We all know the reason many investors worry about a potential recession.
Portfolio returns tend to suffer, as investors pull money out of the markets and wait for the pain to end. Of course, those who stick with the markets and hold through periods of uncertainty (so long as their holdings don’t go under) often outperform. That’s because the best days in the market usually follow the worst. In other words, holding one’s nose can be the best strategy for long-term returns in times of trouble.
So in order for such a strategy to work, investors should own recession-resistant stocks, or at least those that can weather some economic pain. Owning companies that ultimately go under in times of stress won’t do an investor much good.
Let’s look at three of the best stocks long-term investors want to consider right now, ones for the recession-resistant bucket.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is set for sustained gains based on Q2 2023 results, showcasing 11.7% global comp sales growth.
The company’s strategy, “Accelerating the Arches,” enhances customer experience and operational efficiency. It’s clearly been a driver of MCD’s recent growth.
Notably, McDonald’s exceeded expectations this past quarter, with an overall revenue increase of 13.6% and a massive earnings per share surge of 97% in Q2. The company also raised its dividend to $1.52 per share, marking 45 years of consecutive increases. With a 2.1% dividend yield, it’s a safe bet for stability and income even in a recession.
The revival of Grimace through the introduction of the “Grimace Birthday Meal” boosted sales at McDonald’s in the U.S. and Canada. Folks need to eat, and if times get tough, McDonald’s may be among the only affordable option for dining out for the average American. Considering the performance of MCD stock during previous crises, and its performance during good times (up 11% over the past 12 months and 82% in 5 years), it’s a regret-free growth investment.
Devon Energy (DVN)
Devon Energy (NYSE:DVN) shines with robust Q2 oil production of 323,000 barrels/day and plans to hit 330,000 in Q3. Aggressive stock buybacks and debt reduction enhance shareholder value and balance sheet strength. With an 8% dividend yield, DVN stock provides a solid mix of both income and defensive growth potential, something long-term investors should like.
The company presents a higher-risk, higher-reward opportunity. While DVN dropped over 13% this year, recent months saw a minor 1% decline. This shift hints at a potential bullish turnaround, supported by low valuation, trading at a multiple of 6.9-times earnings.
Despite Federal Reserve uncertainty, DVN stock offers strong potential as a high-yield dividend stock within a recovering energy sector. As work patterns normalize, a return to the office en masse and a reversion toward more normalized energy usage could spur continued commodity strength as energy consumption normalizes.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has consistently rewarded investors, dominating the personal computing, cloud computing, and gaming sectors. Impressively, shares of MSFT stock have tripled over the past five years and are among the best-performing mega-cap tech stocks out there.
I think that’s likely to continue, given Microsoft’s dominant market position in its core markets, its strong balance sheet and cash balance, and its impressive total return profile.
The robust tech giant maintains steady growth with diverse income sources. Increased liquidity suggests potential dividend growth and high capital appreciation. Thus, MSFT stock represents a relatively low-risk, high-reward stock for your portfolio, especially during recent stock dips.
Despite the costs of integrating AI, Microsoft sees potential in Microsoft 365 Copilot, priced at $30 per user. This demonstrates their drive to boost AI-generated revenue. Coupled with cloud services and AI, MSFT is set for lasting growth, making it a top AI stock worth buying. Thus, for those seeking defensive growth during a potential period of turmoil, Microsoft is one of my top picks.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.