The Industries That Grew In The '08 Recession Are (Not Surprisingly) Doing Very Well Now

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Includes: AZO, DLTR, F, FCA, GM, MCD, NJR, ORLY, PNRA, RGLD, WMT
by: Wappinger Capital Research

Summary

Industries that did well during the recession are doing pretty well now.

Below we list 8 stocks that did well in the 2008 Great Recession. Most experienced strong growth from then, and are doing very well now.

WCR likes MCD and AZO as an investment now, but almost all of these stocks could be considered for investment.

How We Screened The Stocks:

In a receding market, stocks can sometimes behave differently than in normal market conditions. We tried to choose companies that didn't make any major operating changes during the time and operated in "recession resistant" sectors, so when we compare their historical data to today's there will be a more accurate picture

We chose the following stocks based on this criteria:

  • The stock must have been at least small-cap.

  • The investment must have had a positive return from December 2007 to June 2009 (Great Recession), outperforming the S&P 500 by at least 36%.

  • The company must have not made any major changes during the recession.

(Please note that while a return of 0.03% is considered poor in today's market, in a receding market any positive or even return was considered great.)

We tried to spread out the stocks over various industries but still ended up having most in Discount Retail and Food sectors for reasons discussed below

The Stocks:

The following stocks passed our screening:

Company

Price Percent Change (Dec 2007 - June 2009)

Value (Dec 2007)

Value (June 2009)

Value (Present)

52-Week Range

Sector

S&P 500 (SPX - Benchmark)

-36%

1472.42

942.87

2,415.82

1,991.68 - 2,418.71

N/A

McDonald's (NYSE:MCD)

0.03%

59.83

59.85

149.86

110.33 - 150.24

Restaurants

Dollar Tree (NASDAQ:DLTR)

53.91%

9.81

15.09

78.28

72.55 - 99.93

Discount, variety stores

Wal-Mart (NYSE:WMT)

5.68%

47.87

50.59

78.13

65.28 - 79.44

Discount, variety stores

Panera Bread (NASDAQ:PNRA)

38.36%

38.91

53.85

313.84

185.69 - 316.21

Restaurants

New Jersey Resources (NYSE:NJR)

4.82%

16.62

17.43

41.75

30.46 - 42.65

Utilities

O'Reilly Auto Parts (NASDAQ:ORLY)

13.12%

33.00

37.33

248.48

234.14 - 292.84

Auto Parts

AutoZone (NYSE:AZO)

45.39%

107.87

156.83

607.34

573.80 - 819.54

Auto Parts

Royal Gold (NASDAQ:RGLD)

57.37%

29.32

46.14

81.32

54.35 - 87.74

Precious Metals

The Industries:

The majority of the companies deal with food, either being in the discount restaurant or discount retail industries. It makes sense, consumers with less money to spend will head out to the companies that sell products on a discount, such as Wal-Mart and Dollar Tree. Consumers who want to go out to eat but cannot find the money for expensive dining at private restaurants go to chains that offer lower prices.

AutoZone and O'Reilly also had major gains. While the auto part industry isn't the first recession resistant sector that comes to mind, it does make sense that it would rise in a receding economy. People still need to get to point A to point B via car, despite poor finances. Consumers can't shell out $30,000 for a new car (why Ford (NYSE:F), General Motors (NYSE:GM) and Chrysler (NASDAQ:FCA) tanked), so they are stuck repairing the existing vehicle.

Other industries include precious metals and utilities. The utilities industry is known for stable growth, and is a very defensive investment. In a receding economy, people still need water and power despite their financial situation. While investors cannot expect the industry to directly benefit off of a dropping economy, the companies should be relatively unaffected by it. Now, "the decline in the unemployment rate and an improving GDP are acting as tailwinds for the utility sector in the U.S," states an article by Zacks. NJR has risen 20% since the beginning of 2017 due to growing earnings and analyst optimism.

However, gold and precious metals usually do rise in a receding economy, and 2008-09 caused Royal Gold (and other competition) to jump almost 60%. Usually in recession, gold (and companies relating to gold such as storage and mining) has a short fall followed by a massive spike. This is demonstrated on the following graph, sourced from an article published by Casey Research:

However, unlike retail and utility, gold usually drops in value after recessions and because of this make a volatile investment.

The main similarity between all sectors in which these companies operate is that no matter what, consumers need them (other than gold). Though the economy may be crashing, people still need to eat, go places and have electricity/water. In addition, most of these sectors actually benefit from a recession because they offer lower pricing than competitors and gain new customers because of this.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AZO, WMT over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.