Are There Any Recession-proof Stocks Out There?
Monitoring the markets is an important aspect of successful stock trading. With direct market access trading offered by online broker dealers, the stock market has become a lot more accessible for people. But they still need to watch out for events shaping the market and analyst opinions so they can make the right decisions.
A market crash is always a fear in every investor’s mind. As per this Motley Fool article, it probably could be around the corner, though investors and analysts have been saying this for quite some time. You may not be able to prevent a recession, but you can certainly be prepared for it if you watch the market carefully. There are some stocks that can thrive in recession-like situations. In such situations it is harder to make money. But these stocks could potentially benefit from a market crash. It’s important to keep such stocks in mind since situations are quite volatile now.
Some Stocks Are Strong Enough to Benefit from a Market Crash
Motley Fool analyst Rick Munnariz points out Target ($TGT), McDonald’s ($MCD) and Roku ($ROKU) as stocks that could actually be benefited from a market crash, if that were to happen. These stocks soared to new highs during the summer. Roku might have had a correction recently, but apart from that all three are in fine shape now. But Munnariz says that even when things get bad they could withstand what’s thrown at them. Here’s why:
A Discount Department Store
Target is a discount department store, meaning people get good stuff for less. That makes it an all-weather play. Even when the economy is doing well, and people are having cash to spare, they can’t resist a great deal, which makes them want to visit discount stores often. And when the going is tough, the discount store is again what the doctor ordered. The only challenge comes from online retailers that sell at aggressively discounted rates.
However, Munnariz observes that Target has been able to brush off challenges from online discounters. It has just had a strong quarter, one of many in recent times. The comps were up 3.4%. They’ve been up 10% since the corresponding period two years back. Its adjusted earnings and operating income are growing much faster than even its top line. The company also announced a share buyback of $5 billion in the 3rd week of September. It is an indication of the company’s confidence in its value and relevance no matter what the future brings.
Its latest quarter witnessed a 34% rise in sales for comparable digital channels. That is 10 times quicker than its in-store sales. With its recent acquisition of Shipt, it has transformed to lead the same-day fulfillment category, drive up services and order pick up. It’s now got the advanced technology to complement its great merchandise.
Largest Restaurant in Sales Volume
Moving to the fast food giant, McDonald’s was once only famous for its junk food but at an affordable budget. The company is the largest burger chain in the world and has now made modifications to its higher-end menu to make it healthier. At the same time, it hasn’t forgotten value-driven offerings that make up its core. Its barbell pricing strategy is making it more popular. Though store traffic had a slight dip last year, it is making up for it with the help of third-party apps. These apps help in making McDonald’s menu delivery easy and also priced reasonably.
The company has what it takes to overcome the market downturn as was proved in the recession-hit 2008 when its shares returned 9%. It also had its dividend raised recently, the 43rd consecutive year it’s doing this. McDonald’s and Target enjoy 2.4% yield. That’s more than enough reason to make the stocks worth buying before a market crash comes along. Munnariz also points out McDonald’s refranchising strategy by which it hands over its units to franchises. The strategy not only helps it attain record profits but also disburse the impact of lull periods to its franchisees.
Popular Video Streaming Technology Provider
Roku is a stock in the video streaming industry. That itself makes it an attractive proposition as a result of the increasing popularity of this mode of entertainment and the decreasing popularity of satellite and cable television.
Netflix Was the Big Winner of 2008
This popularity was realized back in 2008, when the last global recession happened. While the S&P 500 slumped 38%, current video streaming provider but then DVD rental provider Netflix ($NFLX) was able to gain 12%! Consumers found the allure of watching new movies at home greater than heading to the movie theater. That helped it thrive during the recession. Now the market has evolved to Internet video streaming, and though Netflix is doing well, its subscriber growth is coming down as a result of pressure from Disney ($DIS). The key to success in this industry is offering premium services with aggressively competitive pricing. Munnariz points out that this situation is where Roku can thrive.
Roku Could Be the Next Winner
When the next recession comes, video streaming will play as crucial a part as DVD rentals played back in 2008. Roku currently has active accounts exceeding 30 million, and is crucial as the favored technology and operating system provider for smart televisions. Roku’s gateway is already contributing to over three hours per day of streaming for the average account. Munnariz reckons that the services now eating into Netflix’s dominance will make Roku a more lucrative platform.
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