CSV

Don’t Panic. 3 Stocks to Own When Things Get Ugly

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Right now, investors are on top of the world. The major American equity indexes seemingly hit new record highs almost every week. Innovations in fields such as artificial intelligence offer tremendous promise to grow corporate earnings and lead to new technological breakthroughs.

But the good times won’t last forever. They never do. Whether the market rolls over next week, next quarter, or years from now, there will inevitably come a point when things get ugly out there on Wall Street once again.

They say the best time to buy an umbrella is while the sun is still shining. In the same way, it’s a great time to pick up some defensive stocks to own in tough times while the markets are still at record highs. Because, whenever that correction comes, it’s best to prepare in advance.

Carriage Services (CSV)

A funeral scene with casket and flowers.

Source: Shutterstock

Carriage Services (NYSE:CSV) is one of the most recession-resistant businesses imaginable.  That’s because the company offers funeral and cemetery services. Regardless of what’s going on with the economy, people are unable to cheat death.

In fact, perversely, shares of Carriage Services soared during the pandemic as investors speculated that COVID-19 would lead to higher death rates and thus more activity at Carriage Services. Thankfully, that scenario largely didn’t come to pass, and CSV stock quickly retreated to its pre-pandemic levels.

Carriage Services is not a fast-growing business, for obvious reasons. However, its revenues are about as dependable as they come. And shares are currently being offered at just 12 times forward earnings. The company is also currently paying down debt, which should help profitability in the current higher interest rate environment.

While Carriage Services is hardly the most exciting business in the world, it’s just the sort of security you might want to own when times get tough. And at today’s starting price, that defensive portfolio is at ]an attractive entry point.

Hormel Foods (HRL)

Hormel Foods Logo shown on a laptop screen behind a phone screen also showing the logo. HRL stock.

Source: viewimage / Shutterstock

Hormel Foods (NYSE:HRL) is a packaged foods company focused on protein products. Known for its canned pork product Spam, the Hormel of nowadays is more focused on health-conscious products such as natural and organic meats, guacamole, Mexican salsas, and nuts and nut butter.

Like many consumer staples companies, Hormel stock has dramatically underperformed the stock market over the past couple of years. Hormel’s profit margins have been hit as prices of key commodities such as livestock and grains surged. In addition, investors are less interested in perceived stodgy blue-chip sorts of companies during a raging bull market.

In a downturn, however, that will change. Food consumption often seems almost unaffected by changes in broader economic conditions. If anything, a weakening economy will cause some folks to trade down from restaurant meals to grocery shopping, and Hormel’s protein-forward offerings make for filling entrees and snacks.

HRL stock has started to bounce back in 2024 as the company’s margins have inflected upward. It’s starting to look like Hormel is a great contrarian bet for this year and beyond and perhaps among the stocks to own in tough times.

McDonald’s (MCD)

McDonald's restaurant in Thailand.

Source: Tama2u / Shutterstock

Turning from groceries to fast food, McDonald’s (NYSE:MCD) is another bargain food option whose value proposition shines during recessions.

Recently, expensive fast-casual options such as Sweetgreen (NYSE:SG) and Cava Group (NYSE:CAVA) have dominated the fast food market. In a growing economy, it makes sense for people to splurge on these interesting offerings, particularly as younger consumers tend to prioritize health-conscious dining options.

In an economic recession, however, the appetite for $18 salads tends to dry up. People return to tried-and-true budget options. McDonald’s, with its worldwide brand and fast affordable menu offerings, fits the bill perfectly.

McDonald’s is also more stable than most of its rivals since it owns so much of the land under its restaurants. In fact, some people have joked that McDonald’s is a real estate business that has a side hustle flipping hamburgers.

In short, McDonald’s has a strong balance sheet and a business built to shine during recessions. MCD stock has underperformed recently, giving investors a chance to buy this safe haven blue chip stock at a discount today.

On the date of publication, Ian Bezek held a long position in HRL stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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The post Don’t Panic. 3 Stocks to Own When Things Get Ugly appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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