There’s a lot of noise competing for your attention and hard-earned capital. On the one hand, many investors believe the economy is ready to take off. However, many economic indicators continue to paint a mixed picture. That’s why many prudent investors will begin to look for recession-resistant stocks. But where should you be looking?
Quarterly earnings will provide a key clue about the health of the consumer. As will future readings on inflation and the potential for an interest rate cut, perhaps as early as September. This could make consumer staples stocks stand out.
And you can’t discount the geopolitical instability that is likely to continue. Nor can you avoid hearing the speculation surrounding the outcome of the presidential election.
None of this means a recession is guaranteed, and there’s no such thing as a truly recession-resistant stock if one does occur. But investors who want some measure of safety may start looking for blue-chip stocks that are defensive in nature. Here are three recession-resistant stocks that investors may want to consider.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is an integrated oil and gas giant that investors should be watching if the Federal Reserve lowers interest rates. The reason is that oil prices continue to hover around $80. That price is more than enough for Exxon Mobil to be profitable. But even a quarter-point cut in interest rates will likely send crude prices higher.
Many investors may view XOM stock to be part of a “Trump trade.” But that would be a mistake. The world is making efforts to wean itself away from crude oil. At the same time, oil will continue to be in demand for decades to come. Both statements can be true. And that’s why a stock like Exxon is agnostic to politics.
It’s also why it’s one of the recession-resistant stocks to buy. While it’s true that there has been some softness on the top and bottom lines from record highs in 2022, both are well above 2019 levels. It’s also fairly valued at around 13x forward earnings.
Plus, XOM stock has delivered a total return of 127.16% in the last three years. That’s due, in part, to a stable dividend that offers a 3.34% yield.
Walmart (WMT)
Walmart (NYSE:WMT) stock is up 34% in 2024. That’s a noticeable difference from the performance of many retail stocks. This comes after the company’s 3-for-1 stock split in early January. A stock split doesn’t change a company’s valuation. However, it frequently has a positive effect on investor sentiment.
To that end, one reason Walmart conducted the stock split was to make shares more accessible for its employees. While it’s too soon to know if that has occurred, other investors decided that the stock was offering value that was too good to pass up.
And in the case of Walmart, it has the revenue and earnings to back it up. Despite what were expected to be tough comparisons to 2023, Walmart has posted YOY gains on the top and bottom lines in its last two quarterly earnings reports. The company’s own forecasts are for sales and operating income to be at the high end or slightly above its guidance.
McDonald’s (MCD)
There’s been a lot of news regarding McDonald’s (NYSE:MCD) in 2024, and most of it hasn’t been great. The company is dealing with a stretched and stressed consumer which makes it hard to pass along prices. And it’s yet to be seen if the company’s $5 adult Happy Meal will put a smile on investors’ faces.
Plus, the company is on the wrong end of the weight loss trade. With GLP-1 drugs increasing in popularity, it would seem that fast-food restaurants may be on the way out. Case in point, McDonald’s isn’t a highly shorted stock, but short interest has been higher than normal in the past year.
That being said, McDonald’s continues to deliver YOY beats on the top and bottom lines. That suggests that the stock price slump has been more a shot at the company’s valuation. And with the stock now trading at a much more attractive 21.4x forward earnings, now may be a good time to buy the dip on MCD stock.
On the date of publication, Chris Markoch had a LONG position in MCD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.