6 Inflation-Proof Stocks Likely to Grow During a Recession

Shutterstock

Investing legend Warren Buffett recommends buying and holding stock from quality companies during lean times. Here are six companies whose stock has outperformed the S&P 500 during the last two most recent recessions.

Warren Buffett’s advice on buying stock from quality companies

Investing master Warren Buffett has said stocks are at their cheapest when fear is running high, making it an excellent time to buy stocks. In his career, Buffett has profited from purchasing quality companies when markets were crashing.

“Buy into a company because you want to own it, not because you want the stock to go up,” Buffett says.

6 companies whose stock has remained strong during recessions

During the past two United States recessions, 2008 and 2020, a handful of stocks outperformed the S&P 500 significantly. Typically, it comes from companies that Americans still purchase from even during lean times or high inflation. According to US News, here are six companies whose stock comes with “buy” ratings from CFRA Research.

  1. Home Depot Inc. (HD)

While the interest rate hike and lumber prices could hurt new construction, Home Depot does a large business on repair materials. During a recession, things still break around the home. Some repairs can’t be put off, and that’s why companies like Home Depot continue to thrive regardless of economic downturns.

S&P 500 outperformance: 5.3% (2020), 23.9% (2008)

  1. Abbott Laboratories (ABT)

Healthcare has always remained stable, as it’s a service people can’t do without. Needs in the area of diabetes care medical devices are growing. There has also been growth, understandably, during the pandemic.

S&P 500 outperformance: 9.8% (2020), 33.6% (2008)

  1. Walmart Inc. (WMT)

Walmart has always thrived during economic downturns, as it sells just about everything, including essentials such as food and clothing. The company is also investing heavily in e-commerce and automation, giving Amazon a challenge in the marketplace.

S&P 500 outperformance: 5% (2020), 20.6% (2008)

  1. Lowe’s Cos. Inc. (LOW)

In the previous paragraph about competitor Home Depot, we’ve already described why companies like Lowe’s remain strong during recessions by selling products people can’t do without. While the recent increase in interest rates could hurt new construction, purchasing building materials for repairs is unlikely to diminish.

S&P 500 outperformance: 17.7% (2020), 33.6% (2008)

  1. Target Corp. (TGT)

Target has consistently met its revenue and operating income growth targets while achieving high-single-digit earnings growth. Target sells things people can’t do without no matter inflation or recession – groceries and clothing. Shoppers can bargain hunt at Target to balance their tight-stretched budgets.

S&P 500 outperformance: 21.4% (2020), 7.6% (2008)

  1. Netflix Inc. (NFLX)

Experts believe companies like Netflix will do well as people opt for entertainment at home, rather than pricier options elsewhere. Netflix provides entertainment for a relatively low monthly fee. Many believe Netflix has a long runway for subscriber growth.

S&P 500 outperformance: 50.8% (2020), 50.9% (2008)