It’s difficult to overstate how much damage our economy has incurred due to the novel coronavirus. According to the Bureau of Labor Statistics, we lost 20.5 million jobs in April, translating to a 14.7% unemployment rate. Not surprisingly, this is the worst month-to-month loss since the government started taking records in 1939. Although the markets have largely dismissed these stats, this unusual disconnect may not last. Therefore, it’s wise to at least prepare your ideas for recession-resistant stocks to buy.
As forward-looking indicators, the benchmark indices are anticipating positive news to overcome the bad. Dirk Hackbarth, Professor of Finance at the Boston University Questrom School of Business, states:
In a conservative estimate, Philadelphia Fed’s Harker predicted the U.S. economy could contract by 5% in 2020. As with the unprecedented unemployment growth, a lot depends on how much markets have anticipated in terms of depth and length of the downturn. Entering Q2, markets shrugged all bad news off and rallied in expectation of more government subsidies and availability of medical treatment of COVID-19, such as Gilead’s remdesivir.
However, it’s fair to point out that this thesis works both ways. If Wall Street has evidence that the economic crisis could last longer, we could see another drop. Thus, the case for stocks to buy for a prolonged recession is still strong.
Further, if you look at the details regarding the record-breaking job losses, you’ll notice that the majority of them are either in blue-collar work or limited-skill occupations. So far, white-collar jobs have been relatively insulated, in part because of their ability to operate remotely. But as the number of initial unemployment claims moves higher, this would suggest that more high-paying occupations are suffering. Therefore, I’d look into these stocks to buy since we’re still not out of the woods:
- Costco (NASDAQ:COST)
- Procter & Gamble (NYSE:PG)
- Kellogg (NYSE:K)
- Dollar General (NYSE:DG)
- Hershey (NYSE:HSY)
- O’Reilly Automotive (NASDAQ:ORLY)
- Allstate (NYSE:ALL)
- Robert Half International (NYSE:RHI)
- Anheuser Busch Inbev (NYSE:BUD)
- Altria Group (NYSE:MO)
No matter what, I believe that we’re heading toward a period of incredible austerity. But even if you don’t share my cautionary outlook, it’s better to be safe than sorry. Here are ten stocks to buy to make you rest a little easier.
A mad rush to the door is typically something that you’ll see during Black Friday. But when the Covid-19 pandemic first started to spread here, millions of Americans read between the lines. Soon, every day became Black Friday for Costco, which of course had positive implications for COST stock.
Of course, tailoring your operations based on a health crisis is no way to run a business. Therefore, some analysts are skeptical about the sustainability of so-called coronavirus stocks to buy. But this uncertainty shouldn’t dissuade you from COST stock because the underlying company was already resilient.
For one thing, Costco features a higher average shopper income relative to other big-box retailers, earning just over $100,000. These are the type of consumers who will feel the impact of a recession the least. Second, the warehouse giant is incredibly popular despite requiring a paid membership.
Therefore, you can ride Costco through thick and thin, making it one of the most robust stocks to buy.
Procter & Gamble (PG)
Years down the line, we’ll look back at the coronavirus pandemic and realize how silly we were. Covid-19 is neither a disease that effects bowels nor a cleaning one, yet at time of writing, shoppers still have difficulty finding toilet paper and paper towels.
I can’t think of any other time when such mundane household products have turned into goldmines. But that’s our new normal, and that happens to make the case for Procter & Gamble as one of the best stocks to buy in a recession.
Should we have a second wave of coronavirus – a sad event that scientists regard as a possibility – the paper products rush would likely lift PG stock. But even if we avoid this scenario, the underlying company would still be relevant.
Irrespective of whether we have a bull or bear market, people need to take care of themselves. Procter & Gamble products are among the most trusted household brands, affording PG stock resilience in any circumstance.
During the initial onset of the crisis, people rushed to buy whatever groceries they could. I would suggest to you that the smart ones bought food products that had long shelf lives. Sure, these aren’t the healthiest products you can eat, but they get the job done during quarantines. Based on this thesis, Kellogg is a viable candidate for stocks to buy.
As with Procter & Gamble, Kellogg solves a fundamental need; in this case, the need to eat. However, K stock hasn’t done so well in recent years. Shifting consumer trends among millennials eschewed quick, processed food over healthier fare. And that left Kellogg on the outside looking in.
Now, the situation is reversed. With meat shortages disrupting food supply chains, you can’t afford to be picky. As well, Kellogg’s Morningstar Farms is a play on the alternative protein craze, thanks to its Incogmeato brand. Given this sudden relevance, K stock would be a reliable buy during a recession.
Dollar General (DG)
During any economic downturn, the thesis for discount retailers as one of the better stocks to buy is a solid one. Should we suffer the Great Recession 2.0, I’m sure that Dollar General and DG stock would weather the storm. At least, they have a better chance of staying in the game longer than other retail entities.
First, you must consider the stark reality that the present job losses have disproportionately impacted the most vulnerable. Thus, these are the folks who will shop at Dollar General to get whatever savings they can. Second, a possible wave of white-collar workers will join them next, bolstering the idea of DG stock.
Finally, the coronavirus stimulus bill will go a long way to helping many households sustain themselves. Should another round of stimulus arrive, I expect discount retailers to benefit the most. Therefore, keep close tabs on DG as a prime candidate for stocks to buy.
If we fall into a recession, boring but stable food stocks to buy represent an easy place to park your money. But candy maker Hershey? Though perhaps not the most intuitive choice for a recession-resistant investment, HSY stock is a play on consumer psychology.
Even in a downturn, people find ways to entertain themselves or to present gifts to others. A recession probably won’t change that sentiment. What will change is the price people are willing to pay. While I don’t see consumers forking over top dollar for Godiva, I can easily see them buying Hershey-branded chocolate products.
Admittedly, this narrative hasn’t worked out for HSY stock, with shares in the red for this year. However, that could change later, especially if investors start anticipating the worst.
O’Reilly Automotive (ORLY)
Despite having a compelling case for stocks to buy in a recession, O’Reilly Automotive is nevertheless a speculative idea. Thus, it’s no surprise that ORLY stock has been all over the map. A major reason is that millennials aren’t as interested in cars as older generations. And that translates to they not knowing how to perform basic maintenance on cars.
However, it’s difficult to avoid car ownership in certain parts of the country. To get around, such as in southern California, a vehicle is a must. However, in a recession, it’s all about driving the same car until the wheels fall off. And that could help drive the bullish argument for ORLY stock.
But what about the lack of know how? With social media and video platforms, there’s never been a better time to learn!
Insurance is a tricky subject, especially in a recession. On one hand, the need to stay protected doesn’t go away because of troubles in the economy. On the other hand, certain insurance products, such as health insurance, can be prohibitively expensive. But in this cloudy segment, Allstate offers a clear proposition as one of the stocks to buy.
As you know, Allstate offers auto insurance among its many services. What makes this type of insurance more pertinent than others is that the chances of you being involved in a vehicular accident is much higher than, say, contracting Covid-19. Thus, the premium you pay makes rational economic sense, supporting the idea of ALL stock.
Moreover, traffic accidents plummeted during the quarantines because of fewer cars on the road. That lower-than-normal volume might continue in a prolonged recession. This would allow Allstate to potentially offer discounts to new members, which would then translate to a higher ALL stock price.
Robert Half International (RHI)
Up until early this year, it was a job-seeker’s market. So much so that a new phenomenon called ghosting popped up in the workplace. Actually, this concept is nothing new – it’s the millennial’s term for standing someone up. But that this would occur in a job interview setting was shocking for many people.
Now, the tables have turned and that could see Robert Half International rise in prominence. An employment agency, Robert Half specializes in connecting qualified candidates with prospective employers. However, RHI stock tumbled in March as the stay-at-home orders began, forcing companies to cancel their recruitment processes.
But once we get past this pandemic, RHI stock should see upside momentum. With millions out of work, not even high-brow white-collar workers will even consider ghosting anyone. This paradigm shift is a strong reason to consider Robert Half as one of the long-term stocks to buy.
Anheuser Busch Inbev (BUD)
As the name implies, recessions aren’t the greatest seasons to live through. But if you’re a cynical investor, such phases offer incredible opportunity. Economic downturns – especially when combined with a pandemic – cause stress. And when people are stressed, they turn to vices, a common one being alcohol. Right there, you have the case for Anheuser Busch Inbev as one of your recession-resistant stocks to buy.
Further, Anheuser Busch specializes in cheap beer, which was already a popular American staple. This dynamic will only accelerate, given that many households are cash-strapped but are also seeking a stronger form of escapism. Like I said, it’s terribly cynical, but the outlook for BUD stock is positive if we suffer a recession.
If you want additional evidence, according to research firm Nielsen, U.S. alcoholic beverages sales jumped 55% in the week ending March 21. When things get bad, vice pays. Thus, keep BUD stock on your must-watch list.
Altria Group (MO)
The coronavirus has not only taken the wind out of the economy, it has also affected the collective psyche. Of course, the destruction of the labor market doesn’t help. Without work, people start to lose their identity. When that happens, many turn to coping mechanisms such as cigarettes. Though another one of my terribly cynical ideas for stocks to buy, I can’t help but notice that this environment finally favors Altria Group.
For several years, cigarettes have fallen out of favor, especially among younger consumers. Additionally, the burgeoning vaporizer sector stole significant market share. As a result, MO stock has sharply declined.
But during this unprecedented crisis, demand for vice products and services have skyrocketed. For millions, nothing satisfies more than taking a deep draw from a cigarette. Certainly, MO stock won’t ever come across as a “feel-good” investment. But when times are rough, Altria might give your portfolio the lift it needs.
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 is long MO stock.