Recession fears are strong, as economic growth slowed to 1.1% in the first quarter and interest rate hikes by the Federal Reserve began to constrain economic activity.
So what types of stocks should investors pursue to protect themselves from a recession?
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“Recession-proof stocks are companies whose products consumers will continue to buy regardless of the economic climate,” Morningstar Investing Written by specialist Susan Dziubinski in comment.
“In a slowing economy, consumers will generally still seek medical care and enjoy their favorite beverages and snacks,” she said. They will also continue to pay for running water, electricity and gas.
In addition, recession-proof companies tend to be financially healthy and highly profitable, “two qualities that are valued when economic times get tough,” Dziubinski said.
Slack stocks often:
– Land in Morningstar’s defensive Super Sector, which includes healthcare, consumer and utility defense.
Earn moat-wide ratings from Morningstar. A wide moat means that the company has competitive advantages that will last at least 20 years.
Morningstar low or medium uncertainty ratings. Such is the uncertainty in Morningstar’s fair value stock price estimates. This rating indicates the predictability of future cash flows.
Slack stock list
Here are the 10 most undervalued stocks, based on Morningstar’s fair value estimates, that meet these three conditions. Stocks are listed in order of valuation, with the most declining (as of May 5th) listed first.
GSK (GSK) – Get a free report, a pharmaceutical company headquartered in the United Kingdom. Morningstar fair value estimate: $54, with medium uncertainty. Share price Wednesday afternoon: $36.40.
Roche Holding (RHHBY) Swiss pharmaceutical company. Morningstar fair value estimate: $57, with low uncertainty. Share price Wednesday afternoon: $39.45.
imperial brands (IMBBY) , a tobacco company headquartered in the United Kingdom. Morningstar fair value estimate: $34, with medium uncertainty. Share price Wednesday afternoon: $23.90
Anheuser-Busch InBev (bud) – Get a free report, beer company. Morningstar fair value estimate: $90, with medium uncertainty. Share price Wednesday afternoon: $61.60.
Bayer (Bayry) – Get a free report, a German healthcare and agricultural company. Morningstar fair value estimate: $22.50, with medium uncertainty. Share price Wednesday afternoon: $16.
Estee Lauder (he) – Get a free report, a provider of beauty products. Morningstar fair value estimate: $253, with medium uncertainty. Share price Wednesday afternoon: $200.40.
Lacqla (BTI) – Get a free report, British Tobacco. Morningstar fair value estimate: $47, with medium uncertainty. Share price Wednesday afternoon: $34.75.
Zimmer Biomet Holdings (ZBH) – Get a free reportMedical equipment company. Morningstar fair value estimate: $175, with medium uncertainty. Share price Wednesday afternoon: $136.75.
Pfizer (PFE) – Get a free report, pharmaceutical company. Morningstar fair value estimate: $48, with medium uncertainty. Share price Wednesday afternoon: $38.25.
Medtronic (MDT) – Get a free report, a medical device company. Morningstar fair value estimate: $112, with medium uncertainty. Share price Wednesday afternoon: $89.35.
Morningstar analysis from GSK
“As one of the largest pharmaceutical and vaccine companies, GSK has used its vast resources to create the next generation of healthcare treatments,” writes Damian Conover, an analyst at Morningstar.
“The company’s range of innovative new products and expanded list of patented medicines create a broad moat.”
Furthermore, “GSK’s scale of reach is evidenced by its product portfolio that spans many therapeutic categories,” said Conover. “We expect GSK to be a major competitor in the respiratory disease, HIV and vaccine space over the next decade.”
The author of this story owns shares of Pfizer and Medtronic
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