Selection of Recession-Proof Stocks

The cover story in your last issue mentioned Quarterly Results of Large-Cap companies which were insightful. Seeing a possible recession in the making, can you share what factors you consider while selecting recession-proof stocks? Also, request you to throw some light on sectors you find recession-proof for the coming period. - Rajendra Sharma

Editor Responds: We are glad to receive such positive feedback from you. Some stocks are immune to the ups and downs of the stock market. These industries experience demand in both a bullish market and a bearish market. You can select stocks from the healthcare sector, as people don’t neglect to visit a hospital and buy medicine when they are sick. The information technology sector is also “recessionproof” as clients prefer to spend either on business transformation or cost takeout deals. In positive times, clients incline on spending on new initiatives and business transformation along with serving customers digitally. On the flip side, in low times, the focus shifts to reducing costs. 

The third sector can be identified as the FMCG sector which includes household and personal care items. Since you won’t stop buying essential products, this can also be identified as a recession-proof industry. Thus, buying defensive stocks with stable margins, steady cash flow and solid dividends from sectors like utilities, healthcare, IT and FMCG will benefit investors. Also, companies with strong balance sheets, low debt, good cash flow and industries that have historically done well during tough economic times make for a good gauge for the selection of stocks. We hope we have been able to answer your query. Keep writing to us!