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5 Businesses that are in demand during a recession

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Is there anything like recession-proof businesses? If so, what makes such businesses withstand the recession? Plus, what are the effects of trading in such products on the stock market? Well, a 21st-century investor must have a keen eye on products that will bring in the most significant gain. You probably already know that grocery store stocks would be stocks to watch during a recession. In this guide, we look at five such businesses that defy any recession.

1. Essential consumer products

Food, hygiene products, and household supplies are consumer staples that always withstand a recession. For, despite the harsh economic times, the demand for such products is ever rising. That’s why companies like Unilever N.V., Proctor & Gamble Co., and Colgate-Palmolive Company have been in existence for even a century and are still going strong. These companies supply toothpaste, laundry detergent, soap, and other toiletries that are essential to people.

2. Grocery stores and discount retailers

Now, manufacturers of essential consumer products must find a way to get the products to the final consumer. Hence, grocery stores, discount retailers, and all major stores that stock the consumer staples also can get through a recession. It is the likes of Walmart Stores, Inc., Kroger Company, and Costco that thrive the most during a downturn. Since these retail giants have their grocery store items spread out throughout the country, they have a wider reach and distribution.

3. Alcoholic beverage manufacturing

Now, how is it possible that alcohol makers get through a recession? Well, picture this. Research shows that, during a recession, people tend to buy less expensive products to get through. In the same way, purchases for expensive liquor goes down. In contrast, the sale of craft beer and other ‘affordable’ alcoholic beverages increase. More so, more people would instead get the ingredients and experiment on different tastes and flavors at the comfort of their homes. As expected, Budweiser, Johnnie Walker, and Smirnoff brands do well during a recession.

4. Beauty products

Now, even during a downturn, women want to look their best when they step out. Even so, the demand for beauty products and cosmetics from luxury brands remains unaltered in a recession. Hence, it is companies like Coty Inc. and Estee Lauder Companies Inc., who can weather such storms. Note that some companies like Unilever are masters in managing recession. For they deal in both cosmetics and consumer staples, allowing them to grab as much revenue as possible.

5. Death and funeral services

Death and taxes are inevitable; that’s for sure. Now, the IRS has no shares trading at the stock market. In contrast, those companies that make a kill from death-related services do. It is the likes of Matthews International Corp. and Carriage Services, Inc. that remain unshaken during a recession. They make caskets and offer funeral services, a vital send-off for each human.

About recession

A recession happens when there is an economic decline across all sectors of the world economy. Here, due to a significant drop in consumer spending, the stock markets experience a slump. Also, as businesses and factories close, there is a spike in unemployment. In turn, countries across the globe fall deeper into the national debt.

Yet, with every dark cloud, a silver lining emerges. It is in such times of recession that companies that offer products and services that cater to the challenges brought about by the recession are used by many.

Effect of recession on the stocks and stock market

Here is the thing. When the economy is doing well, people have high spending power. Hence, they buy more from their favorite stores and brands. In turn, the high profits of these companies translate into an increase in their share prices at the stock market.

During a recession, there is a dip in people’s spending power. Hence, a decline in demand for products and services means that the large companies incur huge losses as they struggle to stay afloat. In turn, the share prices for such companies’ decreases.

Now, the share prices for companies dealing in recession-resistant products behave differently. That is, as the stock market takes a nosedive, these companies will comprise of the remaining stocks out of the S&P 500 that are still going strong. This trend repeats itself in every recession, including the 2008 Great Recession. During this time, the 34 stocks that still had a positive return included Dollar Tree Inc. (60.8%), Walmart (20%), and H&R Block Inc. (25.8%).

Then, what kind of stocks should you invest in during a recession? The final decision will depend on how these recession-resistant products and services behave. Hence, keep off the visible stocks that take the most significant hit during a recession. Then, maximize your gains on the weather-proof shares.

About Andrea Toulsen

andreat@thebusinesswomanmedia.com'

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