In the last month (June 2022), the stock market fell steeply to a low of 13 months. Not only the Indian stock exchange but the Dow Jones has fallen to its lowest point since January 2021.
Indian stocks such as Vedanta, Titan, and mid-caps have all fallen more than 12 percent and 4 percent, respectively. Inflation and the potential for recession are two major factors that have contributed to the fall in stock values.
Is there any oasis of investment to be explored in such a dry economic climate? You can find your oasis in recession-proof stocks. Learn more about these stocks.
Understanding Recession-Proof Stocks
A recession is an economic situation that has a significant impact on the market. In a recession, the economy of a nation experiences a slowdown that leads to extreme volatility. No business is 100% immune to the effects of a recession. Although negative investor sentiments are characteristic of this phase of the economic cycle, you can still find some businesses that offer recession-proof stocks.
If the economy does go into recession, it is better to add these stocks to your investment portfolio before that happens. We are not here, bro, to give you stock advice. We will be discussing stocks to help you better understand the concept.
Recession-proof businesses are those that perform well in a recession.
They have performed historically differently during recessions than other businesses and can, therefore, be classified as one. These stocks may belong to different companies.
Top Stocks to Avoid Recession
You can invest in these top-rated recession-proof businesses:
Consumer essentials
Even if the economy is in a bad recession, no one will stop washing their clothes, brushing their teeth, or bathing.
These companies are involved in the production of essential items such as toothpaste, toothbrushes, shampoo, detergents, dishwashers, etc. Their production, sales, and revenue can be less volatile in a recession. This makes them recession-proof stocks.
Stocks like Marico and Hindustan Unilever are some of the most notable Indian brands. ITC’s stock price has recently increased by over 24 percent for the calendar year of 2022.
These consumer staple stocks offer products that can be in high demand even during a recession. This is why these stocks are often referred to as essentials or consumer staples.
Discount retailers, grocery stocks
Have you ever quickly entered the Dmart billing line on a weekend? Discount retail and grocery businesses are very powerful.
In a recession, the income of the population drops, and they prefer to buy discounted goods more than ever before. Even essentials and staples for consumers must be accepted somewhere. These products can be purchased at discount retailers and supermarkets.
These businesses’ sales and revenues are, therefore, less affected by a recession. These are recession-proof businesses, which allow them to sell other recession-proof goods.
Dmart (Avenue Supermarket), Spencer’s Retail Limited, and others are all notable stocks. These companies are usually supermarkets that sell consumer goods and luxury items.
Manufacturers and Suppliers of Alcoholic Beverages
Alcoholic beverages such as wines, beer, rum, whiskey, and other products have a high profit margin.
These products are less affected by the economic cycles. Since the demand for such products is stable, revenues and profits may not be affected by a recession. If you own such a business, then you can relax as they are recession-proof stocks.
In India, notable liquor manufacturers include United Breweries (United Spirits), Som Distilleries (Som Distilleries), Assoc Alcohol (Assoc Alcohol), Globus Spirits, and Radico Khaitan.
The Indian liquor market is also facing stiff competition from French spirits makers. Recent sales growth by French distillers in India has increased their sales by 25% compared to the previous year. This puts pressure on Indian liquor brands.
Cosmetics and Make-up
What if you could manage the recession by combining beauty and style? You can invest in the stocks of cosmetic and make-up manufacturing companies.
The “Lipstick Effect Theory” suggests that these products are more likely to be sold during a recession.
According to the Lipstick Effect Theory, people are more likely to indulge in small indulgences during a recession. Any economic downturn can be stressful. This is because businesses are experiencing lower revenues, and workers have less money to spend.
These consumers are no longer able to indulge in the previous activities that they would have done. Spending satisfaction can temporarily be diverted from larger items such as lipstick, cosmetics, and clothing to smaller ones like apparel, clothing, or accessories. Demand can rise unexpectedly during a recession because so many people indulge in these purchases. These stocks are recession-proof.
Among the stocks listed are Hindustan Unilever Limited(HUL), Marico Limited, Emami Limited Dabur, Procter & Gamble Hygiene and Health Care Limited P&G, Gillette and others.
Stocks in the grooming, skill-development, and training business can also be considered recession-proof stocks.
To conclude
According to their stock performance during recessions, the businesses mentioned above are considered recession-resistant. There are no guarantees or hard facts that these stocks will only perform well in a downturn.
A recession trend may not be the same for all stocks within these categories. For different stocks, trends might differ.
Investor discretion is, therefore, vital when determining value and investing in stocks. Use Ticker for Finology to research or find out about stocks.
Find your next multi-bagger and monitor your portfolio with #InvestingKaSearchEngine TICKER. Today’s news is over. Until next time, Happy Investing!
