My Top 3 Recession-Proof Stock Picks

By Anthony Bauer, 
Head of Private Equity at Hennessy and Associates 

 

 

The risk of recession is on the minds of all investors at the moment, and in these tough times, investors would be well advised to find companies that are ideally positioned to be able to navigate a potential economic downturn. Here are my recommendations for companies who are well managed, have sound fundamentals, and are strong in their sector with a bright future.

Nvidia 

Nvidia has been under pressure recently due to the slump in the PC gaming market, and revenue and earnings have declined in the 4th Quarter, but the company still managed to beat Wall Street’s expectations due to the year-over-year rise in data center revenues.

Investors have been lifted by Nvidia’s 1st Quarter revenue guidance and CEO Jensen Huang’s statement about how the company is well-positioned to benefit from the heightened interest in generative artificial intelligence (AI), and analysts expect Nvidia’s data center revenues to reaccelerate year-over-year beyond the 1st Quarter and grow 28% in 2023 and then 30% in 2024.

Kontoor Brands 

Consumer discretionary company Kontoor Brands  (KTB), which owns the iconic Wrangler and Lee Brands, has seen its shares rally on the day it reported solid 4th Quarter results and issued a strong outlook for 2023. Demand for Wrangler and Lee continues to improve, fuelled by the company’s brand-enhancing initiatives, and it seems probable that Kontoor’s fiscal 2023 outlook will prove conservative. In addition, the company’s revenue growth in China should turn positive in the 2nd Quarter, and then accelerate thereafter.

Workday 

Workday (WDAY) is a provider of cloud-based finance and human resources applications, and it recently issued a subdued outlook for the fiscal year 2024, which actually overshadowed the better-than-anticipated results for the 4th Quarter of fiscal 2023.

The company continues to gain market share in human capital management and financial management solutions in the enterprise space, and, despite long enterprise sales cycles due to macro pressures, Workday gained seven new Fortune 500 and 11 new Global 2000 customers in the fiscal 4th Quarter, and it is expected to reaccelerate subscription revenue growth once the macro backdrop is normalized, which means that this company has great long-term growth potential.

Disclosure: The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.