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Top U.S. Stocks That Usually Defy Gravity During Economic Slowdowns

Published 29/05/2023, 09:51
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  • The US economy's chances of entering a recession are on the rise
  • While the economy may or may not enter a recession, investors would be wise to add recession-resistant stocks to their portfolios
  • In this piece, we will discuss stocks that posted double-digit gains in the last 5 economic recessions
  • According to Factset, about 95% of the companies listed on S&P 500 have reported their results, and 78% of them have exceeded market expectations.

    Profits are down 2.2% compared to the first quarter of last year, but this is much better than the 6.6% drop that was expected. Moreover, all 11 sectors performed better than expected, with Tech dominating.

    This is good news, but we have to address the elephant in the room: a real recession.

    A recession is a negative change in gross domestic product for two consecutive quarters. The causes are linked to the fluctuation in inflation, which restricts households' purchasing power.

    However, it is not the same as an economic crisis. It refers to a prolonged period of instability that has long-term consequences.

    The economy goes through a significant downturn, which can be considered the intermediate point between a recession and an economic depression.

    And why am I saying there is a high probability of economic recession in the US?

    Because one of the most reliable tools used by the Federal Reserve Bank of New York, which analyzes the spread between 3-month and 10-year Treasury bond yields to predict the probability of a recession in the United States in the next 12 months, indicates so.

    Just recently, the 3-month and 10-year bonds experienced the largest yield curve inversion in more than 40 years. In the last 57 years, there have been 8 occasions in which the New York Federal Reserve recession indicator exceeded 40%.

    In that time, it has never been wrong, and at this time, it suggests a recession probability of 68.22%, the highest level in 42 years.

    Money Supply Growth

    Source: Venture Consulting

    So, investors are looking to ride out the recession with stocks that generally do well during recessions. This article will discuss stocks that have performed much better than the S&P 500 during the last 5 recessions.

    We are going to use the InvestingPro tool to analyze these stocks.

    Walmart

    Walmart (NYSE:WMT) performs well during recessions. When times are bad, people flock to establishments where they can buy almost anything at a lower price.

    Its shares have risen by +39.5% on average in the last 5 recessions (in 2007, they rose +1.12% when the S&P 500 plunged -38%).

    The company will distribute dividends on January 2.

    Walmart Dividend Payouts

    Source: InvestingPro

    The retailer reports earnings on August 17, which are expected to be better than the previous ones.

    Walmart Upcoming Earnings

    Source: InvestingPro

    According to InvestingPro, the average analyst target for the stock is $165.71.

    Walmart Analyst Targets

    Source: InvestingPro

    Walmart has 31 Buy ratings, 10 Hold, and 0 Sell.

    Walmart Pro News

    Source: InvestingPro

    Barclays maintains Walmart at 'overweight' with a price target of $162.

    Walmart Daily Chart

    Technically speaking, the stock could not break through the strong resistance at $153.69.

    Kroger

    Headquartered in Cincinnati, Kroger (NYSE:KR) has performed very well during the last 5 recessions, rising by 22.7% on average.

    Kroger Upcoming Earnings

    Source: InvestingPro

    On June 22, the retail giant will report earnings and is expected to report earnings per share (EPS) of $1.43.

    Kroger

    Source: InvestingPro

    InvestingPro models give it a potential target of $66.12.

    You can see the dividend yield history here:

    Kroger Dividend Yield History

    Source: InvestingPro

    Technically speaking, it has tried to overcome its resistance at $50.35 several times, but without any success.

    Kroger Daily Chart

    Other Stocks Doing Well During Recessions

    Here's a list of stocks that performed well during the past five recessions and their average yields. Check it out.

    • Analog Devices (NASDAQ:ADI) +21.8%.
    • Sherwin-Williams (NYSE:SHW) +20.1%
    • General Mills (NYSE:GIS) +16.8%
    • Hormel Foods (NYSE:HRL) +16,1%
    • Johnson & Johnson (NYSE:JNJ) +15.8%
    • Conagra Brands (NYSE:CAG) +15.6%
    • Campbell Soup (NYSE:CPB) +13%
    • W.W. Grainger Inc (NYSE:GWW) +11,7%
    • Kellogg (NYSE:K) +11.4%

    With InvestingPro, you can conveniently access comprehensive information and outlook on a company in one place, eliminating the need to gather data from multiple sources such as SEC filings, company websites, and market reports.

    In addition to analyst targets, InvestingPro provides a single-page view of complete information, saving you time and effort.

    Start your InvestingPro free 7-day trial now!

    Find All the Info you Need on InvestingPro!

    Disclaimer: This article was written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel, or recommendation to invest, nor is it intended to encourage the purchase of assets in any way.

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