Stocks That See No Recession

By Sham Gad | September 15, 2011 AAA

The million-dollar question investors are trying to figure out today is whether the market is headed for the "double dip", a term used to describe an economy falling back into a recession after having recently recovered from one. Indeed, the answer is important because a recession would most certainly cause stock prices to decline. But the reality is that no one can predict the future with 100% accuracy. Thankfully, you don't have to; just invest in companies whose businesses will be little impacted by an economic downturn. (To help you identify those companies, read 4 Characteristics Of Recession-Proof Companies.)

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The Real Thing
Trading at 13 times earnings and yielding 2.7%, Coca-Cola (NYSE:KO) may be the most recession-proof business in the world. People all over the world have an affinity to Coke that is irreplaceable. It's also a relatively minor purchase for consumers. And the company is experiencing significant growth outside the U.S. The treat of generic substitutes is virtually non-existent; Coke is trusted by consumers who aren't interested in saving 25 cents by going generic.

Coke's main competitor, Pepsico (NYSE:PEP), also looks well-suited to weather any economic storm for reasons similar to Coke. Those that don't drink Coke usually drink Pepsi. Shares in PEP now trade for $63, off from $72, and yield 3.3%. You can be as sure as night follows day that Pepsico's dividend is safe.

These Businesses Like Recession
All right, so maybe no businesses really like a recession, but it sure seems that some of them benefit from it. As times get tougher, the appeal of Wal-Mart's (NYSE:WMT) low prices grows upon consumers. Wal-Mart hasn't been an exciting business to own in terms of shareholder returns, but the world's biggest retailer is trading at 11 times earnings and yielding 2.7%. In a recessionary environment, Wal-Mart shares will likely do a better job of retaining their value relative to other retailers.

Discount fashion retailer TJX (NYSE:TJX) offers the high-end name brand fashions at highly discounted prices. More frugal customers will gravitate toward T.J.Maxx for the savings. The stores carry all the high-end brand merchandise that customers will find at places like Nordstrom or Macy's. TJX has been a consistently profitable company over many years. The fact that shares still trade near a 52-week high despite a nearly 8% decline for the S&P 500 so far in the third quarter indicates that investors are confident in the company's profitability going forward. Despite the price, shares still trade at 13 times earnings.

Bottom Line
Regardless of day-to-day stock price swings, not all businesses suffer recession-like setbacks during a recession. While it doesn't seem like a double dip is on the horizon for the U.S. economy, some businesses will likely keep moving ahead even in the face of a recession. (For help in protecting your portfolio, see Tips For Recession-Proofing Your Portfolio.)

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