We are currently in the midst of a correction, a downturn and potentially a recession. Whatever it is, volatility remains high. Investors have engaged in a broad market sell-off over the last month or so. Although there have been some signs of a rebound, Many continue to worry that a market crash is looming. Given that those fears continue to run high, it makes sense to do as much as possible to recession-proof your portfolio and move into safer stocks.
Measures of overall market fear indicate that a shift is warranted and that those assets should perform well. Although no truly recession-proof industries or companies exist, some perform much better during corrections. Certain industries, including consumer staples and discount retailers, are known to act as buffers against broader economic woes.
Again, there are no guarantees in the market and thus no method to protect against downside risk completely. That said, consider the tried-and-true strategies that have worked historically.
Dollar General (DG)
Dollar General (NYSE:DG) stock is poised to move higher after a somewhat disappointing Q2 print.
The company didn’t have trouble attracting customers or driving sales, with revenues of $9.91 billion that slightly exceeded expectations. Strong customer traffic helped the company gain market share during the period.
As Dollar General customers continued to reel from unrelenting inflation, volume gains more than made up for lower average spending. The company is also dealing with significant shrinkage — a nice term for theft — that was partially responsible for a 26.3% decline in operating profits during the period.
That led Dollar General to shut down 12,000 self-checkout kiosks at its stores as a response to the issue.
Presumably, Dollar General will be hiring more human beings to deal with customers. Personally speaking, that’s much preferable. Regardless, the shift should improve Dollar General from an operating profit standpoint. The stock will be attractive to investors who recognize the strength of discount retailers during market corrections.
Anheuser-Busch InBev (BUD)
Anheuser-Busch InBev (NYSE:BUD) is another stock to buy for its utility as a portfolio buffer. Most investors are aware that alcohol stocks perform well in recessions. The theory is that alcohol consumption increases due to concerns over the economy.
In practice, it’s a little bit different. Alcoholic beverage companies tend to be recession resilient rather than recession proof. All that means is that consumers tend to trade down during recessions and that they remain subject to cyclical demand.
The notion that consumers trade down in anticipation of a recession is particularly good for Anheuser-Busch InBev. The company owns many familiar, low-priced brands, including Budweiser, Bud Light, Busch, Natural Light and more.
Sales grew during the second quarter, though not as much as expected, as the company saw volumes decline, with price increases more than making up for the difference. If the economy worsens in the near term, Anheuser-Busch InBev should see volumes for its lower-priced beers rise.
Procter & Gamble (PG)
Procter & Gamble (NYSE:PG) is one of the first stocks investors recommend during tumultuous times.
The company has historically proven resilient during downturns by selling consumer staples that benefit from relatively inelastic demand. During the 2008 crisis, the stock fell within the broader market but recovered quickly. It held up better than the market during the pandemic downturn.
One reason to believe Procter & Gamble will perform well this time around is that the company is expected to produce an earnings rebound in 2024 overall. Thereafter, the company is expected to be very steady, with approximately 6% earnings growth on an annual basis for the foreseeable future.
Organic sales at the company grew by 4% as the company just released its 2024 fiscal year results. It is the sixth consecutive year that Procter & Gamble has notched that achievement. That should serve as a testament to investors that the core products in the company’s portfolio are strong. Procter & Gamble should continue to derive predictable earnings from that product portfolio that can fund its dividend and continue to bolster its perception as a defensive stalwart.
On the date of publication, Alex Sirois 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
