Market turbulence happens.
Lately, it’s becoming clear that investors need to be focusing on recession-resistant stocks. Companies that provide stable cash flows and pay out dividends, or reinvest their capital into their core high-growth businesses, are likely to outperform. If macro headwinds pick up, it’s better to be safe than sorry. And while growth has outperformed value for quite some time, it’s true that over the long-term, this dynamic is typically reversed.
We could be headed into a period where companies that are fairly-valued and spit off tremendous cash flows are rewarded much more highly by the market. In that regard, I’ve picked three recession-resistant stocks that investors should consider. It doesn’t matter what happens to the market today or tomorrow. But if you expect some turbulence over the next year or two, these companies could be among the best picks to buy right now. (It’s also worth noting they should perform well in a booming economy as well, of course).
Restaurant Brands (QSR)
As the parent company of big fast food chains like Popeyes and Burger King, Restaurant Brands (NYSE:QSR) has stood tall through market turbulence. Its presence and multi-brand strategies enhance its pricing power.
Recently, Burger King sealed a deal with a $300 million investment, overhauling over 1,100 U.S locations. This becomes a big step in the fast food chain’s revitalization. Restaurant Brands made this move to focus more on modern facilities. Upgrades include new equipment, seating and a modernized look which includes ordering kiosks.
The $300 million investment extends the “Reclaim the Flame” strategy, launched in September 2022. Restaurant Brands International allocated $250 million for renovations, tech upgrades and new equipment. Then they threw in an extra $150 million for app enhancements and advertising. Early results show strong sales uplifts from completed remodels.
Over time, consumers will continue to go out to eat. I expect more of a trade-down effect to chains operated by Restaurant Brands, if economic turmoil hits. This is a safe long-term bet to make in an uncertain market.
Meta Platforms (META)
As a Magnificent Seven stock, Meta Platforms (NASDAQ:META) has surged 194% since last year, showing its rebound growth. But just recently, META saw a 12% decrease after it announced plans to spend more on artificial intelligence (AI).
Meta Platform’s profitability is notable, with consistently high revenue and substantial operating leverage. This is evident in its steady gross profit margins and free cash flow, providing financial flexibility for reinvestment. Also, the company revealed a raised 2024 capex guidance between $35 and $40 billion.
The communications behemoth holds most social media platforms, with the big three, Facebook, WhatsApp and Instagram, under their wing. However, it faces competition with YouTube and TikTok. Further, the company enhances its in-house chips, developing more data processing and advertising capabilities. This closed tech stack accelerates revenue opportunities for Meta Platforms.
Berkshire Hathaway (BRK-A, BRK-B)
The last one on the list of recession-proof stocks is Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). Currently, most of Warren Buffett’s holdings are in massive blue-chip stocks that should weather any economic environment. Indeed, the Oracle of Omaha has built his portfolio in a recession-resistant way. He doesn’t like losing money, and that’s a strategy many investors hold as well.
In late 2023, Berkshire Hathaway sold a variety of stocks ranging from Stoneco., Markel, Globe Life and D.R Horton. Notably, the investing giant reduced its mammoth holdings in Apple, still retaining nearly 906 million shares. In addition, it trimmed its HP position while maintaining Bank of America (NYSE:BAC) and Coca-Cola (NYSE:KO).
However, Berkshire Hathaway’s energy exposure extends beyond Chevron (NYSE:CVX). It’s been increasing its stake in Occidental Petroleum (NYSE:OXY), adding 19 million shares in the most recent quarter, totaling over 248 million. Buffett clarified Berkshire Hathaway won’t seek control of Occidental at the 2023 shareholder meeting.
For those bullish on Buffett’s investment wisdom (and that of his team), this is a stock to stick with through thick and thin.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
