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With the Russia-Ukraine war, global banking collapses, and trade tensions dominating the globe, researchers and economists feel that when a recession could hit significant economies in 2023 is not far. Investing in great recession-proof stocks could be a great play to hedge against this. JP Morgan’s Jamie Dimon warned of economic danger lurking around the corner as the debate to raise the debt ceiling continues to dominate markets.
From this CNN article: “Defaulting on the US debt would be “potentially catastrophic,” Dimon said Thursday.
““The closer you get to it, you will panic. Markets will get volatile; maybe the stock market will go down, the Treasury markets will have their problems,” he said. “This is not good.”
“Dimon also expressed concerns that US creditworthiness could be downgraded, as it was during the 2011 debt limit crisis.”
Apart from the debt ceiling debate, the US economy faces big headwinds regarding surged interest rates, relatively high inflation, and weak exports. Most businesses are operating in caution mode and are even refraining from inventory clutter and employee hiring.
During a recession or market instability, investors and traders seek out assets or equities to fortify their portfolios and minimize the risks associated with market downturns. Although investors typically enter the market to maximize profits, this may seem improbable during a recession. However, some stocks may still perform well during these times. Investors look for stocks with good returns regarding capital appreciation and dividends when investing in the stock market. They focus on profitable blue-chip companies and build diversified portfolios that include dividend stocks, small-cap funds, large-cap funds, earnings growth stocks, and hedge funds that can yield substantial returns. During a downturn, investment strategies shift from aggressive to cautious, and investors seek out stocks that can maintain their market capitalization if not provide significant returns.
Top 5 Recession-Proof Stocks That Could Combat a Slowdown Impact in Your Portfolio
Top 5 Best Recession-Proof Stocks You Need to Invest in June 2023
Walmart (NYSE: WMT)
Walmart, a well-known retail giant, has a history of performing exceptionally well during economic downturns. It has not only survived every recession since its inception but has even outperformed in some cases. The company’s low market volatility makes it an attractive investment choice during times of financial crisis. Additionally, Walmart has consistently increased its dividend payouts for the last 25 years, establishing itself as a “dividend aristocrat” with an impressive track record of dividend growth.
For Q4 FY2023, Walmart delivered strong revenue growth globally. Total revenue was $164 billion, up 7.3%. Total revenue for the year was $611.3 billion, up 6.7%. It generated $29.1 billion in operating cash flow and returned $16 billion to shareholders via repurchases and dividends. The company has a dividend yield of 1.49% and a target price of $164.78, a potential upside of over 7.5%.
This stock should be on every investor’s checklist because if invested for the long term, it historically rewards its shareholders with sweet returns irrespective of a bullish or bear market.
Abbott Laboratories (NYSE: ABT)
Abbott, a leading healthcare company, offers innovative medical solutions and a diverse range of life-changing products and devices. During the COVID-19 pandemic in 2020, pharmaceutical stocks gained widespread attention, and Abbott emerged as one of the top performers, providing commendable returns to investors. The company’s expansion into foreign markets has further strengthened its position in the industry, and is expected to become a healthcare giant. Abbott is also a favorite among investors for its substantial dividend payouts, earning it the “dividend king.” The company has offered 397 consecutive quarterly dividends since 1924 and has raised its dividend payouts yearly for the last 50 years.
Abbott’s financial results for the first quarter of 2023 demonstrate growth driven by its core business. The company exceeded analyst estimates, reporting global sales of $9.7 billion. Its medical devices sector experienced solid growth, while nutrition sales increased, and conventional pharmaceuticals showed growth. Additionally, Abbott received multiple approvals from the US FDA, further bolstering its performance during the quarter.
It has also projected full-year 2023 diluted earnings per share at $4.3 to 4.5. The stock has a target price of $124.87, a potential upside of over 13% from its May 12 closing price. With such projections and dividend payouts, this stock has the potential to combat the adverse effects of the recession and keep its shareholders happy even in hard times.
Thermo Fisher Scientific Inc. (NYSE: TMO)
Thermo Fisher Scientific, a US-based scientific instrumentation and software service provider, is an ideal investment option during a recession. With its low market volatility, excellent payout ratio, and history of solid performance, it could be a smart buy. The company is projected to grow by approximately 5% over the next five years and offers a generous dividend payout supported by strong fundamental analysis.
The company’s Q1 FY23 earnings release said despite a 9% decrease in revenue compared to the same quarter last year. The company delivered robust financial results during the first quarter. Core organic revenue growth was 6%, indicating a healthy performance. However, GAAP diluted EPS in the first quarter of 2023 declined to $3.32 from $5.61 in the same quarter last year. It launched a new line of scientific products. The company’s target price is $634.73, a potential upside of almost 21%.
Progressive Corporation (NYSE: PGR)
The Progressive Corporation is a household name in American families and insurance, and its combined solid ratio of approximately 95.8% makes it a formidable player. Insurance not only assures in times of risk, but investing in the equities of a reputable insurance company can also provide a sense of security.
In Q1 2023, Progressive Corporation reported revenue of $14.3 billion, representing a 21% increase from the same quarter in 2022. The company’s net income also increased substantially, reaching $440.6 million, a 43% jump from the previous year’s Q1. The profit margin improved from 2.6% in 1Q 2022 to 3.1% in Q1 2023, driven by the higher revenue. The company’s earnings per share (EPS) also increased, with Q1 2023 EPS at $0.75, up from $0.53 in Q1 2022.
Progressive is one stock that has consistently outperformed the S&P 500 during global recessions. The stock price target for Progressive is $148.47, a potential upside of over 11% from its May 12 closing price.
Costco Wholesale Corporation (NASDAQ: COST)
Costco Wholesale is a well-known brand that provides for almost every household need, but what sets it apart is its warehousing business. The company operates membership warehouses globally that offer significant cost savings to budget-conscious consumers, making it a preferred option during inflation. Moreover, the stock has a proven track record of resilience during economic downturns, with stable sales and favorable market capitalization. Costco reports its financials on a 52/53 weeks basis. In the fiscal second quarter that ended on February 2023, Costco reported growth in revenue of 7.3%, and diluted earnings per share grew at 8%. With positive net income, positive cash flows, and historical performance data in times of high inflation, this is one of the most sought-after stocks that is a haven for almost all kinds of investors in times of recession. Costco’s stock price has a target price of $548.13, a potential upside of almost 9% from its May 12 closing price.
Conclusion
In times of global uncertainty due to wars, layoffs, banking crises, and trade tensions, individuals seek safe investment options to safeguard their hard-earned money. Recession-proof stocks are a smart choice as they combat negative returns from market volatility and currency fluctuations. Investing in these stocks is crucial as we never know when a recession can hit the market. You must research and choose these stocks correctly.
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