In this article, we will be looking at the 10 best recession-proof stocks to buy now. To skip our detailed analysis on the latest probability of recession, click to see 5 Best Recession-Proof Stocks to Buy Now.
Is A Recession On The Horizon?
On June 6, CNBC's 'Squawk on the Street' hosted Jan Hatzius, the Chief Economist and Head of Global Investment Research at Goldman Sachs, who had been brought in after Goldman lowered the US recession probability multiple put forth by the bank. The cut brought the multiple down by 10%, from 35% to 25%. Hatzius claimed that there were two reasons behind this move. First, he explained that prior to the Silicon Valley Bank's collapse, Goldman Sachs' recession multiple had been 25%. It was only increased because of the expected impact of the banking crisis on the US economy, and while professionals at Goldman still felt that the crisis would continue to impact the economy, they can size it at around "40 basis points off-of growth," in Hatzius' words. According to Hatzius, this was the main reason behind Goldman's decision to lower the recession probability multiple in June. He added that a secondary reason behind the move was the fact that the debt ceiling deal had had little impact on American fiscal policy.
While the above report seems to offer a cause for celebration, as the interview with Hatzius shows, this wasn't the whole story. Bulls in the market today are optimistic about the inflationary environment in the US, believing that the Federal Reserve will not be raising any more rates any time soon. At the same time, the bears are in opposition, believing that the Fed may have some more rate hikes up its sleeve even now. When Hatzius was asked about his opinion on this conundrum, he revealed that he was being cautiously optimistic about potential rate hikes. He did add that one of the concessions made by professionals over at Goldman before they lowered their recession probability multiple was that there would likely be another rate hike. However, Hatzius sees this hike coming in July, giving the economy some room to breathe through June.
Industries To Pick In The Event Of A Recession
While Hatzius and others at Goldman Sachs seem to be more optimistic on the matter of whether the US will see a recession in 2023 or not, there are many others who cannot help but think otherwise. For those individuals, investing in recession-proof stocks now can be vital. While deciding which stocks would count as 'recession-proof,' many investors can get confused. To avoid this, the best way to begin a search for these stocks is to learn from the past. Our article on stocks that did well during the 2008 financial crisis can be a helpful place to start, as it takes the reader through a range of stocks in various industries that have proven their resilience in the face of a recession already. They include top-tier companies similar to Abbott Laboratories (NYSE:ABT), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), among many others. The examples of these three companies can give you a hint as to which industries have historically done well during a recession. Consumer staples, utilities, healthcare, streaming, discount store, and even fast food stocks all have a record of positive performance during recessions. Commodities like gold are yet another category of recession-proof stocks because when all else fails, gold stays up.
While it is definitely a good idea to be prepared for anything the economy might throw at you, it's also important to keep in mind what professionals in the financial world are talking about. Bearish sentiment is now being beaten back by the bulls who see a more positive economic future on the horizon. In an earlier interview on CNBC's 'Squawk on the Street,' for instance, Goldman's Hatzius noted that the US jobs report from May had signaled strength and resilience as far as the economy was concerned. He believed that in light of the strong progress demonstrated by the labor markets through May, there was enough cause for believing that the US economy was far from being on the brink of a recession. According to CNBC, the May jobs report boasted the 29th straight month of growth for the labor market. If this optimism pays off, the US economy may be able to make it through 2023 without a recession, but no one can tell for sure if this will be the case.
Considering the rampant insecurity and uncertainty relating to the economy today, we have compiled a list of some of the best recession-proof stocks to invest in today. As mentioned above, while professionals like Hatzius feel inclined to think positively, the paranoia resounding throughout the US markets cannot be countered just yet, making now the perfect time to begin considering safe investments.
10 Best Recession-Proof Stocks to Buy Now
Source:Pixabay
Our Methodology
We used Insider Monkey's hedge fund data for the first quarter, when 943 hedge funds were tracked, to pick the most popular recession-proof stocks among smart money investors. These stocks are from recession-proof industries like utilities, consumer staples, healthcare, and communication services industries. Most of these industries perform well during recessions, based on historical records. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.
Utilities are a must-have in any recession-proof portfolio, so Sempra (NYSE:SRE), a multi-utility company based in San Diego, California, is on our list.
The company's revenue in the first quarter of 2023 was $6.56 billion, up 71.73% year-over-year. Sempra (NYSE:SRE) also beat revenue estimates for the quarter by $2.61 billion.
Holding 542,285 shares, Adage Capital Management was the largest shareholder in Sempra (NYSE:SRE) at the end of the first quarter.
About 31 hedge funds were long Sempra (NYSE:SRE) in the first quarter, with a total stake value of $401 million.
Sempra (NYSE:SRE), like Abbott Laboratories (NYSE:ABT), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), is likely to be a smart recession-proof stock.
The J.M. Smucker Company (NYSE:SJM) is a manufacturer of branded food and beverage products. This consumer staples stock is based in Orrville, Ohio, and can be a valuable addition to a recession-proof portfolio.
The stock is up by 18.29% over the past year as of June 6.
Cody Ross at UBS holds a Neutral rating on The J.M. Smucker Company (NYSE:SJM) as of May 31, alongside a $157 price target.
The J.M. Smucker Company (NYSE:SJM) was spotted in the portfolios of 33 hedge funds in the first quarter. Their total stake value was $798 million.
Gold is an investment that can never go wrong, especially not during a recession. This is why we've picked Barrick Gold Corporation (NYSE:GOLD), a gold producer based in Toronto, Canada.
There were 41 hedge funds long Barrick Gold Corporation (NYSE:GOLD) in the first quarter, with a total stake value of $763 million.
On April 21, Barclays raised the firm's price target on There were 41 hedge funds long Barrick Gold Corporation (NYSE:GOLD) in the first quarter, with a total stake value of $763 million. from $26 to $28, alongside reiterating an Overweight rating on the stock.
At the end of the first quarter, First Eagle Investment Management was the largest shareholder in Barrick Gold Corporation (NYSE:GOLD), holding 42.3 million shares in the company.
When a recession hits, consumer staples stocks like alcoholic beverage producers tend to fare well. As such, we've selected Constellation Brands, Inc. (NYSE:STZ), a New York-based alcoholic beverage producer.
In the fiscal fourth quarter, Constellation Brands, Inc. (NYSE:STZ) delivered an earnings beat with a $1.98 EPS, beating estimates by $0.14.
Analysts at Goldman Sachs have a Buy rating and a $264 price target on Constellation Brands, Inc. (NYSE:STZ) shares as of May 30.
Our hedge fund data for the first quarter shows Constellation Brands, Inc. (NYSE:STZ) among the 13F holdings of 41 hedge funds, with a total stake value of $771 million.
Discount stores like the Dollar General Corporation (NYSE:DG) are bound to do well in times of recession when consumers are trying to cut costs. The company is based in Goodlettsville, Tennessee.
Citadel Investment Group was the most prominent shareholder in Dollar General Corporation (NYSE:DG) at the end of the first quarter, holding 1.6 million shares in the company.
Bobby Griffin at Raymond James holds a Strong Buy rating and a $200 price target on Dollar General Corporation (NYSE:DG) as of June 2.
In total, 53 hedge funds were long Dollar General Corporation (NYSE:DG) in the first quarter. Their total stake value was $1.7 billion.
“Dollar General Corporation (NYSE:DG shares underperformed on a rotation out of more defensive consumer names at the start of the year despite growing concerns of a slowdown in the economy and the coinciding effects on consumer spending. During the first quarter, Dollar General reported solid comps, as their core lower-income consumer remained resilient despite rising inflation.”
Dollar General Corporation (NYSE:DG), like Abbott Laboratories (NYSE:ABT), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), is a recession-proof stock hedge funds are piling into today.
