In this article, we discuss Jim Cramer’s recession-proof stock picks.
Warning bells for recession started ringing in 2022 and they haven’t stopped since. As if investors weren’t already spooked enough, a fresh warning comes straight from the horse’s mouth. On January 2, IMF’s head Kristalina Georgieva warned the world that 2023 would be tougher than the previous year because the three major economies of the world — the US, the EU and China — are slowing down simultaneously. The head of the IMF believes that in 2023, one-third of the world economy would be in recession.
“Even countries that are not in recession, it would feel like recession for hundreds of millions of people,” Georgieva added.
She also said that China’s economic growth will be equal to or below the global economic growth for the first time in 40 years. Over the past few decades, China has been posting record economic growth and has stunned the world with its economic performance. However, the coronavirus outbreak, real estate crisis and severe regulatory pressures spooking the technology companies in the country have wreaked havoc on the country’s growth trajectory.
IMF’s chief also said that the US economy looks strong and it could avoid recession. She said the labor market in the country remains strong. However, this strong labor market is something that could bring more pain for investors in the months to come.
“This is … a mixed blessing because if the labour market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down,” Georgieva said.
Major investment firms and economic institutions are now joining the recession chorus. According to Bloomberg, Barclays Capital believes 2023 would be the worst year for the world economy in four decades, while Ned Davis Research Inc. thinks there’s a 65% chance of a worldwide economic downturn. Fidelity International thinks we are headed for a hard landing.
Inflation Expected to Slow Down
A latest report from the Dutch financial services firm ING said that inflation might start to come down in the US and there are chances that the Federal Reserve will start decreasing interest rates before eventually halting the hikes. However, the report said that inflation in Europe would take some time to recede.
An Unexpected Positive Development
There’s at least one positive news lately: an unexpected late start to the winter season is keeping natural gas prices low, calming investors around the world who were expecting a major energy crunch during the start of the winter.
Jim Cramer’s Playbook for Recession
Jim Cramer has a huge following online and hundreds of thousands of people listen to his commentary of the US and global stock market and economic situation. In November last year, Jim Cramer shared his playbook for inflation in a program and talked frankly about his strategy to survive through a recession. Cramer said that the Federal Reserve’s chair Jerome Powell doesn’t like inflation at all and he wants investors’ stock portfolios to go down.
Cramer said that the Fed is not expected to stop rate hikes anytime soon, which means you should keep selling tech stocks and flock to defensive stocks in sectors like oil, banks, healthcare and consumer products. Cramer said that stocks in these sectors can go up despite inflation because companies in these sectors are more “conservative.”
Jim Cramer then talked about the Dow Jones Industrial Average, and said that the index is full of relatively cheap stocks. He said that some believe the 30 companies in the Dow are vulnerable to recession. But Cramer believes “that’s just not true, that’s wrong.” Cramer thinks the Dow companies can handle recessions pretty well and recommended investors to pick stocks from the index to prepare for a recession.
Our Methodology
In this article, we picked stocks that are recession-proof based on the investment philosophy of Jim Cramer we talked about above. Cramer is bullish on these stocks, and we have mentioned his thesis for each of these stocks.
Jim Cramer’s Recession0Proof Stock Picks
11. American Express Company (NYSE:AXP)
American Express Company (NYSE:AXP) makes it to our list of Jim Cramer’s recession-proof stocks because the company is part of the Dow Jones index, which Cramer believes you should look for if you want to find recession-proof stocks, as mentioned in the introduction of this article. American Express Company is on Jim Cramer radar for quite some time now. In October 2022, Jim Cramer expressed his surprise when American Express Company stock tanked after earnings. He said at that time that American Express Company stock was a buy and praised the company for hiking its dividend in January. He also said that the company is set to profit as consumers increase travel.
A total of 68 hedge funds tracked by Insider Monkey reported owning shares of American Express Company at the end of the third quarter of 2022.
10. Apple Inc. (NASDAQ:AAPL)
Jim Cramer loves Apple Inc. (NASDAQ:AAPL) and has been recommending the stock publicly as well as to his investing club. In October, Jim Cramer said that “Apple is at the root of everything” and the stock’s decline has become synonymous with the decline of the entire market. That proved to be true as the stock market ended lower on the first day of 2023, mainly due to Apple Inc.’s slump. Cramer also said in the same program that Apple is the “greatest stock of all time.”
Apple Inc. is a key part of the Dow Jones index, and the company also pays a dividend. These two factors make Apple Inc. a recession-proof stock, according to Jim Cramer.
Hedge funds seem to agree with Cramer. At the end of the third quarter, 140 hedge funds reported having stakes in Apple, compared to 128 funds in the previous quarter. This shows a sharp increase in hedge fund sentiment around Apple shares.
9. Chevron Corporation (NYSE:CVX)
As we mentioned in the introduction of this article, Jim Cramer recommends oil stocks to prepare for the upcoming recession. Since Chevron Corporation (NYSE:CVX) is the most important oil stock in the Dow Jones index, we added it to the list of Jim Cramer’s recession-proof stocks. Jim Cramer has been a fan of Chevron Corporation for a long time. In April last year, Jim Cramer praised Chevron Corporation’s dividend yield and buybacks and said that Chevron Corporation is the most attractive of the large cap stocks in the market.
Chevron Corporation is an ideal stock for recessions. The company has been increasing its dividend for 35 years now. In the third quarter, Chevron Corporation easily crushed analyst estimates and its net income came in at $11.23 billion. Revenue in the period jumped 49%.
8. The Coca-Cola Company (NYSE:KO)
In July last year, Jim Cramer discussed in detail why he thinks The Coca-Cola Company (NYSE:KO) is a suitable stock pick for recessions. Jim Cramer said that in recessions you should hide behind defensive, recession-proof stocks, and The Coca-Cola Company is a “textbook” example of such stocks. Cramer said that the beverage business is not a hostage to the economy, by which he means that the business continues to thrive irrespective of the economic conditions since people continue to consume basic beverages like Coca Cola.
Cramer said that the economic slowdown could cause a slump in prices of commodities like aluminum and sugar, which would help The Coca-Cola Company offset the losses it might face due to rising inflation.
Recently, UBS analyst Peter Grom and his team said in a note that consumer staples were clear winners in 2022 and they believe many stocks in the group are expected to outperform the market again in 2023. The firm’s analysts are bullish on The Coca-Cola Company, in addition to many other consumer companies.
7. McDonald’s Corporation (NYSE:MCD)
McDonald’s Corporation made it to the list of Jim Cramer’s recession-proof stocks due to obvious reasons. The company is a solid dividend payer, it has loads of cash and it is operating in a segment which is not directly affected by recessions. Last month, Jim Cramer recommended McDonald’s Corporation stock and said that it is a classic defensive stock that typically continues performing well during tough economic times.
McDonald’s Corporation has been increasing its dividend for the last 28 consecutive years.
A total of 53 hedge funds in Insider Monkey’s database of 920 funds reported having stakes in McDonald’s at the end of the September quarter, compared to 50 funds in the previous quarter.
6. The Procter & Gamble Company (NYSE:PG)
In October, in a lightning round in his program, Jim Cramer said that he prefer The Procter & Gamble Company over Walmart. The Procter & Gamble Company is also a key part of the Dow Jones index, which is the favorite index of Cramer to find stocks for a recession. The Procter & Gamble Company is one of the best stocks to buy during difficult times since the company has upped its dividend for 66 years in a row. The stock has a dividend yield of 2.41% as of January 3.
A total of 69 hedge funds tracked by Insider Monkey reported having stakes in The Procter & Gamble Company at the end of the third quarter.
5. Caterpillar Inc. (NYSE:CAT)
Jim Cramer was extremely bullish on Caterpillar Inc. (NYSE:CAT) last month as he spoke about the company in a program at CNBC. Cramer said that Caterpillar Inc. is one of the great industrial companies. He said people are “ignoring” Caterpillar Inc. and the stock is undervalued. He also thinks that President Biden’s infrastructure plan would help the company.
What makes Caterpillar Inc. a recession-proof stock is its steady dividend and recession-proof business dynamics. The Down Jones component company has been increasing its dividends consistently for the past 28 years. The demand for its construction equipment keeps rising as the government and private sector initiates more construction projects.
In the next part of the article we will discuss the remaining four stocks in this list. All these stocks belong to the healthcare sector. These stocks were recommended by Jim Cramer in a recent program, in which he said that healthcare stocks remained steady in 2022 because they “tend to be recession-resistant stocks.” Let’s find out more.
4. Danaher Corporation (NYSE:DHR)
Jim Cramer last month predicted that Danaher is going to have a great year in 2023 and called the company “one of the best-run companies in any industry.” Danaher has been increasing its dividends for the past 8 years. The company has a market cap of $190 billion. It’s a conglomerate that makes medical devices, diagnostics products, equipment, and much more.
Danaher is also very popular among hedge funds. A total of 89 funds tracked by Insider Monkey reported having stakes in Danaher as of the end of the third quarter, compared to 82 funds in the previous quarter.
Here is what Stewart Asset Management has to say about Danaher Corporation (NYSE:DHR) in its Q3 2022 investor letter:
“We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Danaher (NYSE:DHR), among others, is a good example.”
3. Pfizer Inc. (NYSE:PFE)
Pfizer is yet another healthcare stock Jim Cramer is bullish on. Last month, Cramer praised the company’s acquisition of Arena Pharmaceuticals, Biohaven and Global Blood Therapeutics. Cramer added that Pfizer stock is a steal.
A total of 77 hedge funds tracked by Insider Monkey have stakes in Pfizer. Pfizer has increased its dividends consistently for the last 12 years.
2. UnitedHealth Group Inc. (NYSE:UNH)
Minnesota-based managed healthcare and insurance company United Health has a market cap of over $480 billion and is stable enough to survive through any recession. In the summer of 2022, when companies were bracing for a recession, United Health announced a 13.8% dividend increase to $1.65 quarterly per share.
Jim Cramer called United Health “best of breed” managed healthcare stock in his program last month.
Here is what Stewart Asset Management has to say about UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2022 investor letter:
“Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. UnitedHealth’s (NYSE:UNH) earnings were resilient. While it reported modestly down earnings in 2008, its earnings rebounded quickly to record highs in 2010 and the shares responded strongly in anticipation of this.”
1. Edwards Lifesciences Corporation (NYSE:EW)
Jim Cramer likes Edwards Lifesciences because he thinks the company’s underlying business is strong. The California-based medical technology company specializes in artificial heart valves and hemodynamic monitoring.
Edwards Lifesciences saw a strong growth in hedge fund sentiment in the third quarter. Insider Monkey’s database shows that 57 hedge funds ended the third quarter with the stock in their portfolios, compared to just 39 hedge funds in the previous quarter.
Here is what Wedgewood Partners specifically said about Edwards Lifesciences Corporation (NYSE:EW) in its Q3 2022 investor letter:
“Edwards Lifesciences Corporation (NYSE:EW) reported just +5% growth in revenue (foreign exchange adjusted) compared to a year ago. While this quarter represented a deceleration in revenue growth from earlier this year, much of that was due to hospital staffing shortages and the vagaries of global healthcare systems emerging from pandemic disruptions. The Company received FDA approval for its minimally invasive mitral valve repair system, PASCAL, and also presented compelling related clinical data, which should help support accelerating growth over the next few years. As for Edwards’ core TAVR system, there continues to be a (unfortunately) pent-up, untreated population suffering from severe aortic stenosis that will finally be able to find their way back into healthcare systems as labor market pressures ease.”
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This article is originally published at Insider Monkey.
