Wed, May 23, 2012, 12:37 AM EDT - U.S. Markets open in 8 hrs 53 mins

4 Recession Resilient Stocks to Ride Out the Storm

We're in a recession. You can debate that if you like, but at this point it won't make any difference. The economy stinks, it's getting worse, and it's time to move out of denial and try to heal your portfolio.

Friend of Breakout Simon Baker from Baker Ave Asset Management joined me to explore stock ideas for those not yet so disgusted and afraid of equities that they're clutching their knees against their chest and weeping. The dapper Brit shared four counter-cyclical ideas for those who "really want to own equities."

Still with us, would-be equity owner? Good. Here are Baker's picks with a quick and dirty breakdown:

McDonald's (MCD): My favorite stock of all-time (which I own), Micky-D's recently boosted their dividend by 15%, giving them a yield over 3%. Baker's Price Target: $100; Stop-Loss: $80

Philip Morris International (PM): An attractive combination of defensiveness, earnings growth, and a yield over 4%. Baker's Price Target: $77; Stop Loss: $64

Dollar Tree (DLTR): $325 million in free cash flow, an absurdly good chart, and a business model perfect for a struggling economy. Baker's Price Target: $90; Stop-Loss: $69

Autozone (AZO): A chain of auto supply stores that plays to consumers fixing their cars versus buying new ones. Earnings growth of 28% last quarter and $1 billion in free cash flow. Baker's Price Target: $360; Stop Loss $300

They may not be sexy, at least until you pull up the chart, but that's sort of the point. These are plug and chugger companies churning out strong earnings even in this economy. As always, the ideas are launching points for your own research. In these economic times reading up on these four companies is nothing short of uplifting.

Breakout Asks

Do you think Facebook (FB) will end this year above or below its IPO price of $38 a share?

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  • Yes, FB will recover
  • No, FB is too unstable
 

44 comments

  • mike  •  8 months ago
    I would also add Coca-Cola to this list.
    • Cougarlover28 8 months ago
      McDonalds stands out to me because their food is more expensive than getting a months worth of groceries. But I could see how you would want to add Coke to the list since most everyone who goes there orders coke. BUT...most people who decided to cook their own food are ditching soda for substitutes like juice.
    • Calgonman 8 months ago
      Coke's a good stock but I'd take Pepsi (just downgraded by an anal-ist, 9/23/11) pays better dividend, is more diversified with it's snack food segment and Quaker foods and Tropicana juices brands.
    • thad 8 months ago
      Why not own both as part of any core holdings...PEP & KO are both great companies in any portfolio dividend growth portfolio.
  • jeffintucson  •  7 months ago
    Ron Paul gets 7 thumbs down? That's one reason why I left. Go vote in a fascist Repub or a commie dem. You will get a strongman though who will trample rights. Ron Paul and those who follow the constitution as our forefathers laid it out are the last great hope. It's too late I am afraid. Oh the counter argument is America always pulls through. Germans said that in 1933 but it took 12 years of hell before they did. Welcome to hell my fellow Americans. You're going to find out how most of the rest of the world lives then WWIII. Don't take my word for it though. Turn off the tv and start reading history and for god's sake think for yourself...no MSNBC, FOX etc...

    Retired military officer living abroad
  • TS  •  8 months ago
    I think I just head a large popping sound over in the silver market . . .
    • Macke 8 months ago
      Just a brutal week for commodities. Strong dollar and slow economy... a one-two in the kisser.

      - Macke
    • frankmargel.com 8 months ago
      LMFAO! Gotcha!
    • frankmargel.com 8 months ago
      Macke, I predict a major bubble will emerge, it's food! No kidding, what's your take? Thanks!
  • patriot 2  •  7 months ago
    brass and lead, don't eat much and might be handy to have around
  • Obiwan48  •  7 months ago
    4 recession resistant proof stocks?
    I'm sure there are many others that will hold up rather well (if the economy sinks).
    That only leaves about 12000+ other stocks that will tank if we hit a recession.
    Nice, warm fuzzy feeling.
    Thanks goodness there's buy and hold until the politicians with there banking buddies can straighten the economy out.
    Whew!... that's a comfort to know, I was starting to get some frown lines from all the disturbing headlines.
  • Flashy  •  7 months ago
    I have always been an income investor and hold much of what Thad suggests and then some. Switched everything into ING's Sharebuilder Had this been a normal downturn, I would be in with both hands buying more and looking forward to retirement with a nice income created by my "wise" investing. However, this is not your grandpa's recession. We never had $15 trillion in debt. We are headed towards a major catastrophe. Dividends will be cut, prices will plunge and our dollar will be next to worthless. As a result, I am beginning to diversify into reverse ETF's, phisical gold and silver, a few baskets of foreign currency as well as keeping maybe 12 core dividend holdings. MLP's especially, This is NOT part of a normal cycle. Those who tell us to "ride it out" like we have done in the past are going to be swept away. Sad to say.
  • Brian_Penncsc  •  8 months ago
    PM has already triggered his $64 stop loss on Friday, so I guess its down to 3 stocks to ride out the bear market with... lol
  • wl  •  8 months ago
    The 5th most resiliant holding is called cash money!
    • Calvin D 8 months ago
      no its not. usd is facing inflation like there's no tomorrow.
    • wl 8 months ago
      cat voted for NOBAMA
  • David  •  8 months ago
    only game in town.
  • thad  •  8 months ago
    This is why people loose money. Listening to pundits that don't understand the first thing about investing in dividend growth stocks known has buy and hold forever and live off the dividends. This is what your core holdings should look like:

    PG
    CLX
    CL
    JNJ
    GIS
    K
    MCD
    CVX
    PM
    XOM
    PEP
    KO
    HSY
    HNZ
    ED
    D
    EMR
    etc...
    • M5 7 months ago
      Good one! Boom. I like direct purchase no load with DRIPs. When the yield goes to 6-7%, I increase my purchases. Less so, in the current range of 3-4%. I am in XOM, MDU, JPM and HE. Would like to diversify a little more, but I hate paying fees..
  • A Yahoo! User  •  8 months ago
    I am not an expert by a long shot. That being said, I am mostly sitting on the sidelines for now. Maybe from now on. I do own MCD and have a stop sell order in all of the time. As it edges up, move the stop up. Bought Wendy's. Who knows, could be a turn around. Own oil. Other than that, corporate bonds.
  • Peter  •  8 months ago
    PM stop loss at $64? Well shucks, it's already a loss.
    • ryan 8 months ago
      ya, that is exactly what i was thinking, what a worthless suggestion
    • quantumenig 8 months ago
      Good dividend and overseas arm. It'll ratchet back up nearing ex date..........good time to buy.
  • JOE WOO  •  8 months ago
    Wait until October 19 th. Beige Book report , till then it's all " smoke n' mirrors "
  • abc  •  8 months ago
    if you really want to ride out the storm, get out of stocks all the way. it's not worth trying to find winners during a storm. if you insist on trying to make money in a bear market, you might as well just focus on the big losers and either short or buy some puts.
  • Et tu Brute  •  8 months ago
    Smith and Wesson would top my list.
  • Jack  •  8 months ago
    not to rain on Simon's parade, but have you looked at AZO's balance sheet?
    They have financed all their growth with DEBT. You have NEGATIVE EQUITY as a shareholder.
    300billion, and they just borrowed another 200 million with the OK for another 200 million.
    while yes their buybacks have caused the stock to go higher so Eddie can sell out with a profit,
    the long-term is BAD. When the debts come due and buybacks stop, stock plummets.
    Plus NO DIVIDEND. And finally, this was the play in 2009-10, to think it does it again is folly.
  • paul  •  7 months ago
    Great picks...... My question beyond stocks is: "Which country is the most solvent that has it's own currency? Which currency stands to benefit most from everyone else's excesses?"
  • Rock Solid Truth  •  8 months ago
    There is one thing also that you can count on......data costs across the board will be going up. All smartphone carriers, all internet providers......will be congruently and price fixing concurrently....raising fees. As we move to the cloud, start streaming all content...getting hogged out by Facebook traffic and new collision problems.....the guys who own the tollroads will be in a position to control the sxpansion. For the loss of cable subscribers as their customers stream over IP......the losses will have to be offset by increased internet access fees. Same with satelite....becuase the content will come through IP rather than satelite TV. Facebook growth is ultimately going to be contolled by wireless and hardwire providers...no question. You can't do it without a connection.......and noone seems to see this. Facebook becomes "not free" very quickly once the providers decide to jack the monthly price of access. The first step was to ax unlimited data plans. Next.....price increases.....to cover build out for exponential traffic from Facebbok, Netflix, Amazon, and all the other new cloud demnds. Verizon, Time Warner, Comcast, Dish, Direct...all good long bets. AT+T questionable. Level 3 exceptional.
  • frankmargel.com  •  8 months ago
    Right on Jeff! Now you are talking! Thumbs way up! Have a great weekend! Frank out!
  • Stock Wizard  •  8 months ago
    Maybe this article should have been posted a couple of weeks earlier.

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