U.S. interest rates are rising, and general economic conditions are becoming very difficult, making it possible that a recession will occur this year. So, investors are increasingly looking toward stocks that perform well during a recession.
These days, the stock market can be hit and miss, anywhere from going up 10% to crashing overnight. For that reason, it’s best to prepare for volatility, and take control of your financial future. We can do that with a handful of recession-resistant stocks, including these top 3 best recession stocks.
When times get tough, Americans rely on their local grocery stores and supermarkets to provide them with food. In a recession, these stores often raise their prices and offer only limited quantities of products. But this isn’t the case with Walmart (NYSE:WMT), which offers various products at low prices.
Walmart has been able to offer lower prices because it can buy from other retailers and then sell them at lower rates. This gives the retailer a greater selection of items and better customer deals. The company also offers special discounts for certain times, such as Black Friday or Christmas Eve.
Shoppers have been more focused on price lately, which has been good for Walmart’s bottom line. The company’s operating model allows for lower prices, which bodes well for sales since everyone is looking to save on things in this current economy. Revenue surged 9% in its latest quarter from the prior year due to increased customer traffic and spending.
In addition, Walmart has positioned itself to achieve sustainable earnings growth by integrating technology and automation into its business model. Walmart is well known for its high-margin, value-creating “flywheel” businesses. This should help offset the negative effects of major recessions on their near-term inventory of goods. The retailer is successful with this strategy and looks to have a solid future in the years ahead. Hence, when discussing recession stocks, you cannot ignore Walmart.
Home Depot (HD)
The pandemic boom for homebuilders was great, and low mortgage rates were a big reason why. After hawkish moves in 2022, it seems the Fed is now easing up. It raised interest rates by a smaller one-quarter percentage point on Feb. 1, and Chairman Jerome Powell. A reduction in interest rates will let companies like Home Depot (NYSE:HD) benefit from potential consumers eager to put their money into the housing market.
Home Depot’s business model is straightforward. Through its physical footprint of 2,319 stores and its online products, it offers a wide variety of tools to DIY and professional (or Pros) customers for home renovations. The usual DIY customers are people with skills who can work on smaller projects independently. Meanwhile, professional customers include contractors, electricians, and plumbers who build multifamily properties or commercial buildings.
Professionals are very important to companies like Home Depot. They account for about half of the company’s sales. This compares favorably with Lowe’s (NYSE:LOW), its main competitor, which makes just a quarter of its sales from this important customer segment. These customers are important because they visit stores more frequently and tend to make bigger purchases.
Home Depot understands this. It has developed a Pro loyalty program that works together to provide customers with all of the necessary aspects they need. They also provide attractive financing options, dedicated sales staff, and delivery networks. Due to these reasons and its expansive footprint, Home Depot has done well recently, with four consecutive earnings beats and no signs of slowing down. That is why among recession stocks, Home Depot holds a unique space.
Walt Disney (DIS)
Walt Disney (NYSE:DIS) is a company that has been around for almost 100 years. It was founded in 1923 and has survived and even thrived during the Great Depression, World War II, and the dot-com bubble.
The success of this company is because of its diversified business model. The company is not just a movie production studio or theme park operator; it is also a media conglomerate interested in publishing, music production and distribution, television broadcasting, cable networks, digital media distribution, and more.
Disney’s business model has allowed it to flourish despite the global recession of 2008-2009. This can be seen through its strong performance on both the stock market and revenue growth during this time.
Staying in high demand during various economic conditions, including a global pandemic, is impressive. Disney+ streaming subscriptions skyrocketed in 2020, proving a profitable venture for Disney even as its core businesses shut down.
Furthermore, with the return of iconic CEO Bob Iger, investors can expect much more financial discipline from the entertainment conglomerate moving forward. Disney shares rallied after Bob Iger’s reinstallation as the head of Disney. Like other influential CEOs, his presence on the board alone is enough to repose confidence in the company’s future.
On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.