3 Industries to Invest in During a Recession

This article is about investing in stock market businesses over the long term. 

  • Recession Proof Stocks – Healthcare, Consumer Goods, Utilities
  • Value Investing like Warren Buffet
  • Analysis Methods

Motive – Savings are eroding: I don’t like the stock market because I am risk-averse. I’ve had some success in real estate and put all my efforts there. Since the value of my “nest egg” eroded during the big inflation, I’ve reconsidered investing in businesses

Onboarding – Reduce Debt: Before you even think about investing, you should not be in a debt situation. I avoid debt and credit cards like the plague. Don’t make me say “I told you so.” Well, that’s not 100% true. I like my Discover card which pays dividends- I keep the balance at $0.00, by the way.

Strategy: One of the most important Warren Buffett quotes on investing is, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

Value Investing: Warren Buffett is known for his value investing approach, which involves looking for undervalued companies with long-term growth potential and holding onto them for the long term. Here are seven of his investing tenets:

  1. Look for companies with a durable competitive advantage, also known as a “moat.”
  2. Focus on the intrinsic value of the company, rather than its market price.
  3. Invest in companies with strong and competent management teams.
  4. Look for companies with a consistent track record of profitability and growth.
  5. Don’t diversify too much; it’s better to hold a concentrated portfolio of high-quality stocks.
  6. Be patient and willing to hold onto stocks for the long term.
  7. Don’t try to time the market; instead, be disciplined and stick to your investment plan.

 Value Investing like Warren Buffet

Healthcare sector

“Healthcare sector companies that meet Warren Buffett’s value investing strategy include

  • McKesson
  • AbbVie
  • Merck & Co.
  • Bristol-Myers Squibb
  • Pfizer”

Energy sector

Energy sector companies that meet Warren Buffett’s value investing strategy include

  • Chevron
  • Occidental Petroleum
  • Berkshire Hathaway’s energy subsidiary”

Consumer goods sector

“Consumer goods sector companies that meet Warren Buffett’s value investing strategy include

  • Bank of America
  • Apple
  • Coca-Cola
  • Kraft Heinz
  • Berkshire Hathaway”

Sources

1 barrons.com

2 fool.com

3 cnn.com

4 businessinsider.in

5 investopedia.com

6 investors.com

7 forbes.com

8 cnbc.com

9 thestreet.com

10 nasdaq.com

Recession Stocks: With that in mind, let’s look at some of the specifics of this type of investing.

  • During a recession, the stock market can be more volatile and risky, so it’s important to approach investing with caution. One way to potentially make money in a recession is by investing in defensive stocks, which are stocks of companies that tend to hold up well during economic downturns.
    • These can include companies in sectors such as healthcare, consumer staples, and utilities, which provide essential products and services that people continue to need even when the economy is struggling.
  • Another strategy that can be effective during a recession is value investing, which involves looking for undervalued stocks that have the potential to increase in value over the long term. It’s also a good idea to diversify your portfolio so that you’re not too heavily invested in any one sector or company.

A word of caution: It’s important to keep in mind that there are no guarantees in the stock market, and investing always carries some level of risk. It’s a good idea to do your research and consult with a financial advisor before making any investment decisions.

Growth Companies: The examples below are companies on a growth trend. You would need to investigate any company and look at industry headwinds that may affect it.

Healthcare company examples:

  1. UnitedHealth Group (UNH): This is a large healthcare company that provides a wide range of services, including health insurance, healthcare delivery, and pharmacy benefits management.
  2. Johnson & Johnson (JNJ): This is a diversified healthcare company that operates in several areas, including pharmaceuticals, medical devices, and consumer health products.
  3. Roche Holding AG (RHHBY): This is a Swiss multinational healthcare company that is known for its pharmaceuticals, diagnostics, and cancer treatments.
  4. Pfizer Inc. (PFE): This is a large pharmaceutical company that develops and manufactures a wide range of drugs for various medical conditions.
  5. Abbott Laboratories (ABT): This is a diversified healthcare company that operates in some areas, including pharmaceuticals, medical devices, and consumer health products.

Consumer staples companies examples:

Consumer staples are products that people need, like food, household goods, and personal care products.

Some examples of consumer staples companies that are growing steadily:

  1. Procter & Gamble (PG): This is a large consumer goods company that sells a wide range of products, including household cleaning products, personal care products, and health and wellness products.
  2. Nestle (NSRGY): This is a multinational food and beverage company that sells various products, including coffee, pet food, and bottled water.
  3. Unilever PLC (UNLYF): This is a consumer goods company that sells a wide range of products, including personal care products, household cleaning products, and food and beverage products.
  4. PepsiCo (PEP): This is a large food and beverage company that sells various products, including snacks, beverages, and nutrition products.
  5. The Kraft Heinz Company (KHC): This is a food and beverage company that sells a variety of products, including condiments, snacks, and meals.

Utility companies examples

Utility companies provide essential services such as electricity, natural gas, and water. Here are a few examples of utility companies that are growing steadily:

  1. Dominion Energy (D): This is a large diversified energy company that operates in many areas, including electricity generation, transmission, and distribution.
  2. NextEra Energy (NEE): This is a clean energy company that operates a diverse portfolio of electricity generation assets, including wind, solar, and natural gas.
  3. Exelon Corporation (EXC): This is a large energy company that operates in several areas, including electricity generation and distribution, and natural gas distribution.
  4. Southern Company (SO): This is a large energy company that operates in many areas, including electricity generation and distribution, and natural gas distribution.
  5. American Electric Power (AEP): This is a large electricity company that operates in several states, providing electricity to millions of customers.

Analysis

Investigate Undervalued Stocks:

This investigative analysis may bake your brain so strap on your coffee cup. Some tools like Yahoo Finance app and Morningstar.com provide statistics for the following techniques.

stock market analysis coffee cup

Value investing involves looking for stocks that are trading at a discount to their intrinsic value, or the true worth of the company. Many factors can contribute to a stock being undervalued, such as a temporary downturn in the company’s financial performance or industry-wide headwinds. Here are a few examples of factors that investors may consider when looking for undervalued stocks:If you are looking for bracelet. There’s something to suit every look, from body-hugging to structured, from cuffs to chain chain bracelet and cuffs.

1. Low price-to-earnings (P/E) ratio: A low P/E ratio relative to the market or the company’s historical levels could indicate that the stock is undervalued.

The price-to-earnings (P/E) ratio is a financial ratio that is used to evaluate the relative valuation of a company. It is calculated by dividing the current market price of the company’s stock by its earnings per share (EPS). A low P/E ratio may indicate that a company is undervalued, while a high P/E ratio may indicate that a company is overvalued.

To determine a company’s P/E ratio, you can use the following formula:

P/E ratio = Market price per share / Earnings per share

You can find the market price per share and the earnings per share for a company by looking at its financial statements or by using a financial website or tool.

It’s important to note that the P/E ratio should not be used in isolation and should be considered in the context of other financial ratios and the overall financial health of the company. It’s also worth considering the industry average P/E ratio for companies in the same sector as the company you are evaluating.

2. High dividend yield: A high dividend yield could indicate that the stock is undervalued, as the company may be returning more value to shareholders than the market is currently pricing in.

To calculate a company’s dividend yield, you can use the following formula:

Dividend yield = Annual dividends per share / Stock price per share

For example, if a company’s annual dividends per share are $1.50 and the stock price is $50 per share, the dividend yield would be 3% ($1.50 / $50 = 0.03).

It’s important to keep in mind that a high dividend yield may not always be a sign of an undervalued stock. In some cases, a high dividend yield may be the result of a declining stock price, rather than an increase in dividends. It’s a good idea to consider a company’s dividend yield in the context of its overall financial performance and prospects for the future. It’s also worth noting that the dividend yield is just one factor to consider when evaluating a stock.

You can find a company’s annual dividends per share in its financial statements. Specifically, you can find this information in the company’s income statement or the “dividends paid” section of its cash flow statement. You can also find this information on financial websites or by using financial analysis tools.

It’s important to note that the annual dividends per share are the amount of money that the company pays to its shareholders on a per-share basis over a year. This amount is usually expressed in terms of the company’s currency (e.g. dollars per share). If a company has a history of consistently paying dividends, it may be considered to be a dividend-paying stock.

3. Strong balance sheet: A company with a strong balance sheet, including low debt levels and healthy cash reserves, may be better able to weather economic downturns and potentially represent a good value.

A company’s balance sheet is a financial statement that provides an overview of the company’s financial position at a specific point in time. It includes information on the company’s assets, liabilities, and equity.

Annual Report: You can find a company’s balance sheet in its annual report, which is typically available on the company’s website. The annual report will typically include audited financial statements, including the balance sheet, as well as other information about the company’s operations and financial performance.

You can also find a company’s balance sheet in its quarterly or interim reports, which are filed with the SEC regularly. These reports can provide more up-to-date information on the company’s financial position, but they are typically not audited and may not provide as complete a picture as the annual report.

How to calculate the true worth of a company

There are a few different ways to calculate the true worth, or intrinsic value, of a company. Here are a few methods that are commonly used:

Discounted Cash Flow (DCF) method: This involves estimating the future cash flows that a company will generate, and then ignoring them back to the present to arrive at a present value. The present value is then compared to the current market price to determine whether the company is undervalued or overvalued.

Price-to-Earnings (P/E) ratio: This widely used valuation metric compares a company’s stock price to its earnings per share. A low P/E ratio indicates that the stock may be undervalued, while a high P/E ratio indicates that it may be overvalued.

Price-to-Book (P/B) ratio: This compares a company’s stock price to its book value, which is the value of its assets minus its liabilities. A low P/B ratio may indicate that the stock is undervalued, while a high P/B ratio may indicate that it is overvalued.

Dividend Discount Model (DDM): This involves estimating the future dividends that a company will pay out, and then discounting them back to the present to arrive at a present value. The present value is then compared to the current market price to determine whether the stock is undervalued or overvalued.

It’s important to note that these are just a few of the many ways to calculate the intrinsic value of a company, and no single method is perfect. It’s often helpful to use a combination of different valuation methods to get a more complete picture of a company’s worth.

How to determine if a company is growing

  1. Revenue growth: This is perhaps the most obvious indicator of a company’s growth. If a company’s revenue is increasing over time, it is likely to experience growth.
  2. Earnings growth: Earnings, also known as net income or profit, is the money a company makes after accounting for all of its expenses. If a company’s earnings are increasing over time, it is likely to grow.
  3. Cash flow growth: Cash flow is the amount of cash a company generates from its operations. If a company’s cash flow increases over time, it is likely to grow.
  4. Return on investment (ROI): This measures the profitability of a company’s investments. If a company’s ROI increases over time, it is likely to grow.

Strong Management Makes a Difference

Leadership can be an important factor to consider in company analysis. Effective leadership can contribute to a company’s success and drive long-term growth. There are several aspects of leadership worth considering:

  • Management experience: Look at the backgrounds and experience of a company’s management team to determine if they can lead the company effectively.
  • Strategic vision: Assess a company’s leadership team to see if they have a clear vision for the company’s future and can effectively execute their strategic plans.
  • Execution: Look at the track record of a company’s leadership team to see if they have a history of successfully executing their plans and achieving desired results.
  • Culture: Consider the leadership team’s ability to create a positive and productive culture within the company. This can have a significant impact on employee morale and overall performance.

Thanks and good luck.

  1. Securities Exchange Commission
  2. Warren Buffett wiki
  3. Annual Reports
  4. Oil and Gas Headwinds
  5. Life Sciences Headwinds
  6. Consumer Products Headwinds

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