Stocks to Buy During the Recession
While solid companies with consistent earnings tend to ride out recessions reasonably well, their stock prices could take a big hit during recessions. Those businesses that remain generally unaffected are usually involved in consumer staples and health care, which pull in solid cash flows and maintain healthy balance sheets. The economy might be contracting and unemployment might be high, but people need to buy soap and prescriptions. Cutting-edge technology is another area that experiences dependable growth because its products increase efficiency and save costs.
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Consumer Necessities
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Companies that provide consumer necessities typically do good business year in and year out. With heavy competition, corporations that can run efficiently and leverage its scale typically outperform others. National drugstore chains and the companies that supply them generally maintain strong cash flows and enjoy consumer loyalty. Food items such as frozen dinners, macaroni and cheese, peanut butter and jelly, and fast foods also hold up well during recessions.
Pharmaceuticals
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Well-established drug and and biotechnology companies are going to continue selling their cholesterol and heart medications worldwide regardless of a given country's gross domestic product. These businesses have strong research and development pipelines that historically have been counted on to produce a steady stream of new products. While the three key trial phases and ultimate FDA approval might take hundreds of millions of dollars and a number of years, the payoff can dwarf the investment cost.
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Technology
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While companies across most industries tend to cut capital spending during recessions, key technology players can still prove that investments in their hardware and software will directly increase productivity and benefit the bottom line. This means that customers who do not invest in their products will either lose more or not earn as much.
Discounters
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National retailers that deal with everyday consumer goods and discount them heavily nearly always ride out recessions better than specialty retailers or those that deal with discretionary items. During a recession, consumers will buy inexpensive bedding and clothes, for example, but will hold off acquiring flat-screen televisions and SUVs. The profit margins may be thinner, but demand remains strong.
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