10 Best Recession-Proof Stocks to Buy Now

In this article, we will be looking at the 10 best recession-proof stocks to buy now.

Is A Recession On The Horizon?

On June 6, CNBC’s ‘Squawk on the Street‘ hosted Jan Hatzius, the Chief Economist and Head of Global Investment Research at Goldman Sachs, who had been brought in after Goldman lowered the US recession probability multiple put forth by the bank. The cut brought the multiple down by 10%, from 35% to 25%. Hatzius claimed that there were two reasons behind this move. First, he explained that prior to the Silicon Valley Bank’s collapse, Goldman Sachs’ recession multiple had been 25%. It was only increased because of the expected impact of the banking crisis on the US economy, and while professionals at Goldman still felt that the crisis would continue to impact the economy, they can size it at around “40 basis points off-of growth,” in Hatzius’ words. According to Hatzius, this was the main reason behind Goldman’s decision to lower the recession probability multiple in June. He added that a secondary reason behind the move was the fact that the debt ceiling deal had had little impact on American fiscal policy.

While the above report seems to offer a cause for celebration, as the interview with Hatzius shows, this wasn’t the whole story. Bulls in the market today are optimistic about the inflationary environment in the US, believing that the Federal Reserve will not be raising any more rates any time soon. At the same time, the bears are in opposition, believing that the Fed may have some more rate hikes up its sleeve even now. When Hatzius was asked about his opinion on this conundrum, he revealed that he was being cautiously optimistic about potential rate hikes. He did add that one of the concessions made by professionals over at Goldman before they lowered their recession probability multiple was that there would likely be another rate hike. However, Hatzius sees this hike coming in July, giving the economy some room to breathe through June.

Industries To Pick In The Event Of A Recession

While Hatzius and others at Goldman Sachs seem to be more optimistic on the matter of whether the US will see a recession in 2023 or not, there are many others who cannot help but think otherwise. For those individuals, investing in recession-proof stocks now can be vital. While deciding which stocks would count as ‘recession-proof,’ many investors can get confused. To avoid this, the best way to begin a search for these stocks is to learn from the past. Our article on stocks that did well during the 2008 financial crisis can be a helpful place to start, as it takes the reader through a range of stocks in various industries that have proven their resilience in the face of a recession already. They include top-tier companies similar to Abbott Laboratories (NYSE:ABT), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), among many others. The examples of these three companies can give you a hint as to which industries have historically done well during a recession. Consumer staples, utilities, healthcare, streaming, discount store, and even fast food stocks all have a record of positive performance during recessions. Commodities like gold are yet another category of recession-proof stocks because when all else fails, gold stays up.

While it is definitely a good idea to be prepared for anything the economy might throw at you, it’s also important to keep in mind what professionals in the financial world are talking about. Bearish sentiment is now being beaten back by the bulls who see a more positive economic future on the horizon. In an earlier interview on CNBC’s ‘Squawk on the Street,’ for instance, Goldman’s Hatzius noted that the US jobs report from May had signaled strength and resilience as far as the economy was concerned. He believed that in light of the strong progress demonstrated by the labor markets through May, there was enough cause for believing that the US economy was far from being on the brink of a recession. According to CNBC, the May jobs report boasted the 29th straight month of growth for the labor market. If this optimism pays off, the US economy may be able to make it through 2023 without a recession, but no one can tell for sure if this will be the case.

Considering the rampant insecurity and uncertainty relating to the economy today, we have compiled a list of some of the best recession-proof stocks to invest in today. As mentioned above, while professionals like Hatzius feel inclined to think positively, the paranoia resounding throughout the US markets cannot be countered just yet, making now the perfect time to begin considering safe investments.

Source:Pixabay

Our Methodology

We used Insider Monkey’s hedge fund data for the first quarter, when 943 hedge funds were tracked, to pick the most popular recession-proof stocks among smart money investors. These stocks are from recession-proof industries like utilities, consumer staples, healthcare, and communication services industries. Most of these industries perform well during recessions, based on historical records. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.

Best Recession-Proof Stocks to Buy Now

10. Sempra (NYSE:SRE)

Number of Hedge Fund Holders: 31

Utilities are a must-have in any recession-proof portfolio, so Sempra (NYSE:SRE), a multi-utility company based in San Diego, California, is on our list.

The company’s revenue in the first quarter of 2023 was $6.56 billion, up 71.73% year-over-year. Sempra (NYSE:SRE) also beat revenue estimates for the quarter by $2.61 billion.

Holding 542,285 shares, Adage Capital Management was the largest shareholder in Sempra (NYSE:SRE) at the end of the first quarter.

About 31 hedge funds were long Sempra (NYSE:SRE) in the first quarter, with a total stake value of $401 million.

Sempra (NYSE:SRE), like Abbott Laboratories (NYSE:ABT), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), is likely to be a smart recession-proof stock.

9. The J.M. Smucker Company (NYSE:SJM)

Number of Hedge Fund Holders: 33

The J.M. Smucker Company (NYSE:SJM) is a manufacturer of branded food and beverage products. This consumer staples stock is based in Orrville, Ohio, and can be a valuable addition to a recession-proof portfolio.

The stock is up by 18.29% over the past year as of June 6.

Cody Ross at UBS holds a Neutral rating on The J.M. Smucker Company (NYSE:SJM) as of May 31, alongside a $157 price target.

The J.M. Smucker Company (NYSE:SJM) was spotted in the portfolios of 33 hedge funds in the first quarter. Their total stake value was $798 million.

8. Barrick Gold Corporation (NYSE:GOLD)

Number of Hedge Fund Holders: 41

Gold is an investment that can never go wrong, especially not during a recession. This is why we’ve picked Barrick Gold Corporation (NYSE:GOLD), a gold producer based in Toronto, Canada.

There were 41 hedge funds long Barrick Gold Corporation (NYSE:GOLD) in the first quarter, with a total stake value of $763 million.

On April 21, Barclays raised the firm’s price target on There were 41 hedge funds long Barrick Gold Corporation (NYSE:GOLD) in the first quarter, with a total stake value of $763 million. from $26 to $28, alongside reiterating an Overweight rating on the stock.

At the end of the first quarter, First Eagle Investment Management was the largest shareholder in Barrick Gold Corporation (NYSE:GOLD), holding 42.3 million shares in the company.

7. Constellation Brands, Inc. (NYSE:STZ)

Number of Hedge Fund Holders: 41

When a recession hits, consumer staples stocks like alcoholic beverage producers tend to fare well. As such, we’ve selected Constellation Brands, Inc. (NYSE:STZ), a New York-based alcoholic beverage producer.

In the fiscal fourth quarter, Constellation Brands, Inc. (NYSE:STZ) delivered an earnings beat with a $1.98 EPS, beating estimates by $0.14.

Analysts at Goldman Sachs have a Buy rating and a $264 price target on Constellation Brands, Inc. (NYSE:STZ) shares as of May 30.

Our hedge fund data for the first quarter shows Constellation Brands, Inc. (NYSE:STZ) among the 13F holdings of 41 hedge funds, with a total stake value of $771 million.

6. Dollar General Corporation (NYSE:DG)

Number of Hedge Fund Holders: 53

Discount stores like the Dollar General Corporation (NYSE:DG) are bound to do well in times of recession when consumers are trying to cut costs. The company is based in Goodlettsville, Tennessee.

Citadel Investment Group was the most prominent shareholder in Dollar General Corporation (NYSE:DG) at the end of the first quarter, holding 1.6 million shares in the company.

Bobby Griffin at Raymond James holds a Strong Buy rating and a $200 price target on Dollar General Corporation (NYSE:DG) as of June 2.

In total, 53 hedge funds were long Dollar General Corporation (NYSE:DG) in the first quarter. Their total stake value was $1.7 billion.

Aristotle Atlantic Partners, LLC mentioned Dollar General Corporation (NYSE:DG) in its first-quarter 2023 investor letter:

“Dollar General Corporation (NYSE:DG shares underperformed on a rotation out of more defensive consumer names at the start of the year despite growing concerns of a slowdown in the economy and the coinciding effects on consumer spending. During the first quarter, Dollar General reported solid comps, as their core lower-income consumer remained resilient despite rising inflation.”

Dollar General Corporation (NYSE:DG), like Abbott Laboratories (NYSE:ABT), The Coca-Cola Company (NYSE:KO), and The Procter & Gamble Company (NYSE:PG), is a recession-proof stock hedge funds are piling into today.

5. The Coca-Cola Company (NYSE:KO)

Number of Hedge Fund Holders: 61

The Coca-Cola Company (NYSE:KO) was spotted in the 13F holdings of 61 hedge funds in the first quarter, with a total stake value of $27.5 billion.

The Coca-Cola Company (NYSE:KO), a beverage-producing consumer staples stock, is one that investors can benefit from during a recession.

Barclays holds an Overweight rating and a $73 price target on The Coca-Cola Company (NYSE:KO) shares as of April 26.

4. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 70

Abbott Laboratories (NYSE:ABT) is a healthcare equipment company based in North Chicago, Illinois. While many expect healthcare companies to do well during a recession, Abbott Laboratories (NYSE:ABT) proved this was possible by outperforming the S&P 500 by 33.6% during the 2008 financial crisis.

There were 70 hedge funds long Abbott Laboratories (NYSE:ABT) in the first quarter. Their total stake value in the company was $2.4 billion.

Analysts at Raymond James hold an Outperform rating on Abbott Laboratories (NYSE:ABT) shares as of April 20, alongside a raised price target of $123.

Polen Capital made the following comment about Abbott Laboratories (NYSE:ABT) in its first-quarter 2023 investor letter:

“As stated below in the portfolio activity section, Abbott Laboratories (NYSE:ABT) is expected to see roughly $6 billion in COVID test sales evaporate this year, creating a headwind for margins and underlying earnings per share. As long-term owners of the business, these test sales were never part of our original investment case. The core business, our primary focus, has a clear path of growing high single digits in 2023 with durable growth beyond, in our view. We believe the current price of 23x NTM P/E , while reasonable, is also misleading considering earnings this year will be artificially depressed because of the drop in COVID testing sales. On normalized earnings, the price is lower. We anticipate underlying EPS growth of at least low-teens over the next three to five years.

Lastly, we trimmed Abbott Laboratories, bringing it back to a more average position size and to also fund our increase in Thermo Fisher. Abbott is entering a year in which the company is expected to see approximately $6bn in COVID-19 test sales disappear, thus, creating a headwind for margins and EPS. That said, the core business has a clear path to growing high single digits in FY23. EPS grew at a 20% CAGR from 2019-2022, far beyond our expectations when we initiated our investment. Now, we expect a more normal growth rate of low teens EPS beyond this year. Further, management’s adeptness at allocating capital continues to impress us. We expect Abbott to drive top line growth without heavily investing in R&D and SG&A this year— management effectively “front-loaded” those investments in 2021 and 2022 when COVID test sales created a bolus of cash. We believe this should allow for leverage on the operating margin going forward. Combined, Abbott and Thermo Fisher now represent 7% of the Portfolio.”

3. The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 75

Our hedge fund data shows 75 hedge funds long The Procter & Gamble Company (NYSE:PG) in the first quarter, with a total stake value of $4.7 billion.

The Procter & Gamble Company (NYSE:PG) is another consumer staples stock on our list, based in Cincinnati, Ohio.

Lauren Lieberman at Barclays holds an Overweight rating on The Procter & Gamble Company (NYSE:PG) as of April 26, alongside a $167 price target.

2. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 91

Walmart Inc. (NYSE:WMT) is a retail and wholesale company based in Bentonville, Arizona. Retail companies in the consumer staples sector have historically been recession-proof.

Walmart Inc. (NYSE:WMT) outperformed the S&P 500 by 56.3% during the 2008 financial crisis.

Seth Sigman, an analyst at Barclays, holds an Overweight rating on Walmart Inc. (NYSE:WMT) shares as of May 21. The analyst also raised his price target on the stock from $159 to $162.

Walmart Inc. (NYSE:WMT) was seen in the portfolios of 91 hedge funds in the first quarter. Their total stake value was $5.7 billion.

1. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Hedge Fund Holders: 116

Lisa Gill at JPMorgan holds an Overweight rating on UnitedHealth Group Incorporated (NYSE:UNH) as of May 30.

UnitedHealth Group Incorporated (NYSE:UNH) is a stellar healthcare company that is also a dividend payer with a yield of 1.35% as of June 7.

There were 116 hedge funds long UnitedHealth Group Incorporated (NYSE:UNH) in the first quarter. Their total stake value was $11.7 billion.

Fred Alger Management, an investment management company, mentioned UnitedHealth Group Incorporated (NYSE:UNH) in its first-quarter 2023 investor letter:

“UnitedHealth Group Incorporated (NYSE:UNH) is an integrated healthcare benefits company uniquely positioned to address rising healthcare costs for its customers, due to its vertical integration, size, and scale. The Optum health benefits services unit, which accounts for approximately 45% of the company’s operating earnings, in our view, has the potential to grow even further as customers look for ways to manage rising healthcare costs. During the period, shares detracted from performance due to several factors: 1) many 2022 healthcare winners with shorter duration profiles and persistent earnings profiles, such as UnitedHealth Group. underperformed in the first quarter of 2023, 2) uncertainty surrounding Medicare Advantage reimbursement levels from the Federal government in 2023, which will be determined later in the year, and 3) increased regulatory scrutiny in the form of potential Medicare Advantage audits across the industry. While these concerns have impacted UnitedHealth in the near-term, we believe company fundamentals remain intact given its large scale business model, competitive advantages, and medium to long- term growth prospects.”

See also 14 Best Stocks To Buy Before A Recession and 13 Best Gold Stocks To Buy For Recession.

Suggested articles:

• 10 Companies that Make Money During A Recession
• 10 Best Healthcare Stocks for Recession
• Jim Cramer’s Recession-Proof Stocks

Disclosure: None. 10 Best Recession-Proof Stocks to Buy Now is originally published on Insider Monkey.