Stock Picks
If you haven’t already, you will say the “the R word” very soon! You guessed it; it's non-other than recession, the economic term on everybody's lips and should not be taken lightly!
What is a Recession
In simple terms, a recession is when a country sees a significant widespread decline in activity across the country’s economy. A recession is measured over two consecutive quarters of economic decline in Gross Domestic Product (GDP) and can last for months and sometimes even years.
Recession-Proof
To be honest, you will probably never entirely recession-proof your investment portfolio, but we can look at possible options to try and mitigate some risk. Asset classes perform differently during a recession as investors become more risk-averse. Safe havens like Gold have traditionally done well during recessions. Other asset classes like bonds and fixed income also do well as this period is usually a high-interest rate environment.
The Exchange Traded Fundss (ETFs) below might point an EasyVSTR in the right direction when selecting options to mitigate some risk during uncertain times.
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Stock Picks
Stock markets tend to trend lower and enter a bear market during a recession, but luckily it is not all doom and gloom, and there are always opportunities. Companies with good cash flows and healthy balance sheets tend to weather the storm far better than companies riddled with debt.
Historically, during a recession, the sector to have firmly on your radar is the Consumer Staples sector, which is non-cyclical. That means that their products are in demand and purchased all year round regardless of economic wellness or hardships. These include food products, beverages, hygiene products, household goods, and even alcohol and tobacco.
British American Tobacco PLC (JSE: BTI):
Smoking might be so yesterday, but this multinational and dual-listed tobacco company should not be forgotten in the smoke of things. British American Tobacco has the largest market capitalization in the FTSE/JSE Consumer Staples Index and the share price is gaining momentum. British American Tobacco has gained over 60% in the last three years and fast approaching all-time highs.
Coles Group Ltd (ASX: COL)
The ASX-listed mega retail chain group, Coles Group Limited comes into focus for our Aussie investors during turbulent times. The iconic Australian retailer has 2500 retail outlets and services over 21 million customers every week. The group’s businesses are Coles Supermarkets, Coles Online, Coles Liquor, Coles Express, Flybuys, Coles Financial Services, and Spirit Hotels.
The Procter & Gamble Company (NYSE: PG)
The multinational corporation Procter & Gamble Company will not be a stranger to value investors across the globe. The consumer goods company provides branded consumer packaged goods to consumers and operates in five segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. Personal care brands like Head & Shoulders, Herbal Essences, Pantene, Rejoice, Olay, and Old Spice can be found under its beauty segment.
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Informed decisions
EasyVSTRs know that investment opportunities are always around us, and this time is no different. There are loads of investment strategies to use in times of uncertainty but in times of recession, look for non-cyclical companies with low debt, good cash flow, and strong balance sheets.
For those EasyVSTRs who want to look at a cost-effective way to gain from a whole group of Consumer Staple stocks, the Consumer Staples Vanguard ETF (VDC) might be worth the look.
New to investing
and want to know more about our other stock picks?
Read: 3 Dividend Stock Picks During Uncertainty
Sources – EasyReseach, Reuters, Investopedia, Koyfin, Listcorp, Forbes.
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Barry is a market analyst with GT247, with a wealth of experience in the investment markets. Now in his tenth year in the markets, Barry "The Beef" Dumas brings a combination of technical analysis and fundamental insights to the table.