In this article, we will be taking a look at the 10 Best Investments During A Recession.
As of early 2026, the U.S. economy is in a fragile “stagflation-lite” phase, balancing resilient growth against an elevated risk of recession. According to major financial organizations like J.P. Morgan and RSM, there is a probability of a formal U.S. recession in 2026 at a rate of 30-35%. Instead of the economy crashing in one big direction, it is more indicative of a K-shaped recovery where technology and AI-driven industries grow, and housing and lower-income consumers experience increasingly stressful situations.
Economic information is conflicting. The U.S. economy is projected to grow at a robust 4.3% annualized rate in Q3 2025, but growth is predicted to slow down to approximately 1.8%-2.2% in 2026. The labor market has been tight historically, with unemployment standing at 4.4% in December 2025, only slightly lower compared to November 2025. Inflation is also continuing to be constant, with Core PCE being 2.8, which has been enabled by the recent fiscal stimulus and the persistence of tariff impacts.
The signs of recession are becoming more and more industry-specific than global. The American housing sector is performing poorly, with home sales at multi-decade lows as the high mortgage rates and the lack of affordability are still taking their toll on demand, home building, and housing industry jobs.
The federal funds rate has been reduced to a range of 3.50%-3.75% following three rate cuts at the end of 2025. The Federal Reserve is expected to pause at the beginning of 2026 ahead of the appointment of a new Chair in May.
By contributing roughly 1.1 percentage points to GDP growth and preventing a more dire economic catastrophe, investments in artificial intelligence have a major stabilizing effect. Consumer spending is predicted to drop in the first part of 2026 as labor income growth slows. If AI-driven productivity increases materialize and inflation returns to the Federal Reserve’s objective, Morgan Stanley economists predict GDP growth of roughly 3.2% by 2027.
With that being said, let’s now look at the best investments during a recession.
Our Methodology
For our methodology, we first looked at stocks from industries like consumer staples, healthcare, and information technology that often perform well during recessions. After that, we reduced the selection to stocks with market capitalization over $10 billion, positive sentiments from analysts, and a consistent dividend payment history. From this list, we selected the top 10 dividend-paying stocks and ranked them in ascending order based on the number of hedge fund holders as of Q3 2025, as tracked by Insider Monkey database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Here is our list of the 10 best investments during a recession.
10. TD SYNNEX Corporation (NYSE:SNX)
Number of Hedge Fund Holders: 35
TD SYNNEX Corporation (NYSE:SNX) stands tenth on our list among the best investments.
TheFly reported on January 9 that UBS analyst David Vogt maintained a Buy rating on SNX and raised the price target from $187 to $193. This update reflects UBS’s optimism over the company’s strategic position. For instance, the Hyve subsidiary is making good headway on AI data center infrastructure, while interest in Windows 11 and AI-capable PCs is driving up PC demand.
Conversely, on January 9, while keeping an Overweight rating, Morgan Stanley analyst Erik Woodring lowered the price target for TD SYNNEX Corporation (NYSE:SNX) from $177 to $172. Although Morgan Stanley is still confident about the company’s long-term prospects, the modified price target reflects a more cautious near-term assessment and acknowledges expected volatility in IT hardware demand and adjacent markets.
Similarly, Barclays analyst Tim Long reduced SNX’s price objective from $164 to $163 on the same day while keeping an Equal Weight rating. The company’s fiscal Q4 earnings exceeded expectations, according to the research report, due to strong software performance, consistent PC demand, and ongoing momentum in its Hyve segment.
TD SYNNEX Corporation (NYSE:SNX) operates at the heart of the technology ecosystem and provides a comprehensive range of products and services from leading vendors like IBM and Cisco. The company’s architecture is designed to help partners capitalize on high-growth areas, including AI integration, hybrid cloud, and data analytics.
9. Monolithic Power Systems, Inc. (NASDAQ:MPWR)
Number of Hedge Fund Holders: 42
Monolithic Power Systems, Inc. (NASDAQ:MPWR) is placed ninth among the best investments.
TheFly reported on December 19, 2025, that Truist Securities raised its price target for MPWR to $1,375 from $1,163 while maintaining a Buy rating. The company’s strength, according to analyst William Stein, is a compelling AI infrastructure derivative bet, which is fueled by its expertise in high-density power delivery for next-generation GPU and XPU platforms that support a multibillion-dollar potential in AI data centers.
Monolithic Power Systems, Inc. (NASDAQ:MPWR) designs, develops, and markets integrated circuits (ICs) for the computing, automotive, industrial, and communications markets. The company specializes in power management solutions that reduce total energy consumption and heat dissipation in high-performance environments.
8. Cardinal Health, Inc. (NYSE:CAH)
Number of Hedge Fund Holders: 55
Cardinal Health, Inc. (NYSE:CAH) is one of the best investments on our list.
TheFly reported on January 9 that Citi upgraded CAH from Neutral to Buy, raising the price target from $190 to $244. Daniel Grosslight, a Citi analyst, offered this upgrade, which shows confidence in the company’s growth of specialist assets in addition to the solid performance of its main pharmaceutical distribution business.
Citi highlighted further expansion of the specialist business of Cardinal Health, Inc. (NYSE:CAH), especially the addition of newly acquired MSO assets such as Solaris Health, which is expected to enhance the efficiency of operations and aid in the increase of revenue. It was announced that the company remains cautious on the Global Medical Products and Distribution (GMPD) business, although it believes that the potential upside exists compared to its own expectation versus the consensus forecasts.
Cardinal Health, Inc. (NYSE:CAH) is a large U.S. healthcare services and products company headquartered in Dublin, Ohio. It distributes pharmaceuticals and medical supplies to hospitals, pharmacies, and clinics globally, and manufactures medical and surgical products. The business operates in two segments: Pharmaceutical & Specialty Solutions and Global Medical Products & Distribution.
7. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 68
The seventh stock on our list of best investments is Abbott Laboratories (NYSE:ABT).
TheFly reported on January 9 that Bernstein analyst Lee Hambright raised ABT’s price target to $154 from $150, while maintaining an Outperform rating on the stock. The company noted that U.S. healthcare stocks have been rising gradually in recent months following a bottom in September 2025. Bernstein anticipates that healthcare companies, including Abbott, would perform better in 2026 as the market becomes clearer about the macroeconomic and policy issues that put pressure on the industry last year.
In contrast, on the same day, Goldman Sachs reduced its price target for Abbott Laboratories (NYSE:ABT) to $152 from $157 while maintaining a Buy rating. The firm noted that after a year in which stock performance diverged from underlying fundamentals, 2026 is expected to reflect a return to more normalized trends, with organic growth driving relative valuation. The analyst also clarified that the current model does not factor in ABT’s pending acquisition of Exact Sciences (EXAS).
Abbott Laboratories (NYSE:ABT) is a global healthcare leader with a diversified portfolio spanning Medical Devices, Diagnostics, Nutrition, and Established Pharmaceuticals. The company is currently the world leader in Continuous Glucose Monitoring (CGM).
6. The Cigna Group (NYSE:CI)
Number of Hedge Fund Holders: 78
The Cigna Group (NYSE:CI) stands sixth on our list among the best investments.
TheFly reported on January 9 that Mizuho analyst Ann Hynes maintained a Buy rating on CI and adjusted the price target to $325 from $307. The firm noted that its physician survey shows healthcare utilization growth is slowing sequentially, suggesting the trend may be peaking.
Separately, on January 13, 2026, The Cigna Group officially announced that it will release its fourth quarter 2025 financial results on Thursday, February 5, 2026.
The Cigna Group (NYSE:CI) is a global health services company providing medical, dental, behavioral health, pharmacy, and supplemental insurance solutions. It operates in over 30 countries, serving individuals, employers, and governments, with a growing focus on integrated care, pharmacy benefit management, and international health markets.
5. Amphenol Corporation (NYSE:APH)
Number of Hedge Fund Holders: 89
Amphenol Corporation (NYSE:APH) is placed fifth among the best investments on our list.
TheFly reported on January 12 that Citi analyst Asiya Merchant maintained a Buy rating on APH and raised the price target to $175 from $160. The $15 increase shows that the company is more confident in its ability to obtain higher-margin contracts in AI server rack systems. According to Citi’s upbeat assessment, APH is well-positioned to compete and gain market share in the industry’s quest toward faster, denser interconnect solutions.
Separately, on the same day, January 12, Barclays upgraded Amphenol Corporation (NYSE:APH) from Equal Weight to Overweight and increased its price objective to $156 from $143. Barclays analyst Guy Hardwick highlighted a significantly improved outlook for the company’s IT Datacomm segment.
Hardwick now expects 60% organic growth for IT Datacomm in 2026, up from the previous projection of 45%, due to the exceptional need for AI rack connectivity solutions. The upgrade is strengthened by the fact that APH’s recent strategic acquisitions are expanding faster than initially anticipated. According to Barclays’ revised forecast, APH’s fiscal year 2026 earnings per share (EPS) will exceed the market average by 12%.
Amphenol Corporation (NYSE:APH) is a global leader in designing, manufacturing, and marketing high-technology electrical, electronic, and fiber-optic connectors, interconnect systems, antennas, and sensors. Headquartered in Wallingford, Connecticut, it serves diverse markets including automotive, IT/datacom, aerospace, defense, and industrial sectors.
4. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 93
The fourth stock on our list of best investments is Lam Research Corporation (NASDAQ:LRCX).
TheFly reported on January 9 that Goldman Sachs analyst James Schneider raised the LRCX price target to $180 from $160 while maintaining a Buy rating. Improved semiconductor industry circumstances, substantial demand from AI processors, and anticipated higher investment in DRAM and NAND memory are the reasons behind the increase in this price target. The firm is well-positioned to profit from incremental memory investments as capital spending patterns improve and advanced chip production activity picks up speed, according to Goldman Sachs, which also emphasized LRCX’s strong competitive position.
Similarly, on the same day, Mizuho raised its price target on Lam Research Corporation (NASDAQ:LRCX) to $220 from $200 while maintaining an Outperform rating. The update was included in the company’s 2026 capital equipment and semiconductor stock outlook. Mizuho anticipates further, albeit more moderate, growth in 2026 due to appealing values. The company is skeptical about electric cars, automobiles, analog chips, computers, and phones, but it favors AI accelerators, wafer manufacturing equipment, optical, and memory sectors.
Lam Research Corporation (NASDAQ:LRCX) is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. The company’s products allow chipmakers to build smaller and better-performing devices used in a variety of electronic products, including mobile phones, personal computers, and data centers.
3. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 117
Danaher Corporation (NYSE:DHR) is placed third among the best investments.
TheFly reported on January 7 that TD Cowen raised its price target on DHR to $270 from $260, maintaining a Buy rating. The adjustment was part of the firm’s Q4 outlook for the life sciences tools sector. Even though recent share gains have raised expectations, analysts pointed out that some companies have already offered conservative 2026 outlooks, indicating possible upside for DHR. The business is well-positioned to profit from the industry’s continued strength and development prospects in the upcoming year, according to TD Cowen.
Separately, on January 12, the company provided a favorable operational update during the J.P. Morgan Healthcare Conference. Danaher Corporation (NYSE:DHR) stated that it now expects its adjusted diluted net earnings per share (EPS) to be between $7.70 and $7.80 for the full year 2025. Additionally, the company projected a mid-single-digit percent growth in sales over the previous year for the fourth quarter.
Danaher Corporation (NYSE:DHR) operates as a global science and technology innovator. Following its strategic shift to focus exclusively on Life Sciences and Diagnostics, the business provides sophisticated tools and services that improve patient health and accelerate the development of life-changing therapies.
2. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 121
Thermo Fisher Scientific Inc. (NYSE:TMO) is placed second on our list.
TheFly reported on January 9 that Stifel analyst Daniel Arias maintained a Buy rating on TMO and significantly raised the price target to $700 from $583, an increase of $117. According to Arias, the company is anticipating a “solid year” in which organic growth returns to mid-single digits and is modifying its methodology to account for 2027 profits potential. The biopharma industry’s anticipated comeback and strong single-digit EPS growth are the main sources of this optimism.
Separately, on January 12, Thermo Fisher Scientific Inc. (NYSE:TMO) and NVIDIA Corporation announced a strategic partnership to integrate advanced AI into laboratory workflows. In addition to creating “lab-in-the-loop” solutions that link instruments and data to AI software at scale, the partnership will make use of NVIDIA’s DGX Spark supercomputer and BioNeMo models to modernize tasks like experiment planning and data processing.
The collaboration intends to speed up pharmaceutical discovery, improve research accuracy, and boost operational efficiency by fusing NVIDIA’s AI infrastructure with TMO’s life science expertise. This is a “trinity of AI, agents, and instruments” that is changing scientific workflows, according to EVP Gianluca Pettiti.
Thermo Fisher Scientific Inc. (NYSE:TMO) is a leading global provider of life sciences tools, laboratory equipment, and analytical instruments. The company serves biopharma, healthcare, and academic markets, offering products and services for research, diagnostics, and manufacturing.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 312
Microsoft Corporation (NASDAQ:MSFT) tops our list for being one of the best investments during a recession.
On January 11, TheFly reported that Goldman Sachs initiated coverage on MSFT with a Buy rating and a $655 price target, implying ~37% upside. The key factors influencing long-term development, according to analyst Gabriela Borges, are MSFT’s strong AI positioning, cloud leadership, and vertical integration. Goldman predicts that by 2030, the company might reach an EPS of $35 due to core software growth patterns, increasing cloud demand, and growing AI usage.
On January 7, MSFT announced it would release Q2 2026 financial results on January 28, serving as a near-term catalyst for analyst activity.
Microsoft Corporation (NASDAQ:MSFT) is a global technology leader specializing in software, cloud computing, AI, and hardware solutions. Known for Windows, Office, Azure, and AI platforms, the company leverages vertical integration to drive growth, efficiency, and innovation, positioning itself as a dominant player in enterprise and consumer technology markets.
While we acknowledge the potential of MSFT to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than MSFT and that has 100x upside potential, check out our report about this cheapest AI stock.
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