Recession is a fairly common phenomenon, yet if you are not mentally prepared then it can be a painful experience. Since 1929, the US economy has been in recession 15 times, or about once every six years. Yet as nerve-racking as a recession is, companies may have a portfolio that can thrive during these inevitable recession seasons as well as prosperous economic times, helping investors tolerate uncertainty. Can be found.
With this in mind, let’s take a look at the three stocks that have proved their mettle during the recent recession, but offer tremendous growth opportunities over the coming months and years.
Apple: poster child for recession resistance?
Even the 2020 recession saved many technology companies, Apple (NASDAQ: AAPL) Was one of the few that was not hit as hard. The flexibility of its customer base and the ongoing expansion of its service sector helped buffer the company’s results during the recession.
Even at the height of economic uncertainty, the iPhone maker was able to grow its revenue marginally, while many companies saw sales decline. This was driven by an all-time record from its service sector and a quarterly record for wearables. The recurring nature of its services revenue will help insulate Apple during any future recession.
That’s not all Apple is going for. Even as the company works towards its well-publicized plans to be cash neutral, Apple still has one of the biggest cash congestion. The company claimed about $ 193 billion in cash and salable securities on its balance sheet and loaned approximately $ 99 billion to close its most recent quarter.
Finally, we have the advantage of constraint to judge Apple’s stock performance since the surprise market downturns that occurred in late February and mid-March. At its peak, the iPhone maker’s shares declined only 31%, while other tech stocks were devastated, losing half or two-thirds of their value. From below them, Apple shares have returned ascending by 132% as of this writing.
As a result of its rising stock price, the dividend yield has fallen to 0.63% (as of this writing), but since Apple paid quarterly payments using 25% of the profit, the payout is still the safest. is.
Given the many things that work in his favor, it would be difficult to find more suitable stocks than Apple to buy during the recession.
Roku: The future will be a recession stream
One of the undeniable consequences of the recession is unemployment, and with fewer people in the workforce, more people are at home. When those unfortunate people do not look for jobs, many people will kill time watching streaming video.
She is there Roku (NASDAQ: ROKU) Comes in The channel-agnostic platform provides access to over 10,000 channels on its name streaming devices. They are not everything. Roku’s Connected TV operating system (OS) is a top choice among television manufacturers, and is found in 38% of sets sold in the US and 31% sold in Canada – making it the number two smart TV OS sold. Makes 1. Countries.
Those who look for evidence that the company will not only survive, but to thrive during the recession, need not move further than last year, providing sufficient evidence of Roku’s resilience. During the first quarter of 2020, Roku’s active accounts climbed 37% year-over-year, while streaming hours on its platform increased by 49%. Average revenue per user (ARPU) increased by 28%, driving drive revenue by 55%. Those trends continued into the second quarter, as active accounts grew by 41% and streaming hours by 65%. This increased ARPU by 18%, while revenue climbed 42%.
These metrics helped Roku’s stock recover from initial drubbing. Although more than half of its value was destroyed in the early days of the recession, Rocco has since been one of the market’s star performers, gaining more than 550% from its bottom in mid-March.
Roku is on the verge of being consistently profitable, as it leverages a growing base of viewers. Additionally, with nearly $ 1.05 billion in cash on its balance sheet and $ 407 million in debt and operational lease liability, Roku has plenty of resources to run any storm.
Microsoft: a port in the storm
Microsoft (Nasdaq: MSFT) One is the technology and enterprise system, which diversified its business during the recent recession, helping the company maintain its growth. Revenue grew 15% in Microsoft’s fiscal third quarter (ending March 31, 2020). At the time, two statements were revealed in the company’s financial release.
First, CEO Satya Nadella said, “We have seen two years of digital transformation in two months.” This is a feeling that we have heard in technical circles over the course of several months. This reality plays into Microsoft’s strengths as one of the undisputed leaders in cloud computing.
Second, it was a simple statement in the company’s earnings (emphasis mine): “In the third quarter of FY 2020, COVID-19 was Minimum net effect On total company revenue. “It helps to clarify that during one of the most significant economic upheavals in modern history, Microsoft virtually went unpublished.
During the company’s fiscal fourth quarter (ending June 30, 2020), its growth continued unabated, with revenues up 13%. It is worth noting that despite slowing growth from the company’s productivity and business systems segment, it was boosted by cloud computing and gaming. This shows how the diversity of your business will help sustain its growth in difficult times.
Bearish fears initially lowered the stock to 26% between February and March, but from below them, Microsoft shares have halted 56% as of this writing.
The company maintains a respectable dividend yield of around 1%, and with a payout ratio of 33%, this dividend is certain to come. Microsoft also has a rock-solid balance sheet with approximately $ 138 billion in cash and short-term investments, nearly double the $ 71 billion in debt and operating leases.
Given the company’s many advantages, Microsoft is its own stock to withstand economic uncertainty.
One last note
Although each of these companies proved to be recession-resistant during the recent recession, it is important to separate trading performance from stock price. While each company continued to develop its financial matrix as an improvement, that did not deter it from experiencing massive fluctuations in the stock, which is part-and-parcel in an economic downturn.
This helps to illustrate one of the keys to successful investing: focusing on the underlying business long enough for the stock price to catch up with reality.
In investment, like life, there is no guarantee. However, given the performance of each of these companies during the recent unpleasantness, it is even more likely that they will come with the color of recession in the future.