Recessions are an inevitable part of the financial cycle. While the thought of market downturns can be nerve-wracking for investors, there are ways to fortify your portfolio. Recession-proof stocks can offer a layer of stability during times of economic hardship.
These companies tend to provide essential goods and services that remain in demand, even when the economy weakens. Additionally, they also tend to have strong balance sheets and proven track records of performance over long time periods. By strategically incorporating recession-proof stocks into an investment portfolio, investors can mitigate risks and maintain stable returns even amidst market volatility.
Now, let’s discover the best recession-proof stocks for ultimate portfolio protection in 2024!
Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway (NYSE:BRK-A, BRK-B), led by the legendary investor Warren Buffett, stands out as a unique holding company. Unlike traditional companies, Berkshire Hathaway owns a diverse portfolio of subsidiaries across various industries including insurance, utilities, and consumer goods.
One of the primary reasons Berkshire Hathaway is recession-resistant lies in its wide array of subsidiaries and investments spanning various industries. From insurance giants like Gieco to consumer brands like Duracell and Dairy Queen that tend to perform well regardless of economic conditions. Buffett’s disciplined capital allocation approach, patience, and focus on strong management teams provides a solid foundation for long term growth and stability.
Furthermore, Berkshire Hathaway’s substantial cash reserves provide a significant buffer during times of economic uncertainty. They are currently sitting on a record cash pile of approximately $167.6 billion, reflected in their 2023 annual report. This liquidity enables them to capitalize on opportunities, while hedging against macroeconomic risks in the broader economy. As history has shown, Berkshire’s strategy has proven successful and their continued resilience make it a worthy steward in any investment portfolio.
Walmart (WMT)
Walmart (NYSE:WMT) is currently the largest company in the world by revenue. They have cemented their place as a retail giant, offering consumers everyday essentials at consistently low prices.
Walmart’s diverse product offerings include groceries, household essentials, apparel, electronics, and more. This one stop shop coupled with low prices makes their value proposition become even more appealing to consumers. Furthermore, their wide moat, pricing power and shift to e-commerce makes it extremely difficult for their competitors.
Inflation and food prices have been a killer for consumers over the past 24 months. That is where Walmart comes in, saving consumers thousands of dollars per year. In Q4 FY24, Walmart delivered strong operational results with global e-commerce sales up 23%, surpassing $100 billion for the year. The company hiked their annual dividend by 9%, as key growth metrics drove cash flows and profitability. There are few companies of Walmart size, brand loyalty, and dominance, and CEO Doug McMillion is focused on driving down prices in FY25.
Coca-Cola (KO)
Coca-Cola (NYSE:KO) is a formidable choice for investors seeking recession-proof stocks to protect their portfolios from downside risks. The company’s unparalleled brand loyalty has cultivated a strong emotional connection with consumers across the globe.
Founded more than a century ago, Coca-Cola boasts a global presence with operations spanning 200 countries. This broad footprint not only mitigates risks associated with regional economies, but also positions the company to capitalize on the growth of emerging markets. Moreover, the company maintains a strong focus on cost management and innovation.
In FY23, Coca-Cola demonstrated its strong pricing power capabilities with operating margins of 24.7%. Net income for the year increased 12% to $10.7 billion, with EPS up 13% to $2.47 per share. CEO James Quincey remains optimistic on the company’s growth trajectory to drive profitable growth in 2024. This makes Coca-Cola one of the best recession-proof stocks to snap up for the long term.
On the date of publication, Terel Miles 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.
