Whoever coined the expression that patience is a virtue probably never invested money in the equity markets. It can be excruciating to see a stock's price plummet. And that's particularly true when the stock was possibly at all-time highs just one year ago.
Here's the good news. In some cases, the reasons you liked the stock still exist. If that's true, then there's reason to believe that the stock price may recover.
The bad news is there's no way to know for sure when that will be. And anyone who says they do is not telling you the truth.
So what's an investor to do? We believe the answer is to be selective. And right now that means looking at best-in-class stocks that are built to ride out recessions.
In this special presentation, we'll give you seven stocks to consider as you look for safe stocks that give you an opportunity for growth and that pay a dividend for good measure. Here are the 7 recession-proof stocks that will let you wait out this bear market.
Quick Links
- Walmart
- McDonald’s
- General Mills
- PepsiCo
- Cardinal Health
- Deere & Co.
- Exelon
- Lowes
- Abbott Laboratories
- Raytheon
#1 - Walmart (NYSE:WMT)
Leading off my list of recession-proof stocks is Walmart (NYSE:WMT). I knew that Walmart was effectively competing in the e-commerce space. But I was still surprised to learn that Walmart.com gets up to 100 million unique visitors each month. Clearly, Walmart is more than just a brick-and-mortar retailer. In fact, it’s become a formidable competitor of Amazon (NASDAQ:AMZN) in certain areas.
As further evidence of this, the company recently announced the launch of its InHome Delivery Service. This new service allows the company to deliver groceries straight to a customer’s refrigerator. And it allows the company to have a tiered membership plan inside of Walmart+. The basic plan is now $12.95 a month and the add-on service costs an additional $7 month.
Prospective investors will have to wrestle with the company’s 26X price-to-earnings (P/E) ratio against a forecast for just over 8% earnings growth. But analysts are forecasting a 25% upside for the stock. And with a dividend that has grown for 49 years, investors are likely to be well rewarded.
About Walmart
Walmart Inc engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; ecommerce websites, such as walmart.com.mx, walmart.ca, flipkart.com, PhonePe and other sites; and mobile commerce applications.
Read More - Current Price
- $92.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 29 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $93.69 (1.6% Upside)
#2 - McDonald’s (NYSE:MCD)
My next pick for a recession-proof stock is McDonald’s (NYSE:MCD). And like Walmart, a good part of the story has to do with the company’s digital transformation. Even prior to the pandemic, McDonald’s was working to expand its online and mobile ordering through its app. The fast-food giant was also in the process of transforming the dine-in experience with kiosks that allow customers to skip the counter when placing their order.
All of those turned out to be great investments during the pandemic and will likely fuel the company’s growth. And as Sam Quirke pointed out to MarketBeat readers, since the beginning of April MCD stock managed to post a small gain even as its benchmark index, the S&P 500 Index fell over 20%.
Plus, like Walmart, McDonald’s is a dividend aristocrat having raised its dividend for 46 years. The company currently has an annualized payout of $5.52 and a dividend yield of 2.18%.
About McDonald's
McDonald's Corporation operates and franchises restaurants under the McDonald's brand in the United States and internationally. It offers food and beverages, including hamburgers and cheeseburgers, various chicken sandwiches, fries, shakes, desserts, sundaes, cookies, pies, soft drinks, coffee, and other beverages; and full or limited breakfast, as well as sells various other products during limited-time promotions.
Read More - Current Price
- $292.68
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $320.65 (9.6% Upside)
#3 - General Mills (NYSE:GIS)
I give my MarketBeat colleague Thomas Hughes credit for pointing me in the direction of General Mills (NYSE:GIS). In a recent article for MarketBeat, Hughes points out that General Mills delivered a stellar earnings report. But it wasn’t just the numbers the company delivered, it was the guidance. And the company increased its dividend by more than expected.
Analysts will have even more good news to consider since the company updated their forward EPS guidance. The company is now saying that they are projecting EPS to be between $3.94 and $4.06.
GIS stock is up 12% in the year. And with the company’s emphasis on providing the essentials, and brands, that many families crave, the company is well positioned for revenue and earnings growth in the future.
About General Mills
General Mills, Inc manufactures and markets branded consumer foods worldwide. The company operates through four segments: North America Retail; International; Pet; and North America Foodservice. It offers grain, ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, bakery flour, frozen pizza and pizza snacks, snack bars, fruit and savory snacks, ice cream and frozen desserts, unbaked and fully baked frozen dough products, frozen hot snacks, ethnic meals, side dish mixes, frozen breakfast and entrees, nutrition bars, and frozen and shelf-stable vegetables.
Read More - Current Price
- $63.61
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 12 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $71.56 (12.5% Upside)
#4 - PepsiCo (NASDAQ:PEP)
It’s been a roller coaster ride for PepsiCo (NASDAQ:PEP) in 2022. The stock is basically flat but the consensus opinion of analysts is that PEP stock has a 4% upside. And the analyst firm Barclays recently maintained its overweight rating on the stock with a price target of $183.
There are expectations for a “profit recession” and analysts adjusting their prices down. So the fact that analysts are raising their price targets and maintaining a buy rating shouldn’t be overlooked. Plus, the company is a recognized leader in the beverages industry. And, unlike some of its rivals, PepsiCo generates significant revenue from its Frito-Lay division.
In a recession, there are many things that consumers will do without. But their salty snacks and sugary drinks will generally not be among them.
About PepsiCo
PepsiCo, Inc engages in the manufacture, marketing, distribution, and sale of various beverages and convenient foods worldwide. The company operates through seven segments: Frito-Lay North America; Quaker Foods North America; PepsiCo Beverages North America; Latin America; Europe; Africa, Middle East and South Asia; and Asia Pacific, Australia and New Zealand and China Region.
Read More - Current Price
- $152.79
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 9 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $184.31 (20.6% Upside)
#5 - Cardinal Health (NYSE:CAH)
Healthcare is historically one of the purest of all the defensive sectors. Individuals still need their medications and demand for healthcare services doesn’t stop. Cardinal Health (NYSE:CAH) is an integrated health care provider with a pharmaceutical and a medical division. This helps the company capitalize on both areas of the demand equation.
CAH stock is up 18.8% since the onset of the pandemic in 2020, but arguably if you’re looking for growth you need a pretty wide lens. The company was named as a defendant in the nation’s first lawsuit that went to trial regarding the U.S. opioid addiction epidemic. A year after closing arguments, the company is still awaiting a verdict and it’s also dealing with higher input costs related to inflation.
But with Cardinal Health, investors will get paid a respectable dividend that the company has increased for the last 36 years making it a dividend aristocrat. And the stock is also trailing at an attractive 8x earnings.
About Cardinal Health
Cardinal Health, Inc operates as a healthcare services and products company in the United States, Canada, Europe, Asia, and internationally. It provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home.
Read More - Current Price
- $118.28
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $127.50 (7.8% Upside)
#6 - Deere & Co. (NYSE:DE)
It’s been a rough year for shareholders of Deere & Co. (NYSE:DE). Normally a stock known for the same reliability of its signature green machines, the stock has been anything but predictable. As of this writing, DE stock is down 11% for the year and the primary reason seems to be that analysts are concerned about the company’s results and, more importantly, its guidance.
I’ve been all over the map when it comes to DE stock, and I won’t pretend to have all the answers now. But I do now that farmers will need to maximize the efficiency of harvesting their crops particularly in areas of the country that are struggling under drought conditions. As I wrote in March, “Deere is trying to address the need to feed a growing population at a time when there is less available land for farming. And there are fewer farmers to do the work.”
DE stock trades at approximately 15x earnings which is down from around 20x earnings in March and analysts currently give the stock an upside of approximately 37% which suggests the sell-off may be nearly over.
About Deere & Company
Deere & Company engages in the manufacture and distribution of various equipment worldwide. The company operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. The Production and Precision Agriculture segment provides large and medium tractors, combines, cotton pickers and strippers, sugarcane harvesters and loaders, harvesting front-end equipment, pull-behind scrapers, and tillage and seeding equipment, as well as application equipment, including sprayers and nutrient management, and soil preparation machinery for grain growers.
Read More - Current Price
- $432.49
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 13 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $443.94 (2.6% Upside)
#7 - Exelon (NASDAQ:EXC)
Another one of our recession-proof stocks on our list is from the energy sector. And that’s a good reason to look at Exelon (NASDAQ: EXC), the largest utility company in the United States. People will still need to cool and heat their homes and Exelon has a geographic reach that includes over 10 million customers.
However, another reason to believe in Exelon is that the company is truly a play in the “all of the above” approach to energy production. The company owns nuclear, wind, hydroelectric, biomass, and solar generating facilities.
EXC stock is up 38% in the trailing twelve months ending July 7, 2022. And the company recently received a buy recommendation from Bank of America (NYSE: BAC) who gave the stock a $54 price target while saying, “We still see the core Exelon regulated utilities as attractively valued and defensively positioned. Exelon increasingly represents a defensive utility at a reasonable valuation.”
About Exelon
Exelon Corporation, a utility services holding company, engages in the energy distribution and transmission businesses in the United States and Canada. The company is involved in the purchase and regulated retail sale of electricity and natural gas, transmission and distribution of electricity, and distribution of natural gas to retail customers.
Read More - Current Price
- $37.02
- Consensus Rating
- Hold
- Ratings Breakdown
- 4 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $42.00 (13.5% Upside)
#8 - Lowes (NYSE:LOW)
At the time of this writing, Lowe’s (NYSE: LOW) stock is down 27% in 2022. That’s not surprising because few investors expected the housing market to stay as red-hot as it was in 2020 and 2021. However, in the month ending July 18, 2022, LOW stock is up 8%.
There’s a simple reason to explain this apparent contradiction. Home improvement stocks perform well when the housing market is strong. However, they also tend to beat the market even when the housing market weakens. Those are the conditions we’re looking for when identifying recession-proof stocks to own.
Analysts have been lowering their price targets for Lowe’s in the past month. However, the consensus targets still give LOW stock a 28% gain from its current level. And that doesn’t include the company’s dividend. In May 2022, the company increased its quarterly dividend to $1.05 per share. That makes it 48 consecutive years of dividend increases for the home improvement giant.
About Lowe's Companies
Lowe's Companies, Inc, together with its subsidiaries, operates as a home improvement retailer in the United States. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating. It also provides home improvement products, such as appliances, seasonal and outdoor living, lawn and garden, lumber, kitchens and bath, tools, paint, millwork, hardware, flooring, rough plumbing, building materials, décor, and electrical.
Read More - Current Price
- $247.72
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 16 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $280.85 (13.4% Upside)
#9 - Abbott Laboratories (NYSE:ABT)
Abbott Laboratories (NYSE: ABT) is down 30% after hitting its all-time high at the end of December 2021. The narrative seems to be that investors are expecting the company’s pandemic-inspired growth to be coming to an end. However, that wasn’t the case when the company reported earnings in April. And analysts tracked by MarketBeatsuggest that the company will see a year-over-year EPS gain of 8% in the second quarter.
We believe that’s a more likely outcome. Abbott operates in four distinct verticals that give it multiple ways to generate revenue. Of particular interest is the company’s medical devices sector which includes products geared towards the treatment and management of diabetes. The consensus price target for ABT stock shows a gain of nearly 25%. And in December 2021, Abbott joined the exclusive Dividend Kings club by raising its dividend for the 50th consecutive year.
About Abbott Laboratories
Abbott Laboratories, together with its subsidiaries, discovers, develops, manufactures, and sells health care products worldwide. It operates in four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. The company provides generic pharmaceuticals for the treatment of pancreatic exocrine insufficiency, irritable bowel syndrome or biliary spasm, intrahepatic cholestasis or depressive symptoms, gynecological disorder, hormone replacement therapy, dyslipidemia, hypertension, hypothyroidism, Ménière's disease and vestibular vertigo, pain, fever, inflammation, and migraine, as well as provides anti-infective clarithromycin, influenza vaccine, and products to regulate physiological rhythm of the colon.
Read More - Current Price
- $114.23
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $130.71 (14.4% Upside)
#10 - Raytheon (NYSE:RTX)
When investors think about defensive stocks, the defense industry comes to mind. There are several quality stocks in this sector. But we’ll give a nod to Raytheon (NYSE: RTX). The five-year trajectory for earnings and revenue are bullish. And the company’s forward price-to-earnings of around 15X looks pretty compelling at the moment.
Similar to Lowe’s and Abbott Laboratories, analysts give Raytheon a consensus price target that suggests stock price growth of over 20%. But what’s different for Raytheon is that those price targets are being increased in the past few months. Considering forecasts for a profits recession, that’s a compelling reason to look at RTX stock.
And like many stocks on this list, Raytheon also offers a reliable dividend that it has increased in each of the last 20 years. And with free cash flow now above 2019 levels, the company should have no problem paying the dividend going forward.
About RTX
RTX Corporation, an aerospace and defense company, provides systems and services for the commercial, military, and government customers in the United States and internationally. It operates through three segments: Collins Aerospace, Pratt & Whitney, and Raytheon. The Collins Aerospace Systems segment offers aerospace and defense products, and aftermarket service solutions for civil and military aircraft manufacturers and commercial airlines, as well as regional, business, and general aviation, defense, and commercial space operations.
Read More - Current Price
- $116.48
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $177.93 (52.8% Upside)
Timing the market falls into the category of “it was easy everybody would do it." Even the most experienced market analysts avoid calling tops and bottoms. It's simply not a viable investing strategy.
And while conviction is an important attribute to have as an investor, being heroic doesn't have to mean putting new money into falling stocks during times of volatility. That doesn't mean you should sell your losses. But it could mean keeping your position size in losing stocks the same while looking to deploy new capital into better opportunities.
And there are always opportunities. In this presentation, we've given you seven stocks to consider investing as you ride out the current bear market. And just as importantly, we've given you some concepts to consider as you perform your own due diligence. That is look for companies that will always have products that are in demand; seek out companies that have strong fundamentals; and enjoy the benefit of getting paid a dividend just for holding a company's stock.
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