What stocks should you invest in during a recession? A recession can be a challenging time for an investor, and the market is often beaten down. There can be opportunities, however. If you know where to look and know what typically does well during recessionary times you can protect your investments and even make gains.
The Whole Market
You will often be well served by simply investing in an index fund steadily over time. Even if you buy at the peak, you will still come out ahead in the long-term. History shows that to be true. Timing the market is nearly impossible, but if you steadily invest every month year after year, then it doesn’t matter what the current economic conditions are.
You should research any investment before investing. A recession makes this research that much more critical.
Typically, companies with strong balance sheets, a lot of liquidity, and flexibility will do well during a recession.
Companies in Sectors
If you desire to invest in individual stocks as opposed to the entire market, then below is a list of some names to consider. Certain sectors have historically done better during economic downturns. Here are a few to investigate.
Industries within the food and grocery sector often do well in a recession. People always need food and household items no matter how the economy is doing. Look at companies like Kroger(KR), General Mills(GIS), and Proctor & Gamble(PG). Fast Food chains such as McDonald’s(MCD) and Yum Brands(YUM) tend to be resilient as well, as consumers will shift away from more expensive dining options.
Next on the list are discount retailers. Consumers often shift their shopping habits during tough economic times and look for bargains. Names like Walmart(WMT), Dollar General(DG), and Dollar Tree(DLTR) have stood up well during past recessions.
DIY stocks are also a good place to look for investment opportunities. Consumers will often opt to do their own work and repairs when they want to save money. Names like Lowes(LOW), Home Depot(HD), and Auto Zone(AZO) are worth a look in this space.
Utilities such as electric providers, natural gas companies, waste collection, and water providers normally hold up well during recessions. People still need these basic services to keep their households running no matter then economic climate. A few names to check out here are First Energy(FE), Waste Management(WM), American Water Works(AWK), and Exxon Mobil(XOM).
Rounding out our list are healthcare companies. Healthcare is a must for people no matter the economy. Startups in this sector can suffer during a recession, but more established companies tend to be resilient. Names like CVS Health(CVS), Johnson & Johnson(JNJ), Pfizer(PFE), and HCA Healthcare(HCA) are worth your consideration.
Recessions Come and Go
What stocks should you invest in during a recession? Recessions are a normal part of the business cycle, and certain sectors and companies have shown to be resilient to them in the past. You could simply invest in an Index Fund and let the cycle ride itself out. But if you want to explore some individual names, then research names in sectors that have shown to be safe havens during times of economic downturns.
Sectors such as Food and Groceries, Discount Retailers, DIY related companies, Utilities, and Healthcare all tend to be a good place to look for companies that can ride out a recession. As always, do your research on any company before investing in it. Make sure the balance sheet is strong and future growth prospects look positive and realistic. Finally, stick to your plan once you have one. Don’t panic sell or try to time the market. You can ride out any recession with a solid plan and course of action.
Writer and Investor. Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.