM stock.
Due to the almost inhuman rate at which we throw junk away, landfills throughout the country have been nearing capacity. To help remedy this situation, we’ve been exporting our recyclables to China. We’ve mixed our trash with our recyclables, but Chinese workers have sifted through the junk to find recyclable items. However, trade war tensions destroyed this relationship, which might be a benefit to WM stock.
Why? With China and other countries rejecting our trash, land earmarked for waste will jump to a premium. And I don’t think it’s any surprise that WM stock is one of the strongest-performing recession-proof stocks to buy.
Procter & Gamble (PG)
I couldn’t think of a more boring name than Procter & Gamble (NYSE:PG). Known everywhere for their household goods, the company specializes in such compelling products like diapers, detergent and over-the-counter anti-diarrhea medicine. But if you want to protect yourself with recession-proof stocks to buy, boring is usually best.
The markets fully agree with this basic assessment. On a year-to-date basis, PG stock has gained over 33%. Moreover, shares have charted a very clean and consistently rising trend channel. This has been accentuated only by brief moments of volatility. Plus, shares have recovered well from the 800-point drop in the Dow Jones Industrial Average in mid-August.
But will PG stock continue to trek higher? If we head toward a recession, this is one of the few names that will give you confidence. That’s because practically everything that Procter & Gamble sells is a necessity, whether we have a downturn or not.
Home Depot (HD)
In discussions about recession-proof stocks to buy, Home Depot (NYSE:HD) comes up often. I believe that’s the case because HD stock has both bullish and bearish catalysts.
When things are going well, Home Depot benefits from more construction activity. During downturns, its revenue streams are somewhat insulated because repairs and renovations don’t wait for recessions. And since other sectors are doing poorly in bear markets, HD stock wins over defensive-minded investors.
Unsurprisingly, Home Depot shares have performed well this year, gaining about 30%. However, HD stock has offered up a turbulent ride toward those returns, worrying some onlookers.
That said, the company received some good news. Due to the repercussions of the U.S.-China trade war, Home Depot’s suppliers are shifting manufacturing from China to other countries like Taiwan or Vietnam. That translates to a significant mitigation of the trade war impact, bolstering the argument for HD stock.
Dollar General (DG)
I’ve said this before, but the best recession-proof stocks to buy have the most straightforward and logical arguments. Under this context, you should definitely consider adding Dollar General (NYSE:DG) to your portfolio.
Simply put, DG stock is a direct play on consumer behaviors during an economic downturn. What do most people do when job opportunities run dry? They buckle in for a long financial winter. For many folks, that translates into doing whatever is necessary to save money, including shopping at dollar-only stores.
Another factor benefiting DG stock is that such stores offer comprehensively great deals. For instance, I once picked up a can opener for a buck. To this day, this cheap can opener has never failed me, whereas a $12 variant from a big-box retailer might not last a year.
Overall, I think this is the reason why DG stock is up nearly 30% YTD. During this period of extended saber-rattling and worrisome economic metrics, Dollar General has become incredibly relevant.
Over the years, I haven’t shown much love toward grocers like Kroger (NYSE:KR). A big reason why is competition. Not only do you have disruptive organizations like Amazon (NASDAQ:AMZN) encroaching into the arena, big-box retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT) offer one-stop-shop solutions, which include groceries. Thus, KR stock has a steep uphill climb to navigate.
Furthermore, I have been right on my hesitancy toward KR stock. However, with Wall Street now shifting their focus to recession-proof stocks to buy, Kroger suddenly looks much more interesting. Of course, some serious risks abound. For instance, shares are down 15% YTD. This is also a company within an industry that depends on high volume to compensate for the low margins.
However, KR stock has an advantage during downturns. As a strictly grocery specialist, Kroger can offer lower prices due to bulk shipments. Furthermore, Amazon’s disruptive acquisition, Whole Foods Market, probably won’t do so well in a recession. Thus, don’t overlook KR in your search for recession-proof stocks to buy.
Ross Stores (ROST)
If you’re like me, you probably don’t care too much about fashion trends: you just buy whatever looks best on you. And for that reason, I love off-season discount retailers like Ross Stores (NASDAQ:ROST). I get to buy brand-name shoes and apparel, simply because they weren’t popular enough or they’re a few months old. Millions feel the same way, which supports the case for ROST stock during bull markets.
But even in bear markets, ROST stock is compelling. That’s because recessions don’t happen like a light switch. A decline in GDP doesn’t immediately evoke images of a dystopian nightmare. Instead, people do normal things, but with a more cost-conscious mindset. Logically, this environment benefits ROST stock.
The markets have agreed with this assessment. Currently, ROST stock is up over 29% YTD. Moreover, shares have so far handled the August volatility well, moving up slightly for the month. Therefore, this is another name to keep on your list of recession-proof stocks to buy.
Kirkland Lake Gold (KL)Recession-proof stocks to buy don’t always have to be so boring and predictable, as Kirkland Lake Gold (NYSE:KL) proves. As you might deduce from the name, KL stock is a precious metals mining investment. And I really love gold and silver in this particular market setup.
Primarily, I say this because the Federal Reserve is essentially greenlighting gold and silver prices to jump to all-time records. How? In late July, the Fed announced that they will cut benchmark interest rates, a first since 2008. Later, the yield curve inverted, which basically forces the central bank to cut rates further to flatten the curve.
Generally speaking, these actions are inflationary for the U.S. dollar. And that is good for gold and silver prices, which in turn benefits KL stock.
Another factor bolstering shares is the political stability of their projects. Largely doing business in Canada and Australia, these two nations have stable infrastructures and are allied with the U.S. With precious metals moving higher, KL stock just seems like a no-brainer.
AMC Entertainment (AMC)
Unfortunately, cineplex operator AMC Entertainment (NYSE:AMC) hasn’t panned out as I had hoped. Of course, the critics would blast me for even thinking about AMC stock. In a world where streaming giant Netflix (NASDAQ:NFLX) dominates the content-entertainment ecosystem, AMC seems anachronistic, like a time-traveling DeLorean.
A major reason why AMC stock hasn’t performed to speculators’ expectations is this year’s movie offerings. In my opinion, it’s a very slow season for Hollywood. Furthermore, it won’t get better until Disney (NYSE:DIS) releases its highly anticipated “Star Wars” film.
But as a speculative play among recession-proof stocks to buy, I like my chances with AMC stock. No matter what, humans are social creatures. Therefore, no amount of streaming will change our hardwired psychology to interact with others.
Plus, AMC represents (relatively) cheap entertainment. Even with buying outrageously priced popcorn and drinks, you’re still better off at the box office than at a typical NFL game. And during a downturn, that pricing advantage is a huge tailwind.
RCI Hospitality (RICK)If you’re looking for viable recession-proof stocks to buy, RCI Hospitality (NASDAQ:RICK) isn’t an equity that you would put on your portfolio. Instead, you would recommend RICK stock to your “friend,” who utilizes the company’s services frequently. In fact, your “friend” probably has a problem receiving too much hospitality.
Joking aside, RICK stock is one of the most interesting and controversial recession-proof stocks to buy. In the aftermath of the Great Recession, several gentlemen’s clubs reported that business was booming. Psychologically and practically, I understand why. Men need an outlet after suffering humiliation at work. On the other hand, some women are willing to provide acrobatic hospitality when opportunities run dry.
Of course, this is a really shady way of profiting from a possible downturn. However, if you’re truly agnostic about your portfolio, RICK stock offers a pathway to survive and thrive.
Anheuser Busch Inbev (BUD)
I must admit that I don’t feel too terrible about suggesting RICK as one of the better recession-proof stocks to buy. Ultimately, I see this activity as consenting adults doing adult things.
However, I feel almost shameful about discussing Anheuser Busch Inbev (NYSE:BUD). It’s not because of their underlying product. Few things are as American as having a cold one at a backyard barbeque. Instead, it’s the reason behind it: BUD stock may outperform your expectations during a recession.
Why is that? According to health-related studies, an economic recession correlates with increased imbibing. That’s not a surprise. After all, who hasn’t knocked back a few to take the edge off a stressful situation?
But the question is, should you profit from this narrative? If you feel that this is also a case of adults being adults, check out BUD stock. Bud Light is the top-selling beer in America. And due to its price point, it’s very attractive during a recessionary period.
As of this writing, Josh Enomoto is long gold and silver bullion, and AMC stock.