4 consumer staples stocks to hedge against recession

During difficult economic times, people are much more hesitant to spend money on non-essential products. Despite this, people still need to buy food and other essential items. This is where consumer staples come in. Consumer staples are companies that provide essential goods and services that people continue to buy regardless of the state of the economy. Demand for these items may even increase during tough times as people focus on saving money by cooking at home and cutting back on non-essential purchases.

Therefore, investing in companies that produce consumer staples can be a smart move during economic downturns, as consumer staples tend to provide stability during tough times. So, if you’re looking for stocks that will hold up during a recession, consumer staples may be worth considering.

Here are four consumer staples stocks to hedge against recessions:

1. Procter & Gamble

Procter & Gamble is an American consumer goods corporation with many well-known brands, such as Tide, Pampers, Oral-B, and Gillette. The company has a relatively good history of weathering recessions and other economic downturns. P&G has been around for more than 180 years, has weathered many storms since being founded in 1837, and has survived crises such as the Great Depression, the dot-com bubble of the early 2000s and the Global Financial Crisis of 2008-2009.

During the Global Financial Crisis, P&G experienced a decrease in sales due to lower consumer spending. However, the company was able to quickly adapt its strategy and focus on selling more affordable products. As a result, P&G only suffered a decline of less than 4% in sales during that period.

P&G’s ability to weather economic downturns is due to its strong brand equity and diversified product portfolio. P&G’s products are essential for many consumers, and the company has a diversified portfolio of over 300 brands, including luxury and everyday items catering to a wide range of consumers. This allows P&G to maintain its sales even when some of its products are not doing well.

2. McCormick & Company

McCormick & Co is the world’s largest spice company. Founded in 1889, McCormick has a long history of weathering economic downturns. In fact, during the last recession in 2008-2009, the company saw an increase in sales.

Source: McCormick & Company

While many companies are expected to suffer during an economic downturn, McCormick is likely to weather the storm relatively well. The spice company has a long history of consistent profitability, and its products are considered relatively affordable luxuries that people are unlikely to cut back on. Most consumers will find ways to save money by cooking at home more often. That’s good news for McCormick, which sells products that help make home cooking easier and more affordable.

Brands like Old Bay and Zatarain’s, which offer affordable spices and seasonings, are likely to perform well as consumers cook more at home to save money. And with people spending more time at home, there may also be an opportunity for McCormick to sell more premium products like its Gourmet Collection. In addition, McCormick has a diversified product portfolio and exposure to international markets, which will help insulate it from any slowdown in the U.S. economy.

While the recession may present some challenges for McCormick, it seems likely that the company will weather the storm relatively well.

3. Costco Wholesale

Costco is a membership warehouse retailer. The company was founded in 1983 and is headquartered in Issaquah, Washington. Costco has historically done well throughout recessions. Costco has always been a good place to find bargains on items like groceries and household essentials. However, these deals become even more vital to families trying to save money during a recession. During the Global Financial Crisis, the company reported strong sales of US$71.4 billion for its fiscal year ended August 31, 2009, with a minor 1.5% decrease compared to the previous year.

Costco’s stability can be attributed to its unique business strategy, which has garnered consumer confidence by providing reasonably priced, high-quality items. This model appeals to value-conscious customers, especially during the economic slump. Furthermore, Costco has controlled expenses, allowing it to sustain profitability. Costco has demonstrated its ability to adapt to changing consumer behaviour and demands, allowing it to remain profitable even in difficult economic times.

4. Doller General

Dollar General is a discount retailer that offers low prices on essential items like food, health and beauty products, and cleaning supplies. It caters to budget-conscious shoppers, and its prices are lower than Walmart’s.

During recessions, consumers tend to cut back on spending. But they still need to buy essentials like food and cleaning supplies. That’s where Dollar General comes in. Consumers will seek ways to save money to reduce their expenditures. Shopping in discount stores is one method to do this. As the largest chain of discount stores in the U.S., Dollar General will likely benefit from this trend. In times of hardship, they provide an irresistible combination of convenient items at affordable price that are hard to beat, especially during tough economic times.

Throughout the last recession, the company saw an increase in both sales and earnings. If the economy declines again, we’ll probably see similar results. Dollar General has a track record of 31 years of consecutive positive same-store sales growth.

Source: Dollar General

So while other retailers are struggling, discount stores like Dollar General are expected to continue to thrive. That’s good news for its shareholders.

The fifth perspective

Consumer staples stocks are a good hedge against recession. They are typically less volatile than the overall market and have a history of outperforming during periods of economic decline. If you’re looking to protect your portfolio from a potential downturn, consider adding some consumer staples stocks to your holdings.

Choon Leo Wang

Choon Leo is a growth-focused investor with an interest in innovative platform businesses that connect users and fix market inefficiencies. He believes that companies with the most competitive business models will compound in value over the long term. He currently holds CFA Level I qualifications.

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