RECESSION: With recession risks soaring we looked back at the 2008 and 2020 recessions for stocks that were not only defensive but actually made money. Losing less money is one thing, benefiting from recession is another. Industries varied from discount retail and home DIY to auto repair and healthcare. They are doing well again now, and have a strong record (see chart). We use US example, but parallels exist in all markets, with our UK basket outperforming by 120%.
WINNERS: Well represented segments included discount and everyday-low-price retailers as consumers trade down, like Walmart (WMT), Ross Stores (ROST) and Dollar Tree (DLTR). Fast food McDonalds (MCD) is related. Similarly, home DIY, like Home Depot (HD) Lowe’s (LOWE), and auto repair parts stocks Autozone (AZO) and O’Reilly (ORLY). Health care and big biotech is well-represented as inelastic non-discretionary purchases, like Abbott (ABT), Amgen (AMGN), Vertex (VRTX). Also, domestic comforts from toys (Hasbro, HAS) to candy (Hershey, HSY), and getting more from your money and tax (H&R Block, HRB), and educating yourself (2U, TWOU).
INDEX: We created a simple-weight index of 15 of most representative US recession-resilient stocks (see chart). It strongly outperformed the S&P 500 in the global financial crisis and in the correction so-far this year, and to a lesser degree in the short-lived Covid crash of 2020. As impressive is the ‘all-weather’ performance of this group, up 10-fold since the eve of the global financial crisis versus ‘only’ the doubling of the S&P 500 and four-fold increase of the NASDAQ.
All data, figures & charts are valid as of 06/07/2022