Recession Proof Stocks To Purchase During COVID-19

How to Spot a Recession-Proof Company:

According to Financial Writer, Marvin Dumont, when looking for a company that can continue to thrive during an economic downturn, it must possess at least one of the five characteristics, namely:

1. Providing critical repair services.

2. Selling consumer essentials.

3. Serves customers insulated from downturns.

4.  Provides mandated products or services.

5. Sells proprietary or specialized products.

Industries to Steer Away From:

• Banking and Financial Services 

• Travel Accommodation 

• Food and Beverages

• Aviation

• Casino and Gaming

• Automotive 

• Oil and Gas

• Luxury Products and Services

• Small-Cap Businesses*

Industries to Invest In:

• Consumer Staples and Grocery Stores 

• Alcoholic Beverage Manufacturers 

• Cosmetics

• Education

• Utilities 

Consumer Staples     

Consumer Staples is a sector of essential products needed by humans. These include household goods, food, beverages, hygiene products, and other products that individuals are either reluctant or unable to eliminate from their budgets even in times of monetary trouble. As a result, companies that focus primarily on consumer staples have little to no disruptions in revenue during times of economic turmoil. The following are our recommended consumer staple stocks:

1. Walmart (NYSE: WMT)

2. Colgate-Palmolive (NYSE: CL)

3. Procter and Gamble (NYSE: PG)

4. Walgreens (NASDAQ: WBA)

Alcoholic Beverage Manufacturers and Distilleries 

The alcohol industry is citing as a recession-proof industry due to the high margins associated with the manufacturing of alcoholic beverages and its high demand regardless of the economic climate. The following are our recommended alcoholic beverages stocks:

1. Boston Beer (NYSE: SAM)

2. Molson Coors Brewing (NYSE: TAP)

Cosmetics

According to stylecaster.com, 'while the rest of the economy is suffering, beauty salon sales grew at 5.4%'. This growth is primarily attributed to cosmetics being a lower-priced luxury good. However, being purchased in a higher volume than other products. Thus, cosmetics are usually considered recession-proof. Furthermore, research suggests a so-called 'lipstick effect' further proves the validity of cosmetics as a recession-proof industry. The following are our recommended cosmetic stocks:

1. Estee Lauder (NYSE: EL)

2. Coty (NYSE: COTY)

3. Johnson and Johnson (NYSE: JNJ)

Education

One of the least talked about industries, education, or rather for-profit private education businesses. With education viewed as mandatory and people augment their skills during a recession where unemployment numbers rise, it is clear that the for-profit education sector is recession-proof. The following is our recommended education stocks:

1. Grand Canyon Education (NASDAQ: LOPE)

2. Perdoceo Education Corporation (NASDAQ: PRDO)

3. ITT Educational Services (NYSE: ESI)

Utilities 

Similar to the other industries featured on this list, utilities are essential and thus recession-proof. Furthermore, utility companies often operate and are tightly regulated under federal and state regulations. While this may hinder a company's ability to act independently, it also helps create a relatively stable and makes utility companies immune to trade wars amongst other international matters. The following are our recommended utility stocks: 

1. American Water Works (NYSE: AWK)

2. Duke Energy (NYSE: DUK)

3. National Grid (NYSE: NGG)

4. American States Water Company (NYSE: AWR)

5. Exelon (NASDAQ: EXC)

Conclusion

 In light of recently released quarterly earnings, a recession looks more imminent by the day. Thus, by investing in the Consumer Staples, Alcoholic Beverage Manufacturers, Cosmetics, Education, and Utilities, you would be able to mitigate risk during an economic downturn and hopefully turn a profit.