» Top Stocks to Invest in During a Recession

Top Stocks to Invest in During a Recession

By Talha Arshad Dar
— May 30, 2022
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As the stock markets tumble in 2022, we are once again staring at a potential economic recession, which is in part caused by the massive amounts of stimulus floating around the world. While central reserve banks around the world flex their muscles to try and contain this economic bombshell by hiking interest rates and such, it may well be out of their hands. But how does one invest in a market that is shedding so much value, so swiftly? Here we will present to you some of the stocks of industries that are generally unaffected by economic slumps and even post gains. These sectors have a history of doing so and are likely to perform well in the next recession as well. It is important to understand more about these stocks because as economists like to point out; the next recession is a case of when it will happen, not if.  Here are some of the top sectors whose stocks perform well during a recession:

Healthcare Companies

As we look at the performance of healthcare companies, it is clear that they are pretty shielded from a potential economic disaster. This is because even as the economy tanks, people still get sick and need medication. The unfortunate opioid crisis also rears its ugly head during this time of economic depression. Therefore, healthcare stocks often do exceptionally well during financial crises. For example, last time around in the 2008 Great Recession, Vertex Pharma saw its share price increase by 30.8%, Amgen Inc. by 24.3%, and Edwards Lifesciences Group by 19.5%. All three were in the top 10 performers in the S&P 500 in that crucial year.

Chain Stores

Major utility companies including megastores and discount outlets also perform extremely well during financially difficult times. This is primarily because they sell a lot of essential items, and their sales are generally impervious to economic collapses. Rather, they even increase as well as some people panic buy or hoard necessary items. Walmart stock grew 20% during the last major recession in 2008. Other similar companies like Costco, Carrefour, and others are also likely to thrive if they are around in the next recession.

Food Companies

The Coronavirus pandemic and the Russian intervention in Ukraine in 2022 have disrupted food supplies around the world in a significant manner. So much so that food is already close to double-digit inflation in the United States prior to any major financial trouble. This is why this time; the food sector is likely to pocket a lot of money in the next financial crisis. Last time around, there was no specific food company in the top 10 gainers, but it is likely to be so in the near future.
Bull and bear illustrating the different states of the stock market

Video Games

Video game creators have been raking in big bucks, especially in the aftermath of the Coronavirus pandemic. Their stocks shot to the moon, and it seems unreal just how much ground they have already made. But it is also true that in a recession, people tend to take their minds off of things and video gaming is just one of the ways in which they do it. The younger populace, especially millennials are interested in gaming not just for leisure alone but also for social connectivity as well as earnings.

Last time around, game creator Hasbro grew around 16.8% in 2008. Various other big players including Activision Blizzard entertainment, and Tencent are likely to perform really well this time around.

Entertainment

Cinema, streaming services, and online video portals are likely to have it big this time around. The reasons behind their bullish tendencies are similar to that of video games; people tend to take their minds off of things and entertain themselves during tough financial times. In addition, the rapid growth of this sector is also going to impact this segment of the market.

While this sector didn’t perform as well during the last major economic crisis in 2008, it did result in some serious movies and series that laid the foundation for great things to come. Iron Man (2008), The Dark Knight (2008), Game of Thrones (2010), and Breaking Bad (2008) were all classics that spawn right in the middle of it.

Another reason why production companies and streaming services are likely to do well is simply because of the advancement in technology. Back in 2008, video streaming was quite basic, and cinema was in the process of revival. But this time around, the sector is a financial beast that is cranking billion-dollar TV series and movies for fun. So, expect stocks like Walt Disney (the parent company of Marvel Studios), Sony, Netflix, Amazon Prime, and others to do extremely well during the next financial crisis.

 

Concluding…

The stock market can be a very brutal place when it comes to loss-making during an economic recession. Some stocks are known to drop as much as 90% during this time. However, that doesn’t mean that you can’t make money, even with the market down. All of the stocks we mentioned here are known to be bear market survivors but there are other factors involved. Diversification is the key here and that is where all investors should head to.

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