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Best Stocks to Buy in a Recession

Given all that’s happened recently, some people are talking about a recession. What’s that? It’s technically when there are two consecutive quarters (or more) of negative gross domestic product growth. Basically, it’s when the economic engine slows down.

Since 1980, we’ve had six recessions. We aren’t there yet. But if we do get there, don’t fret too much. In five of the last six recessions, the S&P 500 was up a year later.

Plus, it’s possible to succeed in almost all market conditions. I don’t mean there are ways where it’s impossible to lose. Rather, there are some stocks that seem to do quite well in recessions. These kinds of stocks are “durable” – they’re well-established names and tend to pay dividends. Let me show you what I mean.

Focusing on quality is paramount when markets are under pressure. Using my firm MAPsignals’ database, I’ve filtered for various quality metrics and a history of Big Money investment to identify five stocks that tend to do well in harder economic times: WMT, ABT, JNJ, GIS, & HSY.

Walmart Inc.

Up first is Walmart Inc. (WMT), the discount retail giant.

Even though great stocks can be choppy, like WMT over the past year, these companies are worthy of attention, especially when they have a tech-oriented growth strategy and huge hiring plans. Check out WMT:

  • 1-month performance (+8.5%)

  • Historical Big Money signals

Just to show you what our Big Money signal looks like, have a look at the top buy signals WMT has made over the years in the chart below. Blue bars are showing it was likely being bought by a Big Money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

Source: www.MAPsignals.com

But, what about fundamentals? As you can see, WMT’s sales and earnings growth rates have held strong, and its earnings growth estimate is appealing:

  • 3-year sales growth rate (+3.7%)

  • 3-year EPS growth rate (+41.0%)

  • 2-year vs. 1-year EPS growth rate estimate (+7.6%)

What about WMT in a downturn? Over the last six recessions, its average return is an astounding (+34.4%).

Abbott Laboratories

Next up is Abbott Laboratories (ABT), the enormous health care company.

Check out these technicals for ABT:

  • 1-month performance (-3.4%)

  • Historical Big Money signals

Let’s look long-term. These are the top buy signals Abbott has made since 1990. The Big Money love is clear:

Source: www.MAPsignals.com

Now let’s dive deeper. As you can see, Abbott has had rock-solid sales and earnings growth:

  • 1-year sales growth rate (+24.5%)

  • 3-year EPS growth rate (+44.6%)

In the past six recessions, Abbott averaged a (+9.8%) gain. Even better, a year later, its average return was (+13.6%). This stock has handled downturns well in the past.

Johnson & Johnson

The third growth stock idea is Johnson & Johnson (JNJ), another enormous health care company.

Strong stocks usually have Big Money buying the shares. J&J has that. While JNJ has been choppy, it hasn’t fluctuated a lot over the past year. And it’s nice to see the stock has risen recently:

  • 1-month performance (+4.4%)

  • Historical Big Money signals

Below are the Big Money signals J&J has made since 1990. That’s the JUICE!

Source: www.MAPsignals.com

Now let’s look under the hood. J&J’s sales and earnings growth is impressive. Its profitability is strong too and so is its current 2.4% dividend, which help in a recession:

  • 1-year sales growth rate (+13.5%)

  • 3-year EPS growth rate (+13.3%)

  • Profit margin (+22.3%)

In the last six recessions, J&J stock rose fives times. Its average return over those recessions is (+12.3%), so it’s a downturn winner for sure.

General Mills, Inc.

Number four on the list is General Mills, Inc. (GIS), which is a huge food and beverage company with several well-known brand names.

Here are the technicals important to me:

  • 1-month performance (-6.2%)

  • Historical Big Money signals

Below are the Big Money signals for GIS since 1990. While it’s waned a bit recently, the Big Money has liked General Mills for a long time:

Source: www.MAPsignals.com

Let’s examine a bit more. General Mills has been growing sales well, is poised to grow earnings, and owns a nice profit margin:

  • 3-year sales growth rate (+4.8%)

  • 2-year vs. 1-year EPS growth estimate (+4.3%)

  • Profit margin (+12.9%)

Regardless of the economy, people need food. That has certainly helped GIS in the past six recessions, when it gained in five of them. Its average return over that span is (+15.3%), and it grew more one year and two years later (+14.5% and +28.7%, respectively).

The Hershey Company

Our last recession stock is an easy one to understand, it’s The Hershey Company (HSY), which makes candy and snacks seemingly everybody loves.

Check out these technicals:

  • 1-month performance (+1.5%)

  • Historical Big Money signals

Hershey has made the MAPsignals Top 20 report many times since 1990:

Source: www.MAPsignals.com

Now let’s look under the hood. Hershey has been growing sales and earnings, and its profit margin is strong:

  • 1-year sales growth rate (+10.1%)

  • 3-year EPS growth rate (+8.7%)

  • Profit margin (+16.5%)

Does candy melt in a recession? No. In the last six recessions, Hershey has gained four times, with an overall average return of (+8.7%).

The Bottom Line

WMT, ABT, JNJ, GIS, & HSY represent top stocks to buy in a recession. Strong fundamentals and historical Big Money buy signals make these stocks worthy of extra attention in tough economic times.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in WMT in personal accounts.



This article was originally posted on FX Empire