7 Safe-Haven Stocks to Protect Your Portfolio During a Recession
Why bother talking about safe-haven stocks for a recession when we already dodged that bullet last year? Tell me you haven’t seen a Friday the 13th movie without telling me. Any horror film aficionado knows that if you ever survive the maniacal clutches of Jason Voorhees, it ain’t over until the credits roll. Till then, you should probably avoid any bodies of water.
It’s the same principle with so-called recession stocks. No one’s hoping for an economic downturn – I think we’ve all had our fair share of drama. It’s time for some positives in life. Unfortunately, some datapoints suggest we’re not out of the woods yet. For example, the consumer price index demonstrated that inflation came in a bit higher than expected.
Also, the December jobs report printed a number above analysts’ consensus. While that’s good from an employment standpoint, it also means that more dollars are chasing after fewer goods. As well, the housing affordability index shows that fewer households earning the median income are able to qualify for a mortgage on a median-priced home.
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Put another way, certain positive figures such as wage growth haven’t resulted in holistic gains for the average American. Therefore, these safe-haven stocks for a recession remain (begrudgingly) relevant.
Intuit (INTU)
Source: T. Schneider / Shutterstock.com
While a new year brings about feelings of new beginnings, for millions of business owners (including freelancers), it also means a few more months until April. And that means taxes, which can be quite complicated for entrepreneurs. Therefore, tax and accounting software specialist Intuit (NASDAQ:INTU) should be intriguing as one of the safe-haven stocks for a recession.
According to a CNN report last year, the rise of gig workers is changing the face of the U.S. economy. And I’m not sure what to think of this projection. In this country, experts believe that there will be more gig workers than non-gig workers by 2027. If that’s really the case, INTU would make perfect sense as one of the recession stocks.
With the company leveraging artificial intelligence to provide even more utility for taxpayers, Intuit should continue dominating in the field of tax-prep software. Notably, analysts rate shares a consensus strong buy with a high-side target of $720. This is one of those narratives where you simply follow the math.
McDonald’s (MCD)
Source: Tama2u / Shutterstock
While fast-food giant McDonald’s (NYSE:MCD) features many overlaps with the consumer discretionary space, MCD still ranks as one of the top safe-haven stocks. Despite Generation Z gravitating toward healthier food options, the Golden Arches remains relevant. Financially, the company prints a three-year revenue growth rate of 3.8%, above 63.5% of its peers. It’s also consistently profitable with a very strong return on invested capital (ROIC) of 20.37%.
Moreover, people will invariably want to go out and grab something to eat rather than cook at home. During bull markets, fancy restaurants may soak up this demand. However, if a recession materializes, Mickey D’s will probably have to do. What’s more, the U.S. fast-food market size should hit $180.32 billion by 2032. With McDonald’s owning 43.8% market share of this ecosystem, whatever’s good for the industry should boost MCD.
Another element that should work in the company’s favor is its forward dividend yield of 2.22%. With 48 years of consecutive dividend increases, it’s passive income you can rely on.
Procter & Gamble (PG)
Source: rblfmr/ShutterStock.com
Fundamentally, the case for Procter & Gamble (NYSE:PG) as one of the safe-haven stocks for a recession is self-explanatory. As a consumer goods giant, P&G’s underlying products effectively enjoy permanent relevance. Also, they benefit from an economically agnostic profile. Basically, no matter what’s going on with outside circumstances, people will need to clean and care for themselves.
What makes PG an attractive idea for recession stocks also centers on the hard numbers. Per data from Statista, value added in the consumer goods market may reach $3.18 trillion by year’s end. Plus, the sector should see a compound annual growth rate (CAGR) of 3.22% from 2024 to 2028. Admittedly, that’s not much. But because P&G dominates this arena, PG shares offer longstanding confidence.
This is one of those generational plays where people buy certain brands because that’s what they’ve known throughout their whole lives – and ditto for their parents and their parent’s parents. Analysts peg PG a moderate buy with a $161.25 average price target.
Abbott Laboratories (ABT)
Source: Sundry Photography/Shutterstock.com
A multinational medical devices and healthcare company, Abbott Laboratories (NYSE:ABT) offers a great candidate for safe-haven stocks. Primarily, Abbott benefits from a diversified product portfolio. It’s not dependent on any one product or market. For example, during the worst of the pandemic, Abbott played a significant role in Covid-19 testing systems. Once the crisis faded, the company pivoted toward other diagnostic needs and medical devices.
Further, the lingering impact of the SARS-CoV-2 outbreak draws significant attention toward ABT’s core diagnostics business. Recently, world leaders gathered to discuss Disease X, a hypothetical virus 20X deadlier than Covid-19. If such a horrible situation were to materialize, Abbott would be on the front lines. And in the meantime, the healthcare enterprise can focus on in-demand products like insulin pumps.
Enticingly, the company offers a forward yield of 1.92%. While it’s not the highest yield out there, Abbott has a 52-year track record of consecutive dividend increases. Plus, analysts rate shares a unanimous strong buy with an average price target of $126.57.
Walmart (WMT)
Source: Ken Wolter / Shutterstock.com
Practically synonymous with the big-box retail category, Walmart (NYSE:WMT) is one of the most recognizable ideas for safe-haven stocks for a recession. Should the economic waste matter hit the proverbial fan, WMT could be a great idea to have in your portfolio. It probably won’t make you rich. However, you can bank on its many relevancies, such as the underlying everyday low pricing business model.
Because Walmart is a one-stop shop, offering everything from groceries to video games, it’s a reasonably sensible play if you anticipate the possibility of a slowdown occurring. One advantage that the company enjoys is its massive footprint despite the encroachment of e-commerce. True, online sales have picked up conspicuously since the second quarter of 2022. Still, Walmart remains relevant – especially among the modest-income crowd – because of the immediacy effect.
You don’t need to wait around for packages to arrive to your doorstep. Even better, you don’t need to pay shipping fees or membership dues. Rather, just make a shopping list and get everything done at Walmart. It’s sensible, practical and economical – a great idea for recession stocks.
Sempra Energy (SRE)
Source: Michael Vi / Shutterstock.com
When it comes to safe-haven stocks for a recession, it’s difficult to overlook Sempra Energy (NYSE:SRE). Based in San Diego, California, Sempra doesn’t exactly get much love from its customers. Honestly, what utility does? However, what makes SRE so attractive is that it serves large chunks of the lucrative Southern California market. In my opinion – as an investor – that’s worth the price of admission.
In discussing the Golden State, it’s invariable that critics will point out the migration trends: people are leaving California. However, not every city in the state is experiencing a net exit of people. In the utility’s hometown, the population will peak – in 2042. As I argued in my analysis for TipRanks, that gives Sempra a long runway.
Notably, SRE gives out a decent forward yield of 3.27%. Further, the company enjoys a track record of 20 years of consecutive payout increases. Unsurprisingly, analysts peg shares a consensus strong buy with an $81.55 average price target. Sempra’s a relatively easy idea for recession stocks.
Philip Morris (PM)
Source: Vytautas Kielaitis / Shutterstock
A controversial market idea for any context, Philip Morris (NYSE:PM) may seem particularly odd when discussing safe-haven stocks. As multiple resources have pointed out, tobacco use rates globally show a continued decline. Advocacy groups have done a great job of taking away the cool factor associated with smoking imagery from prior paradigms. So, given this social evolution, why would anyone want to buy PM stock?
Though traditional smoking may not be as popular, global vaping rates have soared. Regarding youth usage, one vice has simply replaced another. That’s the ugly, controversial component related to any tobacco enterprise. On the other hand, if you’re looking at straight numbers from the legitimate adult market, the global e-cigarette and vape sector could see revenue of $182.84 billion in 2030.
If so, we’re talking about a CAGR of 30.6% from 2023 to 2030. While you’re waiting for this narrative to materialize, Philip Morris offers a forward yield of 5.63%. Combined with analysts rating shares a strong buy with a $105.75 target, this is a difficult idea to pass up.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
More From InvestorPlace
The #1 AI Investment Might Be This Company You’ve Never Heard Of
Musk’s “Project Omega” May Be Set to Mint New Millionaires. Here’s How to Get In.
The post 7 Safe-Haven Stocks to Protect Your Portfolio During a Recession appeared first on InvestorPlace.
