SPECIAL REPORT The Top 7 Stocks for 2024

How to Recession-Proof Your Portfolio: 7 Top Picks


  • Franco-Nevada (FNV): FNV shares approach gold as a differentiated offering. 
  • Newmont (NEM): Newmont is a clear buy as shareholders agree to Newcrest acquisition. 
  • Altria (MO): If Altria’s dividend wasn’t enough of an enticement, its vice status should be. 
  • Keep reading for more stocks that will recession-proof your portfolio!
Stocks for a Recession - How to Recession-Proof Your Portfolio: 7 Top Picks

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As the economy still looks wobbly, it might be time to start looking for stocks for a recession.

One positive aspect of investing in stocks during a recession is that there is a lot of data from which to derive a strategy. So, when picking stocks for a recession, remember economic cycles are natural and occur with regular frequency.

Human nature leads us to analyze negative outcomes in order to minimize the damage when they recur. 

That’s as true of the stock market as it is of natural disasters. The U.S. has experienced 48 recessions in its history.

Investors have a lot of data and trends from which to draw. Thus, it’s very possible to minimize economic adversity when you buy stocks for a recession.

The best stocks for a recession include gold, consumer staples, shares in firms that satisfy vices, and other assets that perform well in a downturn. 

Franco-Nevada (FNV) 

A pile of shining gold bars. Gold stocks
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Franco-Nevada (NYSE:FNV) is one of hundreds of gold stocks that investors are bound to consider as recession fears abound.

Gold has long been associated with downside protection while offering upside. Investors lose trust in trust in fiat currencies during recessions and that leads them back to gold which has tangible qualities that paper lacks. 

The thinking then, is that investing in gold mining firms and those that produce the precious metal is a wise decision. It is.

However, Franco-Nevada is a differentiated investment in gold because it doesn’t engage in mining. Instead, the company is a royalty and streaming firm. It finances mining firms that produce gold and other royalty bearing streams. 

The company has no debt and $2.3 billion in available capital per its June 30 earnings report. It doesn’t have as much hit-or-miss volatility as investors will find with traditional mining firms.

It provides diversified exposure to gold and is usually among the leading holdings in gold ETFs which also make sense to explore. 

Newmont (NEM) 

Newmont logo on a mobile phone screen
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Newmont (NYSE:NEM) is a gold mining stock. The firm produced more gold than any other globally in 2022. Although I mentioned that gold production can be relatively hit-or-miss just above, Newmont isn’t risky. 

It is sheltered by its scale and it has just gotten bigger. In May, Newmont announced that it had agreed to purchase Newcrest, an Australian gold and copper miner for $17.5 billion.

On Oct. 11, shareholders overwhelmingly approved the acquisition. It is the largest ever deal in the space and makes Newmont that much more attractive as markets begin to tilt in favor of it as an asset. 

The deal is expected to result in $2 billion of cash improvements over 24 months and $500 million in pre-tax value during the same period.

Aside from the clear improvement, it should also be noted that Newmont also strengthened its position as a copper mining firm in the transaction. Copper should grow sharply as the world’s connectivity rapidly increases due to its utility as the best conductor. 

Altria (MO) 

a sign with the Altria (MO) logo
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Altria (NYSE:MO) is a play on the fact that people up their intake of vices during recessions.

The cigarette stock is pivoting toward a greater reliance on smokeless products. Cigarettes still dominate. Regardless, Altria offers nicotine delivery and that’s important because as the stress of a recession mounts, people increasingly turn to nicotine to ease their nerves.  

That’s the most obvious broad catalyst that favors Altria overall. That said, Altria doesn’t necessarily need recession catalysts to push it into ‘buy’ territory. Its shares have been attractive throughout 2023.

MO shares include a high-yield dividend above 9% which hasn’t been reduced since 1970. The company is among the dividend kings, those which haven’t reduced their dividends for 50 years. It’s a great form of income for investors with the added ability to really thrive as smoking ticks up as a recession nears. 

Beyond that, Altria carries a beta of 0.69 meaning it is much less volatile and less prone to broader market swings. 

Dollar General (DG) 

Dollar General (DG) store front with yellow store sign, midday
Source: Jonathan Weiss / Shutterstock.com

There are two big reasons to believe in Dollar General (NYSE:DG) stock moving forward. 

One, the broader truth that discount-priced consumer staples perform well in a downturn. There’s no place better than Dollar General to find a select variety of consumer goods at the cheapest prices. Put simply, those prices draw a larger and larger number of consumers in a downturn pushing earnings and sales higher. 

However, Dollar General had been suffering in 2023 as sales growth slowed and profitability fell. Investor sentiment has shifted dramatically in recent news. That brings me to my second reason to invest in Dollar General. 

The firm is bringing former CEO Todd Vasos back on board to lead the company back to its former strength. Vasos led Dollar General from 2015 to November of 2022.

As soon as he left, share prices fell from $230 and rapidly continued to lose value. They’ve popped from $100 to $110 on the news. Vasos can create massive value for shareholders and those who buy in now can seize the opportunity. 

Constellation Brands (STZ) 

Three bottles of Corona beer are arranged in a bowl with ice.
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Constellation Brands (NYSE:STZ) is another vice stock that stands to benefit investors during a recession. It is one of the largest alcohol brands globally and alcohol sales rise during recessions. 

Constellation Brands owns a portfolio of beer, wine, and spirits brands and an ongoing, hands-off stake in Canopy Growth (NASDAQ:CGC). Perhaps Constellation Brands owns Modelo. 

Modelo famously overtook Bud Light as America’s top beer earlier this year after Bud Light leveraged transgender influencer Dylan Mulvaney as a spokesperson. Bud Light’s misstep has paved a golden path for Constellation Brands.

Second quarter beer sales jumped 12% and Modelo continues to have a huge opportunity in front of it. Erstwhile Bud Light drinkers may never have even heard of Modelo.

Its brand ambassadors simply have to go out into the great big U.S., drink some beer, talk about the border wall and trasngender folks, and Modelo and STZ shares will be set to fly much higher than they could have anticipated at the beginning of the year. 

Walmart (WMT) 

Walmart (WMT) logo on a store front
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Walmart (NYSE:WMT) is, in general, a bellwether of the U.S. economy. It’s also a consumer staple stock and the largest retailer globally.

It provides a huge selection of the goods consumers buy throughout the business cycle at low prices. Those factors insulate the firm and its shareholders from the worst effects of recessions. 

As I mentioned, Walmart acts as a barometer of the economy. From that perspective, it’s unclear whether a recession is impending. Second quarter sales were relatively strong, increasing by 5.7%, eCommerce growth was strong, and that led the company to increase guidance for 2023. 

Make no mistake, consumers are feeling the pinch and market volatility remains elevated. It’s just that based on Walmart’s performance a recession looks less than imminent.

Q2 earnings were released in mid-August, though, and a lot has changed since. Suffice it to say, a recession may occur. If it does, Walmart will continue to make sense. If one doesn’t, Walmart will continue to make sense. 

NextEra Energy (NEE)

Nextra Energy (NEE) website on a mobile phone screen
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NextEra Energy (NYSE:NEE) is a utilities stock. Utilities, underscored by very predictable earnings, are excellent recession-proofing for portfolios. 

That said, the bond market’s recent performance has muddled the picture.  Yields have risen to highs not seen since 2007. Utilities are attractive for their low-risk income as modest yield dividends, have taken a back seat as yields flirt with the 5% threshold. 

NextEra Energy remains a utilities stock at its heart. That will matter because it continues to offer a strong dividend, more price appreciation potential than bonds, and a unique mix of businesses that has strong secular prospects.

Each segment of its business, Florida Power & Light and NextEra Energy Resources (NEER)  are the largest respective global entities within their niches. Overall growth  continues to be very strong for NextEra Energy.

I think the market has overreacted to bonds momentarily and will swing back toward utilities for several reasons, recession proofing among them. 

On the date of publication, Alex Sirois did not have (either 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.


Article printed from InvestorPlace Media, https://investorplace.com/2023/10/how-to-recession-proof-your-portfolio-7-top-picks/.

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