• Recession concerns on the market
    • Difficult business environment
    • These stocks could prove resilient

    The global economy has recovered from the corona pandemic, but market participants now fear that the rising key interest rates, which the monetary authorities are using to combat high inflation, could stall the engine and plunge the economy into a recession in 2023.

    Difficult business environment

    Bloomberg Economics’ Scott Johnson, as MoneyWise reports, predicts that the global economy will grow 2.4 percent in 2023, which – barring the crisis years of 2009 and 2020 – would mean the slowest growth since 1993. According to his analysis, the euro area is likely to slip into recession as early as the beginning of the year, while the US economy is likely to enter a recession at the end of the year.

    Difficult times may lie ahead for some companies, making it difficult for investors to pick the right stocks – but these three stocks could prove resilient in such a difficult environment.

    Southern Company

    Southern Company is an Atlanta-based American energy company focused on the Southeastern United States. “We serve 9 million customers and businesses nationwide with electric utilities in three states and natural gas utilities in four states, providing wholesale energy, customized distributed energy solutions, and fiber and wireless communications nationwide,” the company said on its website.

    In the third quarter of 2022, Southern Company reported earnings of $1.5 billion, which translates to earnings of $1.36 per share. In the prior-year period, the company was worth $1.1 billion, or $1.04 per share. Revenue was $8.4 billion for the third quarter, compared to $6.2 billion for the same quarter last year. “Our leading federally regulated electric and gas utilities continued to perform well in the third quarter,” said Thomas A. Fanning, Chairman, President and CEO of the company. “The economy in our service areas remains strong and customer growth has exceeded our expectations.”

    Utilities stocks are known as defensive stocks and so they should continue to be resilient despite inflation and interest rate increases, because even if everything gets more expensive: people still need electricity and have to heat in winter. This recession-proof nature of the business also allows Southern to pay reliable dividends, according to MoneyWise. In April 2022, the company increased its quarterly payout by 2 cents per share to 68 cents per share, increasing its dividend for the 21st year in a row. Overall, the company, which was founded in 1945, has paid constant or increasing dividends since 1948.

    Kroger

    Another sector that’s known for being defensive is grocery, because no matter what the economy is like, people need groceries. A company in this area that star investor and Berkshire Hathaway CEO Warren Buffett also relies on is the Kroger supermarket chain, which was founded in 1883 and is based in Cincinnati.

    For the third quarter of 2022, the company’s total revenue was $34.2 billion, compared to $31.9 billion in the same period last year. Gross margin was 21.4 percent of sales in the third quarter. Ex-fuel FIFO gross margin rate decreased 5 basis points compared to the same period last year. According to Kroger, this reflects the company’s ability to “effectively manage higher product cost inflation and shrinkage through strong sourcing practices, while helping customers manage their budgets and keep prices competitive.”

    Because people need food at all times, Kroger is able to make money in both good and bad economic times. This resilience is also evident in Kroger’s dividend history. According to MoneyWise, the company has increased its payout to shareholders for 16 years in a row.

    Coke

    Another company that investment legend Warren Buffett is banking on also comes from the food industry and makes the Berkshire Hathaway CEO’s favorite drink. Founded in Atlanta in 1886 and with a stock market history spanning more than 100 years, Coca-Cola is a classic example of a recession-resistant company, according to MoneyWise. Because even if many people may not be able to spend more in difficult times, a cola or another of the group’s many popular drinks is still affordable for most people.

    And so Coca-Cola was able to increase its profit in the third quarter of 2022 despite higher prices and recession worries. This increased compared to the previous year by 14 percent to 2.83 billion US dollars. Revenue rose 10 percent to $11.06 billion and the company raised its full-year revenue target.

    According to MoneyWise, the company enjoys great pricing power thanks to its strong market position, size and portfolio of iconic brands – as well as solid geographic diversification. The company sells its products in more than 200 countries around the world. The company has also increased its dividend for 60 consecutive years, so it should continue to provide investors with reliable payouts going forward.

    Editorial office finanzen.net

    This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.

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