Elevated interest rates, tepid economic growth and an inverted U.S. Treasury yield curve have some investors concerned a recession may be coming. When the economy tanks, even most high-quality stocks get dragged down with it. However, during the past two U.S. recessions in 2008 and 2020, there were still a handful of stocks that significantly outperformed the S&P 500. These recession-resistant stocks might help investors play defense if the U.S. dips into a recession again.
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Here are seven stocks CFRA Research analysts recommend that outperformed the S&P 500 in both 2008 and 2020 (returns include dividends, if offered):
| Stock | Implied upside* |
| Walmart Inc. (ticker: WMT) | 9.2% |
| Abbott Laboratories (ABT) | 5.6% |
| Synopsys Inc. (SNPS) | 19.4% |
| Accenture PLC (ACN) | 17.6% |
| T-Mobile US Inc. (TMUS) | 6.9% |
| Netflix Inc. (NFLX) | 9.6% |
| NextEra Energy Inc. (NEE) | 10.2% |
*Based on CFRA 12-month target price and Aug. 14 closing share price.
Walmart Inc. (WMT)
It’s no surprise that discount retailer Walmart outperformed during each of the past two recession years. Americans can’t go without groceries when times get tough, but they can save money by bargain hunting at Walmart. Analyst Arun Sundaram says Walmart has moved past the inventory and supply chain challenges of recent years and is now positioned to grow operating income faster than revenue moving forward. Sundaram says Walmart has opportunities to integrate new technology and increase automation throughout its supply chain, which could help boost margins further. CFRA has a “buy” rating and $75 price target for WMT stock, which closed at $68.66 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) WMT performance: 23.3% (2020), 20% (2008)
Abbott Laboratories (ABT)
Abbott Laboratories is a diversified health care products company. It’s fairly obvious why many health care stocks performed well during the pandemic in 2020, but Abbott’s shares actually outperformed by an even wider margin in 2008. Analyst Paige Meyer says Abbott has a strong balance sheet and an innovative, diversified health care business model that will help its stock outperform peers in the long term. Abbott has also consistently grown its dividend, so income investors can depend on regular dividend payments even if the market is down. CFRA has a “buy” rating and $116 price target for ABT stock, which closed at $109.89 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) ABT performance: 28% (2020), -2.5% (2008)
Synopsys Inc. (SNPS)
Synopsys provides a platform on which engineers can design and test semiconductor chips and other software applications. The global semiconductor industry is a secular growth market, so demand for chip testing and design services is constant — even during an economic downturn. Analyst Brooks Idlet says Synopsys has sustainable earnings and revenue growth opportunities. Idlet says the company will benefit from the never-ending increases in semiconductor complexity. About 81% of Synopsys’ revenue was recurring in fiscal 2023, showing a potential for additional stability and downside protection during a recession. CFRA has a “buy” rating and $634 price target for SNPS stock, which closed at $530.80 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) SNPS performance: 86.2% (2020), -28.6% (2008)
Accenture PLC (ACN)
Accenture is a global information technologies services firm. The company generates nearly half its revenue from North America, about a third from Europe and the remainder from other parts of the world. Accenture’s diversified consulting and services business made it recession-resistant in the past and will likely continue to do so in the future. Idlet says Accenture has an attractive growth profile and impressive business fundamentals. In addition, the company has demonstrated the defensive nature of its diverse customer base by holding up well during macroeconomic downturns. CFRA has a “strong buy” rating and $376 price target for ACN stock, which closed at $319.83 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) ACN performance: 26% (2020), -7.5% (2008)
T-Mobile US Inc. (TMUS)
Following its merger with Sprint, T-Mobile is now the second-largest U.S. wireless provider. T-Mobile has generated consistent growth in a challenging industry, even during economic downturns. Analyst Keith Snyder says competition among wireless telecom leaders will remain fierce, but T-Mobile’s impressive churn and free cash flow growth potential make it an excellent investment in a recession. Snyder says T-Mobile will continue to gain market share and its 5G network is at least 12 months ahead of the networks of Verizon Communications Inc. (VZ) and AT&T Inc. (T). CFRA has a “strong buy” rating and $210 price target for TMUS stock, which closed at $196.49 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) TMUS performance: 71.9% (2020), -23.6% (2008)
Netflix Inc. (NFLX)
At first glance, it may seem strange that video streaming service Netflix, which relies on discretionary spending, would perform so well during times of economic difficulty. Netflix’s strength in 2008 and 2020 is likely to do with Americans cutting back on pricey entertainment options during financial hardship. Netflix provides access to thousands of shows and movies for as low as $6.99 per month. Analyst Kenneth Leon says Netflix is the undisputed leader in video streaming and can generate ongoing operating margin expansion and double-digit revenue growth. CFRA has a “buy” rating and $725 price target for NFLX stock, which closed at $661.68 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) NFLX performance: 67.1% (2020), 12.4% (2008)
NextEra Energy Inc. (NEE)
NextEra Energy is a utility holding company and the parent of Florida Power & Light and NextEra Energy Resources. Utility sector stocks are generally considered defensive investments and are often a preferred flight-to-safety play during economic downturns. Utility companies have stable and predictable demand and cash flows, as well as limited competition. NextEra shares outperformed the S&P 500 by double-digit percentages in both 2008 and 2020. Analyst Daniel Rich says NextEra is well positioned for earnings and dividend growth and should benefit from a favorable Florida regulatory environment. CFRA has a “buy” rating and $86 price target for NEE stock, which closed at $78.01 on Aug. 14.
S&P 500 performance: 16.3% (2020), -38.5% (2008) NEE performance: 30.1% (2020), -23.5% (2008)
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7 Stocks That Outperform in a Recession originally appeared on usnews.com
Update 08/15/24: This story was published at an earlier date and has been updated with new information.
