Tuesday, December 11, 2007

Recession Proof your Portfolio

If you’re like many other small investors out there you might be feeling a little pang of worry about the possibility of a recession and are starting to unload some of your more cyclical and economically sensitive names. You could simply take the proceeds of your sale and dump them into fixed income products but with bond yield so low what’s the point? Unless of course your only goal is capital preservation as current yields will just barely beat inflation. For those of you nervous about the future of the economy but want to stay invested in equities you might want to take a look at the following three recession resistant areas:

1. Sin Stocks – These would include companies involved with: booze, cigarettes or weapons. Do you know anyone who’s stopped drinking or smoking when they’ve fallen on economically bad times? Wars continue on regardless of the state of the economy.

2. Health Care – Even if the economy is in rough shape people will continue to visit the doctor, continue to take their prescriptions and continue to treat their ailments. As the North American population ages the demand for health care products is going to continue to rise regardless of the state of the economy.

3. Utilities – Regardless of the state of the economy the lights will remain on, the phones will remain connected and houses will continue to be heated in the winter and cooled in the summer.

In my next post I will provide a list of names you can use as a starting point to assemble your own recession resistant portfolio.


telly said...

Good post.

My favourite stock that would belong in this category is JNJ (pays out dividends today :)).

Also, I'll throw Rothman's out there. Pretty sinful but at an almost 5% tax friendly, dividend yield, it may not be a bad choice.

Looking forward to reading your picks.

Anonymous said...

Timely article:

Best SIN stocks IMO: Corbys Distilleries, MO (better than Rothman's), BUD.

Thomas Cort said...

Sin Stocks? Try VICEX.

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