These seven stocks hold their own during tough times.
Leading economists predict turbulent economic times ahead for the U.S. in 2023, and that may mean trouble for the U.S. stock market. Historically, stocks have significantly underperformed in recessionary periods. Overall, of the last 11 recessions since 1950, the average market bottom comes 169 days after the onset, with the average stock market loss, as measured by the S&P 500, clocking in at 21%. The good news is that some stocks thrive during recessions. Here are seven stocks recommended by Wall Street analysts that outperformed the S&P 500 in both 2008 and 2020 — and could do so again in 2023.
Walmart Inc. (ticker: WMT)
Consumer defensive giant Walmart has outperformed the S&P 500 in 2022, posting a total return, which includes dividends, of 0.7% year to date through Dec. 22, while the S&P 500 is down 19.8% over the same period. Credit Suisse analyst Karen Short is on board with WMT, calling it her “top stock” for the 2022 holiday season. Short tapped Walmart stock with an “outperform” rating on Dec. 20, and upped her WMT price target from $160 to $170. Walmart, which proved to be “extremely resilient” during the 2008 to 2009 recession, closed at $143.48 on Dec. 22.
S&P 500 outperformance: 5.1% (2020), 56.3% (2008)
Abbott Laboratories (ABT)
Two factors investors want to see from a recession-resilient stock are cash flow and income reliability. Abbott Laboratories fits the bill on both fronts. On Dec. 9, Abbott announced an 8.5% boost to its dividend, to 51 cents per share. The diversified health care company has a market cap north of $185 billion and internal estimates show Abbott is expected to maintain a 5.1% growth rate over the next five years. ABT also outperformed broad market indexes in both 2008 and in 2020, when a recession crushed most large-cap stocks. While Abbott had a built-in advantage in 2020 due to the global pandemic, the company had no such edge in 2008 and still significantly outperformed the S&P 500. Currently, the average analyst price target is $116.88 for ABT stock, which closed at $108.03 on Dec. 22.
S&P 500 outperformance: 9.8% (2020), 33.6% (2008)
Home Depot Inc. (HD)
Home Depot also has a solid record of outperformance during the 21st century’s deeper recessions, outperforming the S&P 500 in 2008 and in 2020. If, as expected, the Federal Reserve responds to a future economic downturn by slashing interest rates, big box home services retailers like Home Depot benefit. In that scenario, homeowners tend to stick to their homes and spend more on renovations and remodels, rather than move into an entirely new property in a toxic real estate market. That’s a big reason why in Cowen’s top investment selections for 2023, HD made analyst Max Rakhlenko’s list. He recently issued an “outperform” call on Home Depot, with a price target of $379, up from his last target price of $350. Rakhlenko cited Home Depot’s emerging Pro service for professional contractors as a major bullish point. HD stock closed at $316.12 on Dec. 22.
S&P 500 outperformance: 5.3% (2020), 23.9% (2008)
Synopsys Inc. (SNPS)
There’s always a good case to make against recency bias, but in the last recessionary period in 2020 Synopsys blew the S&P 500 away, besting the index by a whopping 70% for the year. Synopsys is well-positioned for 2023, as well, even if the economy tanks. That’s due to Synopsys’ solid positioning in the semiconductor market as the demand for chip-testing and design services remains robust. The burgeoning impact of breakthrough technologies like artificial intelligence, 5G networks, the Internet of Things, high-performance computing, cloud computing and automotive technology should also continue to hike demand for Synopsys’ inventory in 2023. With the company rewarding shareholders with a new $300 million accelerated stock buyback program, investors may want to plug into SNPS for the new year. SNPS recently earned a $420 price target from Deutsche Bank, and closed at $321.72 on Dec. 22.
S&P 500 outperformance: 70% (2020), 9.9% (2008)
Accenture PLC (ACN)
Accenture, one of the largest information technology services companies in the world, is on the right track heading into 2023. The company just announced its fiscal first quarter numbers, with ACN reporting earnings of $3.08 per share, well above FactSet analyst estimates of $2.92 per share. Meanwhile, Accenture reported revenue of $15.7 billion, again ahead of the $15.6 billion projected by analysts. Accenture’s diversified consulting and services business works in its favor in economic downturns and Wall Street is betting the company will repeat that performance in 2023. The average analyst price target is $313.04. ACN stock closed at $264.76 on Dec. 22.
S&P 500 outperformance: 7.8% (2020), 29.5% (2008)
T-Mobile US Inc. (TMUS)
As of late December, T-Mobile’s stock is less than 10% off recent all-time highs, a fairly remarkable scenario in a market where the S&P 500 is down 19.8% on the year. TMUS’s resilience is good news for investors, as T-Mobile has generated consistent growth in a challenging industry, even during economic downturns. Plus, TMUS has a 5G ace up its sleeve with its 2020 purchase of Sprint, which has started to pay real dividends for the company in 2022. The company is also nearly done with its mid-band Ultra Capacity 5G buildout serving more than 260 million customers. That puts T-Mobile years ahead of its competition in the industry, and frees up an abundant amount of cash flow for the telecom giant that should insulate the company if hard economic times do come calling in 2023.
S&P 500 outperformance: 55.7% (2020), 14.8% (2008)
Walt Disney Co. (DIS)
Walt Disney, which slid Bob Iger back into the CEO role on Nov. 22, is looking to re-establish its reputation as the largest and most diversified media and entertainment company in the world. Investors have balked at Disney’s commitment to content streaming, a division which turned in an operating loss of $1.5 billion last quarter. Still, Disney’s streaming operation boasts more than 235 million subscribers and that number is climbing. What DIS investors may not know, but Iger certainly does, is that traditional cable TV is on life support, with Disney’s linear network revenue falling 5% over the past year. That said, Disney has a sprawling entertainment portfolio, and Iger’s return should help the company survive any potential 2023 recession as it relies on its best-in-class lineup of intellectual property to outperform.
S&P 500 outperformance: 9% (2020), 8.8% (2008)
7 stocks that outperform in a recession:
— Walmart Inc. (WMT)
— Abbott Laboratories (ABT)
— Home Depot Inc. (HD)
— Synopsys Inc. (SNPS)
— Accenture PLC (ACN)
— T-Mobile US Inc. (TMUS)
— Walt Disney Co. (DIS)
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7 Stocks That Outperform in a Recession originally appeared on usnews.com
Update 12/23/22: This story was previously published at an earlier date and has been updated with new information.
