As a result of the Covid-19 pandemic’s impact on the economy, many stock traders and investors are looking for recession-proof stocks to own.
Furthermore, with record levels of inflation, followed by the argument for increasing interest rates, however, many feel uncertain how rate hikes would impact the economy.
Moreover, global tensions are impacting markets, with oil prices rising beyond 2008 levels due to Russia’s invasion of Ukraine. The war and sanctions are projected to have a detrimental impact on economic development in the form of gross domestic product (GDP) growth.
According to Bloomberg senior commodity analyst Mike McGlone, the fast spike in wheat prices signals a repeat of 2008, since rising commodity prices, especially food, dampen consumer sentiment and “almost guarantee we will get a global recession out of this.”
In general, investment opportunities remain regardless of the current state of the market environment. Nonetheless, from the perspective of the asset market, it is prudent to prepare for the worst-case situation, which may be a recession.
In order to maximize earnings during a recession, here are three recession-proof stocks to consider investing in:
1. Apple (NASDAQ: AAPL)
The stock of Apple (NASDAQ: AAPL) has been on an upward trajectory, with returns of 35% over the previous 12 months. Despite the fact that the dividend yield is just 0.5%, there is a good chance that yearly payments will continue to climb.
In light of this potential, the stock of AAPL is not too expensive, with a projected P/E ratio of 28x.
Apple is attempting to diversify its business. For instance, growth in the company’s services division has been solid. The segment’s sales were $19.5 billion in the first quarter of 2022. The segment is seeing robust app sales as well as an increase in the number of paid subscriptions on its platform, which is expected to be the primary driver of growth.
Furthermore, given its massive size and large operating profits margins, Apple is well-positioned to handle supply challenges far more effectively than its competitors in the consumer electronics market, which might put the company in a better position to secure supplies during difficult times.
YoY, the segment’s revenue increased by 24.2% compared to the previous year. The revenue of the wearables, home, and accessories segments also increased by 14% in the first quarter of 2022, reaching $14.7 billion.
Elsewhere, 29 Wall Street analysts have given Apple a high price target of $215 and a low forecast of $161 for the next 12 months. On average, the analysts project $193.32, representing an 18% upside from the current price.
2. Pfizer (NYSE: PFE)
Pharmaceuticals giant Pfizer (NYSE: PFE) has an attractive dividend yield of 3.5%, making it a solid investment, especially when you consider it is projected to earn record revenue in 2022 powered by the company’s antiviral Covid-19 pill dubbed Paxlovid and vaccines.
Overall the firm expects to generate $32 billion from the Covid vaccines and $22 billion from its antiviral coronavirus treatment pill Paxlovid.
Pfizer announced strong sales growth of 92% in the fiscal year 2021. However, when the influence of the Covid-19 vaccine sales was excluded, the increase rate was just 6%.
In fact, the corporation expects to generate sales of $100 billion in the current fiscal year as a whole. The revenue rise would be 23% on a year-over-year (YOY) basis.
The important element to note is that the Covid-19 vaccine-driven expansion assisted Pfizer in improving its financial situation. This makes it possible to make significant investments in research and development (R&D). Pfizer aims to spend at least $10.5 billion in research and development in the current fiscal year.
Pfizer also has a substantial portfolio of medicines for a variety of health conditions. Meanwhile, the registration process is now underway for ten products, with another 27 are going through phase three trials. A solid revenue increase is expected to be maintained as a result of the inventory.
Finally, PFE stock seems to be a good investment based on its projected price-to-earnings (P/E) ratio of 7.5x. In the event of a recession, the stock is expected to outperform the market in terms of returns.
It’s worth mentioning that 16 Wall Street analysts have provided 12-month price estimates for PFE in the past three months. In general, a median price goal of $60.81 is expected, with a high prediction of $76 and a low projection of $500 forecasted.
The average price objective indicates a 24.74% upside over the stock’s most recent trading price of $48.75.
3. Chevron Corporation (CVX)
An economic downturn, in general, is damaging to the price of oil; nevertheless, given the rising global tensions and inflation, it makes sense to include an oil and gas business as part of a defensive portfolio, especially given the rising price of oil.
Due to the pandemic, the price of Brent fell in 2020. Even throughout that year, the corporation was able to disclose positive net operating cash flows to investors.
When it comes to investments, Chevron has a reserve replacement ratio of 103%on average over the last five years. Despite having a solid production profile, the corporation has been able to increase reserves by making investments in solid existing assets.
It’s also vital to note that Chevron generated operational cash flow (OCF) of $29.2 billion in the fiscal year 2021. Given the current trajectory in oil prices, it is expected that OCF will be higher in 2022.
The American multinational energy corporation Chevron has filed a new metaverse-related trademark for its name and logo, indicating the firm plans to expand into the metaverse and offer branded non-fungible tokens (NFTs), as well as gas, renewable energy products, and convenience store products in the form of digital commodities.
Overall, 23 Wall Street analysts have set a high price objective of $173 for CVX stock for the next 12 months and a low price goal of $109 for the firm in the same period. On average, analysts estimate LCID to trade at $154.43, representing a 7.12% decrease in value over the stock’s current trading price of $166.27.
However, given that the forecast was made over the last three months, analysts won’t have taken into consideration the recent climb in oil prices in response to the conflict in Ukraine.
The company’s shares are trading well above its 20-day simple moving average (SMA) and its 50-day SMA, which usually indicates an uptrend. Given the recent performance and a price above the 20-day SMA by 21%, the firm’s short-term momentum appears bullish.
All in all, when considering low-beta shares in light of the market’s volatility, it’s important to keep in mind that certain stocks may be able to aid you in protecting your cash during these tough times. Low-volatility stocks often provide a high dividend yield, which ensures that cash flows remain consistent.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.