The 5 Best Performing Stocks During the Last 5 Recessions (And What You Can Learn from Them)

The 5 Best Performing Stocks During the Last 5 Recessions (And What You Can Learn from Them)

Recessions are a normal part of the economic cycle, and investing during these periods can be challenging. However, by studying the past, we can gain valuable insights into which stocks have performed well during recessions and learn from them. In this article, we’ll explore the 5 best-performing stocks during the last 5 recessions and what we can learn from them.

What is a Recession?

A recession is a period of economic decline, typically defined as a decline in a country’s gross domestic product (GDP) for two or more consecutive quarters. Recessions are often caused by a combination of factors, including global economic changes, trade wars, and domestic economic policies.

The 5 Best-Performing Stocks During the Last 5 Recessions

1. Alphabet (GOOGL) – 2001 Recession

The dot-com bubble burst in 2001 led to a recession, and Alphabet (then known as Google) was one of the few winners during this period. The company’s focus on advertising and its early mover advantage in the online search space helped it weather the economic storm.

Takeaway: Invest in companies with a dominant position in their industry, especially those with a strong online presence.

1. Visa (V) – 2007 Recession

The housing market collapse in 2007 led to a global financial crisis, and Visa was one of the few companies that came out unscathed. The cautionary tale is that people still need to purchase goods and services, even in a recession.

Takeaway: Invest in companies that provide essential services or products, such as Visa, which facilitates transactions.

1. Mastercard (MA) – 2007 Recession

Similar to Visa, Mastercard’s business thrived during the 2007 recession. The company’s focus on online transactions and e-commerce enabled it to benefit from the shift away from cash and checks.

Takeaway: Invest in companies that are adapting to changes in consumer behavior, such as digitization.

1. Procter & Gamble (PG) – 2009 Recession

Procter & Gamble, a consumer goods company, rode out the 2009 recession by focusing on its strong brand portfolio and cost-cutting measures.

Takeaway: Invest in companies with strong brand recognition and a focus on cost efficiency, especially those that cater to essential consumer needs.

1. Walmart (WMT) – 2020 Recession

The 2020 recession, triggered by the COVID-19 pandemic, initially seemed like a bleak time for brick-and-mortar retailers. However, Walmart, with its strong e-commerce presence and efficient supply chain, was able to adapt and thrive.

Takeaway: Invest in companies that are adapting to changing consumer habits, such as the shift towards e-commerce, and have a strong supply chain.

What You Can Learn from These Stocks

1. Focus on the Essentials: Invest in companies that provide essential goods and services, such as Visa, Mastercard, and Procter & Gamble, which cater to the needs of consumers even in times of economic uncertainty.
2. Adapt to Changes: Companies that adapt to changes in consumer behavior and technology, such as Walmart and Alphabet, are more likely to thrive during recessions.
3. Strong Brand Recognition: Invest in companies with strong brand recognition, as this can help them weather the economic storm, as seen with Procter & Gamble.
4. Cost Efficiency: Companies that focus on cost efficiency, like Procter & Gamble, are better equipped to navigate recessions.
5. Diversification: Recessions affect different sectors and industries in different ways. Diversify your portfolio by investing in a range of companies from various sectors to reduce risk.

Conclusion

Investing during recessions can be challenging, but by studying the performance of the 5 best-performing stocks during the last 5 recessions, we can gain valuable insights into which types of companies tend to do well. By focusing on essential goods and services, adapting to changes in consumer behavior, and leveraging strong brand recognition, cost efficiency, and diversification, you can build a resilient investment portfolio that can weather the storms of economic uncertainty.

Frequently Asked Questions

1. What are the most resilient stocks during recessions?

According to our analysis, the 5 best-performing stocks during the last 5 recessions are Alphabet (GOOGL), Visa (V), Mastercard (MA), Procter & Gamble (PG), and Walmart (WMT), due to their adaptability, strong brand recognition, and focus on essential goods and services.

1. What are the most important factors to consider when investing during a recession?

When investing during a recession, it’s essential to consider factors such as a company’s focus on essential goods and services, its adaptability to changes in consumer behavior, strong brand recognition, cost efficiency, and diversification.

1. How can I diversify my portfolio during a recession?

To diversify your portfolio during a recession, consider investing in a range of companies from different sectors, such as:

• Technology (e.g., Alphabet, Visa, and Mastercard)
• Consumer Goods (e.g., Procter & Gamble and Walmart)
• Healthcare (e.g., Johnson & Johnson)
• Industrials (e.g., 3M)
• Finance (e.g., JPMorgan Chase)

1. Can I invest during a recession if I’m new to the stock market?

New investors should consider starting with a solid understanding of investing basics and a moderate risk tolerance. It’s essential to research, educate yourself, and start with a diversified portfolio.

1. What should I look for in a company’s financials during a recession?

During a recession, look for companies with:

• Strong balance sheets
• Low debt levels
• High liquidity
• Diversified revenue streams
• A track record of adapting to changing market conditions

By understanding the performance of the 5 best-performing stocks during the last 5 recessions, you can gain valuable insights into how to create a resilient investment portfolio that can weather economic uncertainty. Remember to focus on essential goods and services, adapt to changes in consumer behavior, and leverage strong brand recognition, cost efficiency, and diversification to build a portfolio that can thrive in times of economic turmoil.