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7 Stocks That Have Historically Done Well in a Recession



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There’s no such thing as a crystal ball when it comes to stock price forecasting. However, historically speaking, certain types of stock tend to perform better in different economic environments. As there has been talk of America heading into a recession in the second half of 2022, it’s a good time to examine what types of stocks typically do well during recessionary periods, at least on a relative basis.
Generally speaking, companies that are more defensive during economic slowdowns are those that provide goods and services that are essential parts of daily life, as they are usually the last to be cut out of a household budget during tough times. Here are a few of the stocks that have historically done well during a recession and that might hold up better than others if a recession were to take root in 2022.
Walmart (WMT)
When it comes to prior recessions, Walmart is the king. The stock has not just risen in each of the past five recessions, it has thrived, averaging a 39.5% return over those time periods. Considering the nature of the products Walmart sells and its drive to be the low-cost leader, it only makes sense that people continue to shop at Walmart even during recessions. People still need to buy groceries and home and personal necessities even in a bad economy, and with Walmart offering “always low prices,” it tends to outperform competitors that charge higher prices and/or have a less necessity-oriented product mix.
Johnson & Johnson (JNJ)
Just like Americans continue to spend on necessities like food during recessions, they also need to maintain their prescriptions. Personal care items such as sanitary napkins and bathing supplies also continue to be purchased. This makes a broad-based pharmaceutical and household products company like Johnson & Johnson more immune to the effects of a recession. In severe downdrafts, of course, even quality names like Johnson & Johnson can go down. In the carnage of the 2008 stock market selloff, for example, shares of J&J fell 21%. But on a relative basis, the shares were a star, as the broader market sold off by 54%. The company’s cash flow still remained intact, however, continuing its string of dividend increases that reached 60 consecutive years as of 2021. Overall, over the past five recessions, J&J stock has averaged a sparkling 15.8% return.
Pfizer (PFE)
Just like Johnson & Johnson, Pfizer has proven fairly resilient during past recessions and will likely do so in the future. Although Pfizer isn’t quite as diversified as Johnson & Johnson, the pharmaceutical giant also produces products that consumers tend to buy no matter what their financial situation. During the past five recessions, Pfizer has produced an average return of 16.9%, proving its historical resilience.
Coca-Cola (KO)
Coca-Cola has always been a defensive, durable brand. The company’s name and signature soda are found in countries throughout the world, and it has long had a durable, sustainable cash flow. Coca-Cola has paid a dividend for 60 straight years, and it has raised that dividend for more than 25 years in a row, even through recessions. But the company has also been working hard at diversifying its product line away from its core soda product and now offers more than 200 brands, including teas, coffees, kombucha, juices and even flavored alcoholic beverages. Coca-Cola has proven that it can generate consistent cash flow in a variety of economic environments, and its diversified portfolio of products that consumers love and tend to continue to buy even when times are tight should get it through any future recessions fairly well.
Lockheed Martin (LMT)
Lockheed Martin doesn’t fall into the category of offering consumers basic necessities like food, water or drugs. Rather, it sells what’s considered in government circles to be the very top priority in terms of national spending. As a defense contractor, Lockheed Martin designs and constructs everything from helicopters and radar systems to missiles and tactical aircraft. During fiscal year 2021, the U.S. government spent a whopping $754 billion on defense, comprising about 11% of the total federal budget. In 2021, Lockheed Martin received about $42.42 billion in revenue from the government alone. Even in times of national recession, the U.S. government tends to maintain or even increase its defense spending, as it did in 2009, when the federal defense budget increased by 7.5%. During the next recession, government spending on defense — and Lockheed Martin’s share — should also be secure.
Costco (COST)
Costco has proven resilient during prior recessions, and that may come as a bit of a surprise to some investors. The membership warehouse store actually charges its customers an annual fee just for the privilege of shopping in its stores, which seems like a discretionary expense that could be cut out when times are hard. But Costco’s membership rolls have actually increased during recessions, as its members are both fiercely loyal and value the chain’s low prices. In the first 11 months of 2009, for example, overall retail sales fell 11%, but those at warehouse and superstores grew by 2%. From the company’s perspective, a membership model both encourages more frequent visits from its customer base and allows it to earn razor-thin margins on its product line while still generating consistent and rising profits.
Kroger (KR)
Even during recessionary periods, Americans have to eat. While restaurant sales often suffer during recessions, grocery store sales tend to perk up. This simple reason for this is that grocery store food is cheaper than the cost of dining in a restaurant. Kroger is the largest grocery store chain by revenue in the U.S., and it’s the second-largest general retailer, behind only industry heavyweight Walmart. Thus, Kroger tends to get the lion’s share of grocery store purchases in any environment, including a recession. The stock has performed admirably in the most recent five recessions, returning an average of 22.7%.
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