Maintaining Portfolio Value As Recession Fears Grow

How do you safeguard your investments when the economy is under pressure? Uber CEO Dara Khosrowshahi stated earlier this month at a Bloomberg event that the ridesharing and food delivery company is “recession-resistant.”

That statement’s  accuracy may be a bit misleading, because Wall Street’s stats tell another story. This year, Uber’s (UBER) stock has lost more than half of its value.
However, with fears of a recession growing, due to runaway inflation and the Federal Reserve’s continued intentions to raise interest rates, now may be the moment for investors to seek out truly “recession-resistant” investing opportunities.

Shares of power and water utilities, as well as consumer staples like food and beverages (both alcoholic and non-alcoholic), typically fare better in a market downturn, especially since many of those firms offer consistent dividends.
In a midyear market analysis issued this week, a Wells Fargo analysts stated that they now “favor a full, market-weight allocation” of consumer staples and utility stocks “due to their traditional resilience in a slowing economy.”

Sempra (SRE), ConEd (ED), Exelon (EXC), and American Electric Power (AEP) all have somewhat higher stock prices for the year.

Utilities and staples are regarded as necessities. In a downturn, you may not take as many luxury vacations or dine out as frequently. But you’re still going to pay the electric bill and purchase some Coke (KO), General Mills’ (GIS) cereal, and Kraft’s (KHC) mac and cheese at the grocery store.

“Food staples are hard to substitute and the last items on which households tend to cut spending,” noted BNP Paribas analysts this week in a study, adding that “a fall in demand is improbable” despite “the breadth of food price hikes.”
According to the Wells Fargo analysts, food and basics retailers, or supermarkets, are now on their list of “favorable sub-industries” within the broader consumer sector “because we expect this group to benefit from an increasingly value-conscious consumer”

To that end, Kroger (KR) posted better-than-expected sales and earnings Thursday morning, as well as an enthusiastic outlook. The stock sank along with the rest of the market on Thursday, but it is still up 9 percent this year. The S&P 500 is down 23%.

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Several other food and beverage companies are defying the market’s negative trend as well. This year, shares of Molson Coors (TAP), Hershey (HSY), Kellogg (K), and Campbell Soup (CPB) are all up.

Energy stocks may continue to rise.

Then there’s the matter of oil. Energy companies have been huge market winners this year, owing partly to the rise in crude prices since Russia’s invasion of Ukraine.

Chevron (CVX) stock, which is now one of Warren Buffett’s Berkshire Hathaway (BRKB) top holdings, has risen more than 30 percent this year, making it one of the best Dow performers. The top stock in the S&P 500 is Occidental Petroleum (OXY), which is owned by Warren Buffett as well. It has almost doubled.

Despite mounting concerns that rising oil and gas costs would force the economy into recession, some experts believe energy stocks will fare better than other sectors of the market.

“Profits in the energy sector are rising much faster than the sector’s overall valuation, so there remains plenty of upsides,” said David Trainer, CEO of financial research firm New Constructs, in a report.

Trainer is “particularly bullish” on Petrobras (PBR), Shell, and Phillips 66 (PSX) of Brazil, citing “superior profitability” and “very attractive valuations.”
“We believe energy prices will remain elevated for the foreseeable future, as demand for fossil fuels is not declining as fast as people think and alternative energy is not as available as people think,” Trainer added.

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