Think we're headed back into a recession? A lot of investors do. They are buying the most defensive, recession-proof names they can get their hands on. That means consumer staples names Colgate Palmolive (NYSE:CL) and Coca-Cola (NYSE:KO) are quickly coming back into favor; both are knocking on the door of new highs. Makes sense, as it's unlikely consumers will give up the most basic daily things - no matter how deep the economy sinks.

SEE: Tips For Recession-Proofing Your Portfolio

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

There's another group of stocks that do just as well in a recessionary period though, and these corporations don't make anything you can eat or clean yourself with. In fact, these companies don't even target consumers at all - at least not individual consumers.

Corporate Staples
In the same sense that the average consumer just isn't going to give up food or hygiene no matter how tough times get, some corporations can't give up something they've grown quite accustomed to as well - their technology. Specifically, a whole host of enterprises are quite married to their software-as-a-service and database management service, so much so that they couldn't get rid of it if they wanted to.

This is a unique business. Unlike auto manufacturing or retailing, technology service providers are built from the ground up not to generate one-time sales, but rather generate recurring revenue on a monthly and quarterly basis.

Oracle Sees Solid Growth
It's a model that's worked well for the likes of Oracle (Nasdaq:ORCL). While the company has seen its ups and downs on the personnel front (the Mark Hurd, HP saga), Oracle made more for shareholders in 2008 than it did in 2007, and made more in 2009 than it did in 2008. In fact, Oracle's earnings have increased solidly every year since 2005.

How does that happen when every other industry is still struggling to push itself up off the mat? It's the recurring-revenue nature of the database and software management business. Once Oracle integrates itself into the daily routine of its customers, it's entrenched.

The Niche Player
Where Oracle paints a broad brush stroke in the industry, some of the more focused names perform even better within a particular niche.

Take Cerner Corporation (Nasdaq:CERN) for instance. This supplier of healthcare information technology solutions has also grown its top and bottom line every year since 2006, sailing right through the 2008 recession as if it wasn't happening. Analysts predict this year's revenue will be $2.5 billion. Although shares are priced at a hefty 41.22 times trailing earnings, the consistent fiscal progress is undeniable.

Right Idea, Wrong Stocks
While Oracle and Cerner are fine stocks in their own way, as is so often the case, the highest-profile name in the group isn't necessarily the best stock in that group.

Among the healthcare technology names, Quality Systems (Nasdaq:QSII) may be the better choice. With shares priced at 22 times trailing earnings, it may not going to win any value awards. After four straight quarters of earnings increases though - not to mention five consecutive years of higher per-share profits - it's tough to deny it is a growth juggernaut.

In the same broad vein as Oracle, smaller New York-based CA Inc. (NYSE:CA) may be a wiser choice. Like Quality Systems as well as Oracle, CA has created stunningly reliable growth regardless of the environment. For every quarter over the past two years now, the company has posted high year over year quarterly profits. And, it also boasts five straight years of improved profits, as if the recession wasn't even happening. (To help identify which stocks to add to your portfolio, read 4 Characteristics Of Recession-Proof Companies.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    Will WYNN Continue to Rally?

    Wynn Resorts has experienced a rally recently. Will it remain a good bet?
  2. Stock Analysis

    Don't Be Fooled by the Market's Recent Rally

    The bulls won for a bit in early October, but will bears have the last laugh?
  3. Stock Analysis

    Will Twitter's Stock Find its Wings Soon?

    Twitter is an enigma to many investors, but its story is pretty straightforward.
  4. Stock Analysis

    8 Solid Utility Stocks for a Bear Market

    If you're seeking modest appreciation, generous dividend payments and resiliency, consider these eight utility stocks.
  5. Stock Analysis

    Why Phillips 66 (PSX) is a Solid Long-Term Bet

    Here's why Phillips 66 will likely remain one of the world’s largest and most profitable companies for a long time to come.
  6. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  7. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  8. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  9. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  10. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  1. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!