Recession-resistant stocks are essential to achieving stable, long term portfolio returns. The economy goes through periods of both economic expansions and contractions. These cycles can impact stock market returns, during both bull and bear markets.
New risks in the economy continue to emerge, keeping investors on edge. That is why its more important than ever to have a well diversified, multi-asset portfolio. While you do not have a crystal ball to tell the future, there are ways to hedge your portfolio to accommodate such risks.
Some recession-proof sectors include consumer-staples, healthcare and utilities. However, picking companies in these sectors will not guarantee you any level of success. If you’re a more risk averse investor, you’re probably better off holding mutual funds and ETFs such as SPDR S&P 500 ETF Trust (NYSE:SPY). However, that doesn’t mean that you can’t have a little fun with a small allocation to individual stocks.
Below are my top three recession-resistant stocks to buy right now!
SPDR S&P 500 ETF Trust (SPY)
S&P 500 ETF Trust is synonymous with the stock market and is the single best way to track large-cap U.S. equities. Over the last 2 decades, the S&P 500 has returned 10.20% per year. This translates to 7.47% per year on an inflation-adjusted basis. If you had invested $10,000 into the S&P 500 in 2003, assuming you re-invested the dividends, you’d have about $73,200.00 by the end of 2023.
The S&P 500 allows investors to gain exposure to the top 500 companies in the United States. It also provides investors with sector diversification, although the technology sector holds its largest weighting. Some of the sectors that the S&P 500 covers include technology, healthcare, consumer staples, financials, industrials, and energy.
The ETF’s top 10 largest holdings include technology companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Nvidia (NASDAQ:NVDA). They account for approximately 31% of the S&P 500’s total weighting. As of Nov. 6, the S&P 500’s market capitalization is estimated at $36.54 trillion. Additionally, the index has returned 14.73% year-to-date (YTD). With the new bull market on the horizon, the S&P 500 is a no-brainer recession-proof stock to buy and hold through market volatility.
Berkshire Hathaway (BRK-A, BRK-B)
Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) is a multinational conglomerate holding company headquartered in Omaha, Nebraska. The company is majority owned by legendary investor Warren Buffett. He is largely considered the greatest investor of all time. Currently, Berkshire Hathaway’s market capitalization stands at $754.32 billion.
Berkshire Hathaway has had an impressive run over the last two decades. The stock has averaged a CAGR of 10%, slightly above the S&P 500’s 9.75% during the same period. However, these numbers may be skewed and slightly less than 10%. This may be a tell tale sign, as even Warren Buffett has struggled to beat the market over the last two decades.
On Monday, Nov. 5, Berkshire Hathaway reported its third quarter 2023 financial results. The company booked its first operating loss for the year of $12.77 billion, with operating earnings climbing 40% to $10.76 billion. Berkshire Hathaway is currently sitting on a record cash pile of $157.2 billion, as Warren Buffett seeks attractive returns in short-dated U.S. treasuries. If you’re looking for increased portfolio protection, Berkshire Hathaway is among the best recession-resistant stocks to consider.
SPDR Gold Shares (GLD)
SPDR Gold Shares (NYSEARCA:GLD) is an ETF that seeks to track the spot price of physical gold bullion. It is the largest ETF to invest directly into physical gold. The ETF is managed by State Street Global Advisors, the world’s 4th largest asset manager with approximately $3.6 trillion in AUM.
SPDR Gold Shares is unique in that it offers a relatively cost effective way to gain exposure to physical gold bullion. It is a much safer way to gain access to the gold market, rather than investing into gold mining stocks. Investors can sleep better at night knowing that they are less exposed to the cyclicality of the gold mining sector.
Some of the largest hedge funds and institutions in the world hold SPDR Gold Shares including Ray Dalio’s Bridgewater Associates and Warren Buffett’s Berkshire Hathaway. There are a number of different ways to hedge your portfolio, and smart money tends to believe that a hard asset class like Gold should not be ignored. In 2023, the price of Gold rose more than 15% YTD as a result of ongoing macroeconomic headwinds threatening economic stability. If you want exposure to a hard asset, consider GLD as one of your best bets.
On the date of publication, Terel Miles 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.