Despite positive rhetoric from the top, the economy may be headed for troubled waters. For one thing, the benchmark indices have not demonstrated much conviction. Further, individual names have taken some ugly dives, scaring off investors from the usual stocks to buy.
Unfortunately, the situation may not improve in the nearer term. While President Trump has always spouted the message of winning against China, the actual data suggests otherwise. According to Moody’s Analytics, the trade war has cost the U.S. approximately 300,000 jobs. Based on present trends, the firm estimates that the job loss tally will reach 450,000 by year’s end.
Another factor that has stymied stocks to buy is the political situation. Currently, we’re in one of the most divisive eras in American history. With a high-stakes election coming up next year, Trump can’t afford to look weak to his core voting base. Thus, the trade war might continue for at least another year.
But in the midst of this turmoil, investors have an opportunity to go contrarian with recession-resistant services stocks to buy. Although consumers are generally incentivized to curtail spending in a downturn, some service providers are simply indelible. Others help clients save money, which is a necessity in troubled times.
So without any more delays, here are my picks for recession-resistant services stocks to buy:
Alphabet (GOOG, GOOGL)
At first glance, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) doesn’t appear an intuitive candidate for recession-resistant services stocks to buy. With its technology-centric business, and one that is increasingly geared toward the cloud, GOOGL stock would seem more vulnerable to volatility under a recession.
However, what changes the calculus for GOOGL stock is YouTube. As we all know, recessions are generally unhelpful for discretionary retail names: people simply will shut down unnecessary spending. And in some ways, that applies to services stocks as well. However, Alphabet via YouTube provides a wealth of free information (amid all the other junk).
I’ll use a personal example. I’m not the most technically inclined for household maintenance work. However, with YouTube, I’ve been able to take care of several basic jobs, allowing me to save hundreds. In a recession, I think this example will be amplified tenfold, making GOOGL stock one of the surprisingly good services stocks to buy.
You don’t have to do deep research to understand that auto sales decline sharply in a recession. But if you want the proof, here it is: according to the Federal Reserve’s economic research arm, the retail automotive sector was one of the hardest hit segments of the economy during the 2008 financial crisis and the subsequent Great Recession.
That’s bad news for automakers. However, it might spell at least a stable revenue channel for AutoZone (NYSE:AZO) and AZO stock.
Part of the allure of buying a new car is the associated benefits. For instance, many dealerships offer complementary services like oil changes for the first few years of ownership (or lease). But in a recession, such offers won’t be enough to overcome consumer fears. That plays into the hands of AZO stock and related services stocks to buy.
Not only does AutoZone provide an extensive array of parts, their customer service team can help direct you accordingly. Combined with the do-it-yourself information available at YouTube, AZO stock appears a compelling contrarian buy in a recession.
O’Reilly Automotive (ORLY)
One of the difficult aspects about figuring out which services stocks to buy for a recession is the underlying assumption: nobody truly knows what’s going to happen next. With the markets still relatively elevated, it seems a recovery is possible in the nearer term. But for those who think that, I’d still recommend looking into O’Reilly Automotive (NASDAQ:ORLY) and ORLY stock.
While benchmark indices still have their foot in the bull market, the automotive sector is decidedly bearish. Earlier this summer, automotive journal Jalopnik noted that car sales have slipped to a “recession-level decline.” As I mentioned earlier, this is bad news for most automakers. However, it suits ORLY stock perfectly.
Aside from offering a warehouse of parts, O’Reilly also provides several free services. These include critical functions, such as battery testing and “check engine light” testing. While complementary, these offers facilitate upselling for parts and specialized services. That’s a big plus for ORLY stock as investors seek out viable opportunities in a distressed environment.
H&R Block (HRB)
Among recession-resistant services stocks to buy, H&R Block (NYSE:HRB) is probably the least intuitive play. That assessment has only been exacerbated by the recent sharp decline in HRB stock. With the drop, shares have essentially gone flat for over the last three years. Certainly, this is not a great way to make an introduction.
I’ll freely admit that HRB stock has substantial risks. If you have a conservative portfolio, you may want to seek other services stocks. That said, if we fall into a recession, H&R Block’s core business becomes all the more valuable.
Yes, you can do your taxes yourself, which saves frontline costs. However, in the long run, you’re better off with credentialed accounting advice. That applies even more so with small business owners and those with complex tax situations.
Indeed, in these latter categories, people can save money in the long haul. With accountants guiding you to perfectly legal deductions, clients can maximize their financials and have peace of mind. Those are all valuable attributes that underline HRB stock.
Supplemental insurance provider Aflac (NYSE:AFL) hasn’t enjoyed the best performance over the past few months. Since the middle of July, AFL stock is down nearly double digits. With some of the recessionary fears impacting trading behavior, the equity may unfortunately be choppy over the nearer term.
But in the broader picture, I think the realities of an economic downturn may inspire people to consider Aflac’s services. While traditional insurance programs may cover the basics, there are always potential gaps that might not be covered. In these situations, Aflac provides a valuable service, making AFL stock one of the more critical stocks to buy.
On a more personal note, I interviewed James Wright, an aircraft mechanic who suffered debilitating osteoarthritis. Wright was out of work for 20 months while he concentrated on rehabilitation. Through his dedicated commitment, as well as assistance from employment network Allsup Employment Services, he was back on his feet.
Certainly, Wright is one of the lucky ones. But his story is a reminder that our health is not guaranteed. However, companies like Aflac can provide peace of mind, which is a tremendous boost for AFL stock.
Carriage Services (CSV)
This is an icky topic, but death is simply a part of life, ironically enough. While it’s also not dinner table conversation, investments like Carriage Services (NYSE:CSV) benefit from a guaranteed bullish narrative: we have lots of people in the U.S. and they’re all going to die. As one of the biggest funeral services providers, Carriage Services and CSV stock have lucrative growth opportunities.
Furthermore, now might be a great time to consider CSV as one of your top recession-resistant stocks to buy. I say this because of demographic realities. Following World War II, the U.S. experienced a surge in population size. Called the baby boom, the demographic belonging to this group peaked in 1999 at nearly 80 million.
Despite many who passed, there are many more waiting to knock on St. Peter’s gate. In other words, CSV stock should have ample opportunities for upside.
Service Corporation International (SCI)
The same arguments for CSV can be made for other funeral services stocks such as Service Corporation International (NYSE:SCI). There are certain industries where the demand does not decrease when the economy is hurting. Unfortunately, making arrangements for deceased loved ones is one of those industries.
SCI states that its brands “provide families with a full range of choices, from the simplest funeral arrangements to elegant ceremonies requiring intricate planning and unique features or events.” That means that while simpler services may become more popular out of necessity in a major downturn, SCI can still provide those services.
CVS Health (CVS)
Prior to its rally that started in early August, CVS Health (NYSE:CVS) was contrary to its name not looking healthy. At one point, CVS stock was down nearly 20% for the year. And part of the reason was the competition. With disruptive names like Amazon (NASDAQ:AMZN) or Walmart (NYSE:WMT) attempting to take more of the healthcare pie, CVS stock has historically absorbed serious pain.
Fortunately, that appears to be changing. Since the beginning of August, CVS stock is up nearly 15%, completely altering the implications behind its chart. Against January’s opening price, shares are just above break even. By itself, that’s nothing to write home about. But considering where it was, investors will gladly take what they can.
But a little more patience might be in order, especially if we hit a recession. Even in a downturn, people can’t avoid everyday frustrations, such as getting sick. Thus, CVS enjoys secular demand, which is why you should consider it among relevant stocks to buy.
If you still have a bad taste in your mouth about the funeral services stocks to buy, don’t worry: these last two names will put a smile on your face.
I’m going to start this duo of stocks to buy with Trupanion (NASDAQ:TRUP), a medical insurance provider for your pets. Specifically, Trupanion insures dogs and cats, but seeing as how these are the most popular pet species, this fits well for TRUP stock.
Of course, we all know how expensive medical insurance for humans is. With insuring pets, it might seem overkill. However, our pets are often a huge part of our lives. Plus, an acute issue can cost thousands of dollars. In a recession, it might make sense to insure whatever you can, thus lifting the case for TRUP stock.
IDEXX Laboratories (IDXX)
IDEXX Laboratories (NASDAQ:IDXX) specializes in medical diagnostic equipment for pets. Up until a recent decline, business has been good for IDXX stock. Even with the drop in market value, shares are up nearly 47%.
And against a longer-term framework, you might want to consider adding IDXX to your list of potential stocks to buy. For one thing, Americans love their furry friends. According to the American Pet Products Association, nearly 70% of U.S. households own a pet. Moreover, millennials will spend more on their pets’ healthcare than on their own health-related needs.
Yes, that sounds crazy, but it also underlines the bullish narrative for IDXX stock. Plus, our four-legged family members offer us humans a number of therapeutic benefits. These factors will especially be important if we incur an economic downturn.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.