7 recession-proof actions to batten down the hatches


As fears grow over a global economic downturn, investors should consider recession-proof stocks to batten down the hatches. Fundamentally, one of the biggest concerns cited by analysts is money supply tightening by global central banks. Reduced liquidity almost certainly signals deflation if left unchecked, resulting in reduced trading activity. This is going to be a killer for growth-oriented investments.

On the other hand, it may open up a cynical opportunity for so-called recession-proof stocks. These companies usually command well-established and relevant business models that meet overriding needs. They are not the sexiest market ideas and therefore do not offer extreme growth potential. However, they can offer reliability and stability, which can be higher given the circumstances.

On the contrary, your portfolio must be protected from the vagaries of the current market cycle. Also, in the event of currency fluctuations, recession-proof stocks could protect your wealth. Therefore, every investor should at least consider the background ideas below.

KO Coca Cola $60.52
KR Kroger $47.83
HD Home deposit $314.91
PG Procter & Gamble $141.74
RPG progressive $125.91
FIVE five below $149.77
IRI Robert Demi $76.88

Coca-Cola (KO)

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One of the most iconic brands in American commerce, Coca Cola (NYSE:KO) offers a classic example of buying recession-proof stocks. In the aftermath of the Great Recession, many analysts cited KO as a name investors can trust. No, it’s not the most exciting business in the world. However, the brand is integrated into the social fabric.

For me, Coca-Cola generates a lot of value and trust because of its cheap narrative. During decidedly bullish economic cycles, consumers usually won’t hesitate to walk into their local coffee shop franchise to order an overpriced cup of Joe. However, with recessionary forces at play, consumers need to tighten their belts. This will benefit Coca-Cola.

Financially, investors can rely on KO’s solid profitability indicators. For example, its net margin stands at 23.4%, above more than 94% of its competitors. In addition, the company has a return on equity (ROE) of almost 43%. In contrast, the industry median is only 10.7%.

Kroger (KR)

Kroger Supermarket (KR).  The Kroger Co. is one of the largest grocery retailers in the world.

Source: Eric Glenn / Shutterstock.com

Basically, the story of Kroger (NYSE:KR) as one of the recession-proof stocks to buy is selling. It’s a cynical subject but let’s be realistic. Humans need a minimum caloric intake. No calories and liquids and you won’t go too far in life. Therefore, households have no choice but to sacrifice everything else before cutting the grocery budget.

Another factor that contributes to making KR one of the recession-proof stocks to put on your radar is the downside trading effect. During a bull market, people feel good about themselves. Thus, they could treat themselves (and offer their loved ones) refined dinners. However, with the specter of a global recession looming, these fancy dinners are becoming take-out. Then this category boils down to microwave dinners.

You get the point. Plus, Kroger likes some schemers financial measures. For example, its ROE is nearly 26%, reflecting quality business. Moreover, its price-to-sales ratio is 0.24 times, lower than the industry median of 0.5 times.

Home Depot

an interior view of a house attic under construction

Source: ronstik / Shutterstock.com

A reliable company when circumstances go wrong, Home deposit (NYSE:HD) happens to be built for economic and literal storms. Additionally, the organization has proven its benefit to the public, staying open longer than most other businesses during the initial wave of the coronavirus pandemic. Frankly, I don’t think Home Depot gets enough credit for this gesture.

Today, as one of the recession-proof stocks to buy, Home Depot benefits from cynical realities. Basically, Murphy’s Law doesn’t care whether a recession is underway or not. Sometimes it seems like Murphy’s Law becomes more important when a recession or other crisis materializes. While it’s not a panacea for all mishaps, you can count on Home Depot to carry the products that will get you out of your particular jam.

Financially, investors will likely be very encouraged by the company’s income statement metrics. More specifically, his operating and net margins 15.3% and 10.9%, respectively, rank among the elite of the underlying sector.

Procter & Gamble (PG)

Procter & Gamble Union Distribution Center.  P&G is an American multinational consumer goods company

Source: Jonathan Weiss/Shutterstock.com

A relatively easy-to-buy choice for recession-proof stocks, Procter & Gamble (NYSE:PG) benefits from an indelible economic model. Making several household items, Procter & Gamble combines relevance (meeting basic needs) and brand awareness. To be fair, consumers can opt for generic alternatives. However, the circumstances will have to be truly dire before it comes to that.

Interestingly, however, PG’s dull nature as one of the recession-proof stocks hasn’t spared it volatility. So far this year, stocks have fallen nearly 14% in net worth. It’s not too far from the reference S&P500, which lost almost 17%. However, PG has been gaining momentum recently, gaining more than 2% in the past five days. It was also up more than 10% over the previous month.

Financially, the company benefits from reasonable balance sheet stability. For example, his Altman’s Z-score is 5.23, reflecting a very low risk of bankruptcy. Also, it has strong profitability metrics such as an 18% net margin which stands above nearly 92% of the competition.

Progressive (PGR)

ROOT Stock - Man holding car insurance

Source: Jirsak / Shutterstock.com

Representing the leading commercial automobile insurer in the United States, progressive (NYSE:RPG) enjoys significant brand awareness. Thanks to its memorable fictional salesman character Flo, Progressive has established itself in auto insurance. And that’s important because it allows the company to bolster other recession-proof stocks in this insurance sub-segment.

While this is a cynical talking point, we have to face the reality: Progressive enjoys a hostage audience. According to the company’s website, each state in the Union requires car insurance except New Hampshire. Even then, those who decide not to be covered must meet the state’s financial responsibility requirements. Honestly, it’s better to get car insurance.

Another cynical argument for PGR as one of the recession-proof stocks to buy? This is becomes more dangerous there on American roads. Although you can’t control what other people do, you can at least protect yourself. Since everyone has learned a lesson that things can happen at any time, PGR makes a great case for itself.

Five under (FIVE)

Friends sit on ledge with shopping bags after shopping in retail stores.

Source: Rawpixel.com/Shutterstock

Should an economic downturn materialize, investors will want to target five below (NASDAQ:FIVE) as one of the recession-proof stocks to buy. It comes down to the downward trade effect. When financial pressures materialize, consumers naturally begin to tighten up their spending habits. However, they do not go from one extreme to the other. On the contrary, they gradually reduce their expenses.

Deep down, that’s what I love about Five Below. Unlike a pure discount store, Five Below mainly offers products at $5 or less. Additionally, the company offers a small selection of products ranging from $6 to $25, allowing consumers more choice. It also means the stores have a more upscale vibe which can definitely help the shopping experience.

Financially, Gurufocus.com argues that Five Below represents a slightly undervalued investment. Backed by a fairly stable balance sheet, Five Below is showing excellent revenue growth and profit margins that rank first in the industry.

Robert Half (RHI)

An image of someone using a laptop on a whiteboard with

Source: TierneyMJ / Shutterstock

To be clear, the inclusion of Robert Demi (NYSE:IRI) as one of the recession-proof stocks is likely to stir controversy. As an employment agency, there is an argument that Robert Half and his cronies are stealing the herd. After all, job seekers can apply directly for the positions they want. And with employers seemingly desperate for workers, RHI seems out of place.

However, the research process quality workers is a major problem. Plus, so many things can go wrong if a company hires an unqualified person for the job. Additionally, you have other factors (such as personality incompatibilities) that can cloud an organization’s vibe. For the sake of efficiency, many companies outsource the hassle of hiring to professional recruitment agencies.

Also, keep the current circumstances in mind. As the Fed continues to attack the inflation rate with higher interest rates, the strategy is having a major effect. Several companies, especially those related to big technologies, are implementing big layoffs. Cynically, then, Robert Half could see an influx of demand, making RHI one of the recession-proof stocks to consider.

As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided critical and unique insights to investment markets, as well as various other industries including law, construction management and healthcare.


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