When the markets are volatile, some investors get nervous and start to sell. While some industries are very susceptible to economic changes, there are other industries that do well no matter what is happening with the economy. While no company is completely recession-proof, the following industries continue to see strong performance even when unemployment rises and consumer sentiment falls. (For more insight, read about industries that thrive on recession).
No matter what happens in the economy, people still need certain household items on a recurring basis. Toothpaste, soap, shampoo, laundry detergent, dish soap, toilet paper and paper towels are always in demand and are considered consumer staples. A small group of conglomerates produces the majority of these items. Major companies in this sector include Colgate-Palmolive Company (CL), Proctor & Gamble Co (PG) and Unilever N.V. (UN). If you look at the manufacturer of many items in your home, you will find these companies. They own more than 30 brands with revenues over $1 billion per year, as well as dozens more smaller brands.
Grocery Stores and Discount Retailers
Consumer staples have to be purchased somewhere, and many of those purchases happen at grocery stores or large retail chains with locations around the world. The Kroger Company (KR), Wal-Mart Stores, Inc. (WMT), and Costco Wholesale Corporation (COST) control the largest grocery chains in the United States. These powerhouse retail giants collectively bring in hundreds of billions.
Alcoholic Beverage Manufacturing
Beer, wine and distilled beverages are high-margin products that people want around the world. In recent years, a small group of companies has acquired many of the largest beer and spirit brands around the globe. The largest companies in this sector today include Anheuser Busch InBev SA (BUD), Companhia de Bebidas das Americas (ABV) and Diageo plc (DEO). Anheuser-Busch InBev owns brands such as Budweiser, Corona, Stella Artois, Beck’s, Leffe and Hoegaarden. UK-based Diageo controls brands such as Smirnoff, Johnnie Walker, Tanqueray and many more.
Research shows that people do tend to spend less on alcohol and other vices during a recession, but quantity increases as people buy more of less-expensive products. If you are out for a night on the town or keep a stocked liquor cabinet at home, you are most likely a customer of these companies.
Women and men, like to look good when going out and when they head to work. A down economy does not change that. The largest cosmetics companies include Estee Lauder Companies Inc. (EL) and Coty Inc. (COTY), a major licensed brand manufacturer. Both of these companies have non-cyclical product portfolios that do well in weak economic conditions, in addition to luxury brands, which thrive in a strong economy. Previously mentioned Procter & Gamble and Unilever are also strong members of the beauty industry.
Death and Funeral Services
As the popular saying goes, the only two things that are certain in life are death and taxes. While no one can buy stock in the Internal Revenue Service, investors can buy shares in companies that profit from death-related services. StoneMor Partners L.P. (STON), Carriage Services, Inc. (CSV), Service Corporation International (SCI) and Matthews International Corp. (MATW) are four companies that make their revenues from life’s inevitable end. These companies provide caskets and funeral related services that people are dying to use.
The Bottom Line
There is never any guarantee of investment gains, but if you are looking to put a hedge in your portfolio against a weak economy, these industries can provide some safety. You can minimize your risk by creating a diversified, well-rounded portfolio.