Thanks to the record-breaking bull market we’ve witnessed over the last several years, boring recession-proof stocks to buy have not necessarily attracted the most attention. However, in the past two weeks, that has changed substantially due to the coronavirus from China. Now, boring is very much in vogue.
Primarily, the appeal for ho-hum recession-proof stocks is their secular demand profile. Should the coronavirus cause a domestic or global economic slowdown, you’ll want to focus on everyday necessities. Obviously, we’re talking about food, water and clothing. Additionally, it wouldn’t hurt to think about the pharmaceutical industry, considering the present pandemic.
And make no mistake about it, this is a pandemic. At time of writing, there are a total of 106,211 cases with 3,600 deaths. The coronavirus has impacted 103 countries and territories and international conveyance – the now infamous Diamond Princess cruise liner. According to the World Health Organization, a pandemic is a virus that causes “sustained community-level outbreaks” in at least two world regions.
We have more than broken that threshold; thus, the case for recession-proof stocks.
And while some experts continue to plead for calm, increasingly, the coronavirus appears poised to impose at least a significant deceleration of economic activity. As Harvard Business Review contributors Pierre Haren and David Simchi-Levi wrote, given the unparalleled efforts of the Chinese government to contain the virus, “we can safely conclude that the impact of Covid-19 on Chinese manufacturing is at least an order of magnitude larger than that of SARS.”
Put another way, it’s time to shift priorities. Here are nine recession-proof stocks to buy to ride out the coronavirus.
Johnson & Johnson (JNJ)
In recent years, the once-revered Johnson & Johnson (NYSE:JNJ) brand has been dragged through the mud through various shocking scandals and lawsuits. Not surprisingly, JNJ stock has traded in a relatively flat trajectory over the last two years. However, the present coronavirus crisis makes shares one of the best recession-proof stocks to buy.
Principally, JNJ stock should rise based on the underlying company’s consumer health products. According to the Centers for Disease Control and Prevention, no vaccine exists that prevents Covid-19. As such, if you do succumb to the disease, you’ve got to take the protocol you would for the flu. That bodes well for Johnson & Johnson, due to its household brands like Tylenol and Motrin.
If the coronavirus sends us into a recession, note that its other product categories, such as medical devices and pharmaceutical products, are not easily replaceable. And with a decent dividend, you can receive compensation while holding JNJ stock.
Waste Management (WM)
Trash. It’s a concept that few people really think about, whether we’re in a bull market or bear. Be that as it may, the process of handling waste remains permanently relevant. As such, if the current pandemic starts to unwind our economic riches, Waste Management (NYSE:WM) is a name to consider among your short list of recession-proof stocks.
First, many fear that we’re running out of capacity to store our refuse. Certainly, high-profile stories of developing countries refusing to take our recycling materials lends credence to this anxiety. With other countries growing in economic power, they don’t need to take crap from us, literally. Naturally, this lifts the longer-term case for WM stock.
In fairness, companies within the waste industry have pushed back against these fears, noting that disposal facilities are far more advanced today than they’ve ever been. Still, land is a finite resource. Therefore, the sector must keep its eye on the ball. No matter what, I see our present circumstances as a positive narrative for WM stock.
Duke Energy (DUK)
In the mad scramble for supplies, I get the impression that most folks assume that the lights will stay on. Plus, as CNBC reported, the virus outbreak has magnified the concept of working from home. As well, we should see streaming entertainment companies experience a nice lift. But none of that matters if the lights don’t turn on. That’s where Duke Energy (NYSE:DUK) and DUK stock comes in.
Frankly, I’m not terribly worried about the health impact of the coronavirus. Don’t get me wrong: I don’t want that thing so if you have it, please stay at home and get better. But with our digitalization of everything society, I don’t need to get out of the house except for buying essentials. But if the lights go out? That’s a different story.
Of course, utility firms aren’t the sexiest names out there. But in this circumstance, DUK stock stands out for its stability and generous yield. Even if we suffer a slowdown, Duke is one of the more viable recession-proof stocks to buy.
Procter & Gamble (PG)
Over the last several days, I noticed a gradual shift in consumer behavior. At first, canned goods and other consumable products with long shelf lives started disappearing. Then of course went disinfectant products from Clorox (NYSE:CLX) as well as seemingly mundane products like toilet paper. People realized that they need more than food and water to survive comfortably, which bolsters the case for Procter & Gamble (NYSE:PG).
In most circumstances, PG stock is a boring name to hold as an anchor. It’s not that shares won’t ever suffer volatility because they do – indeed, it’s a little shaky right now. But over the long run, you can have confidence in Procter & Gamble for their indispensable household essential goods. From toilet paper to toothpaste to laundry detergent, the company has you covered.
However, I have one tactical word of advice: if you buy now, I’d keep the powder keg dry. Because of the coronavirus panic, PG stock is liable for a solid thwack to its share price.
Kroger (KR)
Grocery shopping has never been a source of urgency. But with the coronavirus rapidly spreading across the U.S. – at time of writing, there are 446 cases in our nation – people have hit their local grocers in a panic. This kind of mass irrationality isn’t doing anyone any good. That is, if you’re a stakeholder of Kroger (NYSE:KR). KR stock hasn’t looked this good in a while.
Typically, you’d peg Kroger as one of the better recession-proof stocks to buy. For one thing, everybody needs to eat. With better scale than some of the competitors entering the space, Kroger should hold up decently, potentially lifting KR stock. Second, consumers will shift more dollars allocated to dining out and spend it on groceries.
But with the pandemic the major talking point, KR stock has taken on new life. With everything that you need – except perhaps for face masks – Kroger should enjoy some much-needed upside. And if the outbreak lasts longer than expected, well, at least one company will benefit.
Walmart (WMT)
Though Walmart (NYSE:WMT) is usually a solid candidate for recession-proof stocks – the big-box retailer provides everyday low pricing without requiring a membership fee – this present circumstance makes WMT stock a tricky bet. Still, I wanted to include it on this gallery as I believe most investors will be curious about this company.
First, let’s get the bad news out of the way. If we suffer a downturn in the economy, the idea of Walmart being one of the better recession-proof stocks will be put to the test. While the U.S. and China inked a phase one trade deal, we’ve got a long way to go. With China the epicenter of the nasty coronavirus, we can see supply chain disruptions that may negatively impact customers.
On the other hand, Walmart is itself the epicenter of cheap everything, from essential goods to discretionary ones. That could keep the lights on and more for WMT stock, given the panic we’re witnessing.
Teva Pharmaceutical Industries (TEVA)
Like Johnson & Johnson, Teva Pharmaceutical Industries (NYSE:TEVA) has found itself in firestorms of controversy. A particularly damaging accusation are claims of price gouging. Obviously, it’s a terrible look for Teva. As the world’s leading generic drug maker, its off-brand products are supposed to be cheaper than branded drugs. Unsurprisingly, TEVA stock has tumbled badly over the past five years.
At the same time, Teva and the generic drug industry is what you may call necessary evils. Really, the entire pharmaceutical industry is one giant necessary evil. We can complain but who will listen?
Plus, let’s not forget that drug companies have been embroiled in massive controversies in the past, yet have overcome them. Whether because of necessity or due to Americans’ tendency of forgiving and forgetting, I wouldn’t let Teva’s scandals completely dissuade you from TEVA stock. With healthcare only getting more expensive and convoluted, this is one of the better recession-proof stocks to buy.
Hostess Brands (TWNK)
One of the riskier recession-proof stocks to buy, Hostess Brands (NASDAQ:TWNK) is down double digits on a year-to-date basis. With the retail panic-buying, most investors have focused on the core essentials: food, water, medicine, and protective materials and accessories. Still, TWNK stock could see a lift higher than to its underlying flagship product: the Twinkie.
Like many American culinary traditions, the Twinkie puzzles me. Personally, I find the taste too saccharine. And the fact that it can outlast cockroaches in a nuclear apocalypse isn’t exactly a selling point, from my perspective. Nevertheless, coronavirus-panicked customers have been emptying store shelves of this (supposedly) tasty treat.
Even if TWNK stock doesn’t receive a boost from the crazed purchases, it’s still a recession play. In a slowing economy, people may shift their purchases of premium confections to cheap ones. Aside from the Twinkie, Hostess Brands feature plenty of inexpensive sugary delights. Like I said, it’s risky, but this is one of the recession-proof stocks with strong upside possibilities.
Brown-Forman (BF.B)
The name Brown-Forman (NYSE:BF.B) may not ring a bell for many folks. However, the company’s flagship product – Jack Daniel’s – certainly does. As a premium whiskey brand, by logical deduction, BF.B stock doesn’t immediately sound like a prime candidate among recession-proof stocks. And you might be right, which is why I’ve put this company last on my list.
Obviously, a huge source of anxiety is that European tariffs badly hurt BF.B stock. While President Donald Trump promised to put “America First,” the Louisville, Kentucky-headquartered firm hasn’t felt much love. Second, as I alluded to above, Jack Daniel’s isn’t exactly cheap.
However, the speculative side of my brain recognizes that generally speaking, when the economy goes down, drinking goes up. Of course, this is a very cynical play. But let’s face it: the imbibing is going to occur anyways. You might as well profit from it.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
