What Are the Best Recession Proof Stocks?

Most people reading this will have already lived through several economic recessions, and in all likelihood experience more. A recession is a natural part of the ebb and flow of an economy. Unfortunately, nobody likes to see what it does to their stock portfolio. But what if you could add some recession-proof stocks to your investments?

15 Recession Proof Stocks

1. Walmart
2. Lowes
3. Target
4. Apple
5. Adobe
6. O’Reilly Auto Parts
7. Coca-Cola
8. Wells Fargo
9. Johnson & Johnson
10. Kroger
11. AT&T
12. Royal Dutch Shell
13. NextEra Energy
14. Dollar Tree
15. Molson Coors Beverage

Stocks are still the most popular asset class when it comes to investments. Of course, there are also things like real estate, gold, and now crypto, but any financial advisor will tell you that a diversified asset allocation is the best way to avoid the fallout of a market crash or great recession. For most retail investors, though, the stock market is the easiest way to invest their cash.

Stocks are often touted as passive income, but this is mostly true for investors who are playing Wall Street for dividend growth. An investor who chases after dividend yield will find that their stocks are recession proof investments because even if the stock price goes down in the economic downturn of a bear market, the dividend stocks in their investment portfolio will continue to generate cash flow.

In addition to this passive income stream, investors can also choose to invest in a recession proof industry or industries. Looking at past recessions, you can see that these defensive stock picks did not get hammered as much as some more discretionary areas in consumer spending. It’s easy to use common sense to figure out what these areas might be by considering your own spending habits. When times are lean, you still need food, and you still need items like soap, toothpaste, and toilet paper. These are called consumer staples. You don’t need items like a plane ticket or  a weekly restaurant binge. These are discretionary items.

Should You Invest During a Recession?

A recession is actually the best time to invest in stocks. Think of it like this: would you rather pay $25 for your favorite takeout place, or $50? When the economy is good, stock prices soar. When the economy is bad, stock prices tank.

Many consumers let fear take over and avoid buying stocks when the price is down—or worse, they sell off what stocks they have. This is the opposite of sound business advice, which (as you probably know) is buy low and sell high. When a recession hits the economy, even recession-proof stocks can take a dip. And when stocks dip, that’s when you should be buying.

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15 Recession Proof Stocks

1. Walmart

Walmart has more than 4,700 stores across the United States. This international retailer offers consumers staples through its big box business model, marketing itself as a place for discounted and reasonably priced goods. It is actually the largest company in the world in terms of revenue according to Forbes. Because Walmart sells so many different items, it’s going to do well in any economy, but in recessions where consumers are looking for discounts, it will do especially well.

2. Lowes

Lowes sells home improvement materials to consumers and contractors. In a recession, many home improvement projects will become DIY ventures, meaning sales increase. Moreover, the price of the materials can also rise, which means in turn that Lowes could see increased cash flow.

The quarantines and lockdowns of the Covid Pandemic have seen a surge in DIY activity, as homeowners and renters try to transform the spaces where they’re quarantined.

3. Target

Target is another big box retailer, but one that targets their marketing to a more specific group than the catch-all approach of Walmart. In their own words, Target’s appeal is directed to a more urban group of millennial consumers shopping for cheap-chic. Because the consumer staples they sell are discounted, and their in-house apparel and home goods brands are cheaper than boutique options, Target is appealing to consumers year-round, but especially when they are looking to stretch the power of their dollars.

4. Apple

Have you met anyone without a smartphone? Apple doesn’t have a total monopoly over the smartphone market, but among tech companies, they certainly have a sizable market share—one that is even increasing over time; from 39 percent in 2019 to 46 percent in 2020.

Part of this is Apple’s dedication to consumer products with curb appeal, such as their phones, tablets, and personal computers. But even in a recession, consumers are not willing to part with personal electronics, especially because they afford avenues of entertainment and provide a wide range of necessary services.

5. Adobe

Adobe is a software company headquartered in San Jose, California that makes software for the creative industry; think photography, illustration, graphic design, architecture, and engineering.

As these services are mostly inseparable from modern day life (and a necessity for most businesses), Adobe can weather the storms of a recession economy fairly well. Over the last 10 years its stock has seen incredible growth, going from less than $30 to more than $650.

6. O’Reilly Auto Parts

This may seem like a strange one, but O’Reilly Auto Parts has also seen steady growth over the last 10 years, going from around $40 in 2010 to well over $600 today.

At the time of this article, they have almost 5k stores across the United States, selling car parts both directly to consumers and servicing auto repair shops. Even if and when the car landscape shifts to green energy sources, it’s unavoidable that individual consumers and body shops will need parts to service their vehicles. And even in recessions, people still need vehicles to get around.

7. Coca-Cola

Fewer securities can beat consumer staples when it comes to steady growth over time and/or beating the market during a recession. This is because, quite simply, people need to eat.

Coca-Cola is one of the oldest and most established companies in the food business, serving consumers directly with several lines of food and beverage products. While restaurant businesses may take a dip in a slower economy, edible and drinkable consumer staples don’t take such a hit, because (again) people need food.

8. Wells Fargo

People need banking services as well.  And while the banking sector, in general, is a very stable investment, Wells Fargo particularly a great buy.

Wells Fargo is one of the largest consumer-facing banks in the nation, and also one of the largest mortgage lien holders. Their overall diversification in consumer checking and lending means that they have a sizable control of the market, as most consumers tend to conduct their financial activity through their bank. Banking stocks are also very conservatively priced, and typically have a great dividend payout—which means they are a great investment for riding out a recession.

9. Johnson & Johnson

In addition to food, consumer staples include things like toiletries and medicine. Since Johnson & Johnson manufactures both (and both are necessities people cannot do without during a recession), their stock is poised to do well even when the market dips.

Johnson & Johnson is another one of those stocks that does well over time and pays great dividends, making it a must in your portfolio if you are on the long term side of trading vs investing.

10. Kroger

Kroger is one of the largest grocery retail chains in the country, and certainly the largest one in the Midwest. As mentioned, restaurant stocks do not always do well in a recession because people don’t have extra disposable income to eat out. But they do still need food, so they tend divert that money to grocery retailers, like Kroger.

11. AT&T

There are a handful of large telecom companies in the United States, and AT&T is one of them. At the time of this article, AT&T was also one of the few that pays regular dividends. As telecom companies handle communications networks for phone, TV, and internet, (services consumers tend to hang onto, even in a recession), utility stocks, like AT&T, are poised to do well.

12. Royal Dutch Shell

You might be surprised to see a gas company on this list, but Royal Dutch Shell is one company that does consistently well. This is because oil companies like Royal Dutch Shell are often hedged against losses through other investments of their own. Moreover, they can do well in a recession when gas prices go up at the pump. This is one way you can get ahead of the curve in recessions where fuel prices are on the rise—investing in the companies that distribute fuel.

13. Amazon

With the advent of the Covid Pandemic, Amazon stock seemed to be headed (in the words of r/wallstreetbets) “for the moon.” It makes sense: people quarantined in their homes can’t do much shopping outside of their computer, phone, or tablet. That’s where Amazon comes into play.

In fact, Amazon’s market share is quickly on the rise, poised to eclipse similarly large retailers like Walmart. Since Amazon stock is so expensive (more than $3k per share at the time of this article) you might think it’s out of your price range, but you can still get in on the action by micro investing through a trading app that lets you purchase fractional shares.

14. Dollar Tree

Dollar Tree is a chain of stores that once focused on items that could be purchased for less than one dollar, but in recent years they have branched out to discounted consumer staples.

As this business model is particularly appealing to individuals on a budget, Dollar Tree is one stock that’s poised to do well in a recession with continued cash flow. It shows too, with stock priced more than $200 per share at the time of this article.

15. Molson Coors Beverage

As unsavory as it sounds, you can always count on gambling, alcohol, and cigarettes to do well—even during a recession. Beer stocks did take a slight hit when quarantines shut off the taps in bars and restaurants, but consumers do not give up their vices easily.

The Molson Coors Beverage company owns the Miller and Coors brands of beer, along with many other craft and international breweries. And while you might be reluctant to invest too much of your money into beer stocks, you can always test the waters by investing fractional shares through one of the best trading apps.

Recessions Are an Opportunity to Invest When Prices Are Low

A recession is a great time to invest in stocks because prices often dip. Moreover, there are some stocks that won’t be as negatively impacted by a recession. While consumer discretionary stocks (entertainment, restaurant, travel) do tend to dip during times where people have less money to spend, consumer staples—including banking, telecom, and healthcare—all continue to stay strong.

If you have additional questions about recession-proof stock investing strategies, we invite you to join the Infinity Investing financial experts at our Weekly Stock Investing Room. Can’t wait to see you there!

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