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The central theses
- There are stocks in the energy and healthcare sectors that have soared even as the rest of the stock market has tumbled on recession fears.
- Companies like Exxon Mobil and EQT will benefit from rising energy prices around the world for the foreseeable future.
- While some stocks have been winners this year, we have to warn you that even the pros can’t predict which stocks will do well going forward.
The stock market is down and the numbers are not looking pretty – the Dow closed down 400 points yesterday. With inflation still soaring, the Fed has raised interest rates, causing investors to sell stocks to liquidate their assets.
Ten of the 11 sectors in the S&P 500 Index are down year-to-date. If you look at any report, you will see how much the market has just fallen. However, not all stocks have been equally affected by the economic slowdown.
We’ll look at recessionary stocks to find some surprise winners in this declining market, although we should note that we’re not officially in a recession just yet.
Does a falling market affect all stocks?
In general, the entire stock market is affected when the market sells off. This is because investors want to liquidate their assets into cash to prepare for the worst-case scenario.
Even stocks with strong financials are feeling the impact. When there’s so much uncertainty and volatility in the market overall, investors look for payoffs regardless of how well companies perform, even when companies meet or exceed expectations.
The National Bureau of Economic Research explained that a recession is defined as “a significant decline in economic activity that is spread across the economy and lasts longer than a few months.” This means that every company feels the effects of a recession in some way.
However, certain industries still make money during a recession. Some fields even thrive when the economy is shrinking.
How can you find winners in this declining market?
How do you find stocks that are still doing well? Many investors struggle to decide where to invest their wealth during an economic downturn.
You need to look for companies operating in recession-proof industries. Try to look for defensive stocks that are known for doing well even when the economy is slowing.
Which sectors fall under this umbrella?
- consumer goods: Humans will always need basic necessities including bread, milk, toiletries and other necessities needed to survive.
- Alcohol: People don’t give up their vices during a recession. Maybe less money will be spent on good food, but consumers will still buy alcohol.
- Utilities: Energy companies do well in a recession because people still need electricity, gas and water.
- health care: People still have to go to the doctor, buy medicines and spend money on health care related items.
- Ground transportation: Goods need to be transported even when consumer spending falls because people are still buying basic groceries. Basic transportation includes everything from trucking, shipping, and rail transportation.
That doesn’t mean that every company in these industries will thrive in a declining market. However, it is worth considering rebalancing your portfolio to increase exposure to more stable assets.
Which stocks are the winners in this down market?
We wanted to highlight some of the biggest winners for 2022 when it comes to stocks that have risen in value while the rest of the market has plummeted.
Please note that these stocks were winners until the close of trading on October 14, 2022. Investing in the stock market is risky and news could come out that affects the stock price.
Biogenic (BIIB)
This stock is up just 8.39% for the year to $264.63. The company is a recession winner because it’s one of the rare stocks to rise after rate hike announcements sent the stock market tumbling in September.
Biogen’s stock skyrocketed 39.85% on Sept. 28 amid positive news about its latest Alzheimer’s treatment. This stock has been a gainer lately based on new developments surrounding Alzheimer’s. If all goes well, there could be more good news.
Of note are Biogen’s peers who also saw stock prices rise on the positive news, including Eisai ($ESALY), Eli Lilly ($LLY) and Roche (RHHBY).
Exxon Mobil Corp (XOM)
This stock is up 56.11% to $99.19 in 2022 due to rising energy prices due to current events. The latest rally for energy stocks came last week on news that OPEC was discussing a significant oil price cut in a bid to control prices.
Exxon Mobil recently signaled that third-quarter earnings would be strong as the company continues to enjoy its dominant position as the largest oil producer in the US
McKesson Corp (MCK)
McKesson stock is up 42.14% for the year to $352.65. This rally is partly due to the company recently announcing an agreement to extend its partnership with CVS to continue drug distribution through June 2027.
McKesson is responsible for getting vaccines, medical supplies and other products into the hands of medical professionals from manufacturers. This stock has outperformed the market recently.
Even Warren Buffett has invested in the company as the dividend continues to rise.
Coterra Energy (CTRA)
Coterra Energy stock price is up 45.22% in 2022 to $28.42. This diversified energy company was formed in 2021 from the merger of Cabot Oil & Gas and Cimarex Energy.
The company posted impressive earnings growth due to strong reinvestments in the business.
EQT Corp. (EQT)
With improved finances and a hot natural gas market, EQT shares are up 88.50% to $41.13 in 2022. This natural gas producer is aiming for record profits this year as the US becomes the largest exporter of natural gas.
The Company has a large inventory of drill sites that will help it continue to grow sales. With sanctions imposed on Russia over natural gas, EQT should continue to be a winner.
Which Stocks Typically Outperform the Market During a Recession?
While we’re not officially in a recession, here are a few stocks that have done well in economic downturns in the past.
- Walmart Inc (WMT): While supply chain issues and rising inflation have hurt profits, Walmart is fairly recession-proof given its focus on consumer staples.
- McDonald’s Corp. (MCD): People will always have to eat. In difficult economic times, people turn to fast food.
- Procter & Gamble Co (PG): Consumer staples companies do well during a recession because people still need to buy basic necessities.
- Johnson & Johnson (JNJ): This company is diversified among many recession-proof healthcare products.
These stocks weren’t yet winners in 2022, but we wanted to list them because they’re in recession-proof industries.
How do you make your portfolio recession-proof?
You want to do whatever it takes to ensure your portfolio is recession-proof. Here are a few steps you could take now if inflation is still soaring:
- Invest for the long term: It’s important to zoom in on your investments and keep perspective that investing is a long game.
- Look for defensive stocks: You may want to change allocations in your portfolio to invest in defensive stocks to protect yourself.
- Know yourself and your willingness to take risks: If you panic when the market slips, you need to reconsider your strategy. You may want to build a more balanced portfolio.
Remember that a recession will not last forever. The economy has historically always bounced back, no matter how dark times appear.
How should you invest?
While it’s possible to find winners in the stock market, it’s a challenging task at best, and there are many risks associated with investing these days.
There are ways to make your portfolio more defensive and less risky. Take a look at Q.ai’s inflation kit and protect your investments from falling in value, so you don’t have to worry about daily market report checking.
bottom line
The good news is that even though the stock market is down, it doesn’t mean every company is suffering. The bad news is that we cannot guarantee that the stocks we list or the industries we mention will continue to appreciate in value.
Nobody can predict the future of the stock market. At the end of the day, we’re all just trying to predict what’s going to happen next based on the information we have. That’s why Q.ai uses artificial intelligence to scan the markets for the best investments for all types of risk tolerance and economic situations. Better still, you can turn on portfolio protection at any time to protect your profits and reduce your losses.
Download Q.ai today for access to AI-supported investment strategies. If you deposit $100, we’ll add another $100 to your account.
