As the dark clouds of a potential recession loom on the horizon, investors are scrambling to find safe havens for their hard-earned money. While it’s true that most stocks tend to suffer during economic downturns, there are always a few outliers that manage to defy the odds and emerge stronger than ever.
However, before you rush to invest in the first “recession-proof” stock you come across, let me offer a word of caution. Just because a company weathered the storm in the past doesn’t guarantee it will do so again. The market is an unpredictable beast, and past performance is no guarantee of future results.
That being said, there are certain companies out there with business models so solid and recession-resistant that they’re worth considering as potential portfolio defenders. These are the rare gems that could surprise investors by continuing to rise even as the rest of the market tumbles.
In the current environment, with macroeconomic indicators screaming recession and rate cuts potentially pushing us over the edge, I believe it’s more important than ever to seek out these resilient stocks. History has shown that rate cuts can be the catalyst that tips us into a full-blown recession, as we saw during the Great Recession. That may or may not happen again, but it’s worth keeping these stocks on your watchlist:
McDonald’s (MCD)
McDonald’s Corporation (NYSE:MCD) operates and franchises McDonald’s restaurants worldwide. The fast-food giant has been facing challenges in 2024, with Q2 global comparable sales falling 1% and revenue of $6.49 billion slightly missing expectations. You might think McDonald’s is a cliché pick when it comes to recession-resistant stocks, but I believe it’s cliché for a good reason. The Golden Arches performed admirably during the Great Recession and also weathered the storm of 2020 quite well, even as the pandemic decimated many restaurant businesses.
I’m confident McDonald’s can continue to shine and will likely benefit if a recession hits, as its affordable menu attracts budget-conscious diners looking for the occasional meal out. The recent introduction of a $5 value meal deal, which 93% of U.S. restaurants are extending into August, is already boosting traffic. While UBS analysts trimmed their price target on MCD to $305, they maintain a “Buy” rating, expecting a stronger second half fueled by value promotions. So, while McDonald’s faces some near-term headwinds, I believe its resilient business model and strategic focus on value position it well to satisfy hungry investors.
The dividend yield is at 2.5% as of writing.
Rollins (ROL)
Rollins (NYSE:ROL) provides pest control services for residential and commercial customers. The company delivered strong Q2 2024 results, with revenue growing 8.7% to $892 million and organic growth of 7.7%, driven by solid demand across its residential, commercial, and termite segments.
I believe Rollins is unlikely to lose much business even in a recession.
After all, you’re not going to just live with roaches and termites in your home because the economy hits a rough patch. Rollins’ services are non-discretionary – its stock actually rose 17% in 2007-2008 while the broader market tanked. I wouldn’t be surprised to see a repeat performance in the next downturn.
Another tailwind for Rollins is climate change. As summers get hotter and more humid, pest problems are spreading to more parts of the country. That means more business for Rollins for years to come. The global pest control market is expected to nearly double from $23 billion in 2023 to $42 billion in 2032.
Rollins also pays a small 1.26% dividend. While some analysts see limited upside at the current valuation, I think Rollins’ recession-resistant business model makes it a solid pick for uncertain times.
Cintas (CTAS)
Cintas (NASDAQ:CTAS) provides corporate identity uniforms and related business services to over a million businesses across North America. The company recently reported strong fiscal 2024 fourth quarter and full-year results, with revenue growing 8.2% and 8.9%, respectively. Diluted EPS increased 19.8% for the quarter and 16.6% for the year.
While Cintas took a hit during the Great Recession, I don’t believe a potential near-term recession would impact the company as severely. Cintas has diversified its business, and I expect any upcoming downturn to be more focused on the tech sector rather than the industries Cintas serves. With the U.S. undergoing a major re-industrialization push and welcoming millions of migrants to fill new blue-collar jobs, Cintas stands to benefit greatly.
Government funding is likely to continue flowing into blue-collar industries, and if a white-collar recession does occur, it shouldn’t have a significant effect on Cintas. In fact, given the influx of migrants and the ongoing construction and industrial boom, I anticipate Cintas will maintain its growth trajectory.
The dividend yield is at 0.8%.
Anheuser-Busch (BUD)
Anheuser-Busch InBev (NYSE:BUD) is the world’s largest brewing company, boasting over 500 beer brands across the globe. The beer behemoth recently reported solid second-quarter 2024 results, with revenue growing 2.7% and EBITDA increasing 10.2% year-over-year. BUD stock has been a relatively stable investment in recent years, characterized by low volatility and consistent sales. While the stock trended downward from 2016 to 2020, I believe it is currently priced attractively.
Analysts maintain an “Overweight” consensus on BUD, with an average price target of $73. However, the company did face a setback recently when Russian authorities blocked its attempt to offload its joint-venture stake in the country to Turkey’s Anadolu Efes. On the bright side, AB InBev continues to capitalize on key industry trends like low-alcohol beers and seasonal releases.
In my view, BUD stock is trading sideways at levels that leave little room for downside, even if a recession hits. In fact, these undervalued levels could position the stock to benefit during an economic downturn as consumers trade down to affordable brands. With its diverse portfolio, robust financials, and recession-resistant business model, I think Anheuser-Busch InBev deserves a spot on your watchlist.
The dividend isn’t the most stable and it currently yields 1.46%.
Ross Stores (ROST)
Ross Stores (NASDAQ:ROST) operates a chain of off-price retail apparel and home accessories stores. The company recently reported strong Q1 2024 results, with earnings per share of $1.46, beating estimates by 11 cents and revenue growing 8% year-over-year to $4.86 billion.
I believe Ross Stores is well-positioned to benefit if a recession hits. During the Great Recession, Ross was one of the quickest retailers to recover and arguably came out even stronger. Its focus on delivering great branded bargains resonates with budget-conscious shoppers.
As inflation squeezes discretionary spending, more consumers are likely to seek out the discounted apparel and home goods that Ross excels at providing. Management is leaning into this opportunity by sharpening prices and strengthening its value proposition. While this may pressure margins in the near future, it’s the right move to gain market share.
With the stock currently rated “Overweight” by analysts and an average price target of $163, I think you should keep ROST on your radar.
It also comes with a 1% dividend yield to sweeten the deal. Management raised dividends during the Great Recession but panicked and cut in 2020.
Walmart (WMT)
Walmart (NYSE:WMT) operates a chain of hypermarkets, discount department stores, and grocery stores. The retail giant has been firing on all cylinders lately, with strong sales growth, market share gains, and expanding profit margins driven by its thriving e-commerce business and newer ventures like advertising and fulfillment services.
In Q1 2025, Walmart beat expectations with 6% revenue growth to $161.5 billion and adjusted EPS of 60 cents, which topped estimates by eight cents. The company is winning over higher-income shoppers and saw 22% e-commerce growth in its U.S. business. CFO John David Rainey told CNBC that the widening gap between grocery prices at home versus restaurants is helping boost Walmart’s food sales.
However, with the stock near all-time highs, much of the good news seems priced in. Tougher year-over-year comparisons and economic uncertainty could pressure the stock. However, if a recession hits, Walmart is well-positioned to gain wallet share from cash-strapped consumers trading down.
Dividends only go up when it comes to WMT, and it currently yields 1.2%.
Regeneron Pharmaceuticals (REGN)
Regeneron Pharmaceuticals (NASDAQ:REGN) develops life-transforming medicines for serious diseases. The biotech giant has been executing well lately, with double-digit revenue and earnings growth in Q2 2024, driven by strong sales of Eylea, Dupixent, and Libtayo. Despite increased competition, Regeneron’s retinal disease drug, Eylea, remains the market leader with a 45% share. The company also has a robust pipeline with over 35 programs in clinical development spanning several therapeutic areas.
However, Regeneron faces some challenges. Lingering inflation, geopolitical tensions, and pressures to cut drug prices will be key headwinds for the pharma industry in 2024. The Department of Justice is investigating Regeneron’s Eylea marketing practices, though the company believes the lawsuit is baseless. Analysts remain mostly bullish, with an average price target of $1,169 versus the current $1,121 stock price. But some rate it a “Hold,” likely due to the legal overhang and industry pressures.
I’m keeping this at the caboose of this list due to the prospects of a Harris presidency. You’d have to watch politics closely if you want to invest here. It also doesn’t pay a dividend, so you’re unlikely to get extra cash during a recession.
On the date of publication, Omor Ibne Ehsan did not hold (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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.