5 Recession-Proof Stocks for Coronavirus-Led Mass Layoffs

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For the last three to five years, a healthy labor market has been the powerhouse of the U.S. economy. And households have, undoubtedly, been the beacon of stability amid last year’s trade war and market volatility.  Unfortunately, things are pretty grim for the labor market this year. As recent as last week, the number of Americans who applied for jobless claims jumped by a record 6.6 million, reaching the increase in claims for unemployment benefits in the past two weeks of March to a staggering 10 million. In fact, in just the past two weeks alone, new jobless claims surpassed the number of people that have claimed jobless benefits during the 2007-2009 recession. 

Just to put things into perspective, a month ago new jobless claims were only 200,000, which was near a half-century low. What’s more, this unprecedented uptick in new claims indicates that the unemployment rate has certainly increased significantly last month from an official 3.5% rate in February, a 50-year low.

By the way, the states that registered the biggest increase in unemployment benefits last week were California (878,727), Pennsylvania (405,880) and New York (366,403). The nation’s largest state, California in fact has accounted for nearly 10% of new claims in the past two weeks. But why have jobless claims increased? The coronavirus pandemic has slammed the U.S. economy and triggered massive layoffs. The spread of the deadly pathogen forced businesses to shut down and disrupted supply chains.  BofA researchers now expect a grimier outlook for the U.S. economy. They said that the “coming recession appears to be deeper and more prolonged than we were led to believe just 14 days ago when we last updated our forecasts, not just in the US but globally as well.”

How to Invest in the Time of Recession? 

Contrary to popular belief, there are stocks that do well during economic downturns. Prominent among them are defensive stocks. These stocks are generally non-cyclical, or companies whose business performance and sales are not highly correlated with activities in the larger market. Their products are in constant demand, irrespective of market volatility, and such names include companies from the utilities and consumer staples sectors. Utilities are deemed defensive stocks as electricity, gas and water are essentials. Food companies are true defensive plays as demand for such staple stocks remains unaltered during market gyrations. The idea of investing in “vice” stocks can also be considered. After all, products or services in this space are relatively inelastic, and business is recession-proof. The very nature of their business ensures a stable stream of consumers, irrespective of market conditions, which eventually leads to higher margins and solid profits. Noteworthy vice stocks include cannabis producers, and tobacco and gaming companies. 

Buy These 5 Recession-Proof Stocks Now 

We have, thus, selected five stocks from the aforesaid areas that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). 

Chesapeake Utilities Corporation (CPK) is a utility company engaged in natural gas distribution and transmission. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current quarter and year is 8% and 9.6%, respectively. In fact, its expected earnings growth rate for the next year is 10.5%. 

Conagra Brands Inc. (CAG) is one of the leading branded food company of North America. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current and next quarter is 47.2% and 18.6%, respectively. Its projected earnings growth rate for the current year is 2.5%. 

Innovative Industrial Properties, Inc. (IIPR) is focused on the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. The company currently has a Zacks Rank #1. The company’s expected earnings growth rate for the current quarter and year is 94.9% and 63%, respectively. In fact, its expected earnings growth rate for the next year is 37.5%.

Turning Point Brands, Inc. (TPB) provides tobacco products. The company currently has a Zacks Rank #1. The company’s expected earnings growth rate for the current and next year is 2.7% and 11.5%, respectively. 

Super League Gaming, Inc. (SLGG) is an amateur esports community and content platform. The company currently has a Zacks Rank #2. The company’s expected earnings growth rate for the current quarter is 9.1%.

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