The Only Stocks to Buy in a Recession
Companies / Investing 2022 Oct 25, 2022 - 10:30 PM GMTBy: Submissions
By Chris Wood : When you think of “recession-proof” stocks... what comes to mind?
Let me guess… toilet paper and toothpaste?
The widespread (but wrong) belief is companies that sell “essentials,” like Clorox or Johnson & Johnson, are the best way to ride out a recession.
No offense... but I’m not interested in making 5% on a toilet paper stock.
Not today… when there’s a brand-new group of stocks that are all but guaranteed to grow rapidly through a recession.
- When I say “all but guaranteed to grow”… I mean it.
I put a 99.5% probability on these stocks continuing to grow fast… regardless of economic conditions.
Because this group of stocks has the most elusive trait in all of investing.
I’m talking four magic words:
“Grow no matter what.”
Most stocks do not grow “no matter what.” Most stocks only grow IF certain conditions are met.
FedEx will grow… IF the economy grows.
JPMorgan will grow… IF the Federal Reserve cooperates.
Netflix will grow… IF it outmaneuvers the other big streamers.
In a recession, “IFs” tend to go against you. The key is to eliminate as many IFs as possible.
You want to own stocks that’ll grow no matter what.
In many past recessions, the Cloroxes of the world may have been the only option.
This time around, it’s very different.
Because the government is essentially forcing one young sector to grow rapidly no matter what the economy does.
- Before I tell you what this sector is, let me assure you I’m no fan of the government picking winners and losers in the stock market…
I believe in the free market.
My dad was one of the few college professors who defended free markets.
I don’t agree with the government funneling $370 billion into one emerging sector.
But that’s exactly what the so-called Inflation Reduction Act set in motion.
Yep… even though this massive bill, signed by President Biden, has “inflation reduction” in the name… it’s actually the biggest subsidy of all time to the green energy industry.
Time Magazine calls it “The most significant climate legislation in US history.”
It’s the latest instance of world governments shoving unprecedented sums of cash into green energy. International governments are hell-bent on pushing the world to zero carbon. Every country of consequence on earth has agreed to the Paris Climate Accords.
- My team and I have spent hundreds of hours studying climate tech. Like any industry on the receiving end of government largess… there are some questionable and ideologically-driven projects I wouldn’t touch.
But there are also genuinely amazing opportunities in this sector that Bloomberg calls “Recession-Proof.”
Source: Bloomberg
Look at the stunning growth in sales of electric vehicles (EVs), for example.
While the rest of the market struggles… EV sales are skyrocketing to new highs.
Per Yahoo Finance:
Car sales are down this year. But EV sales are up. And they aren’t just “up” — they’re up big.
…Through June, consumers have purchased 4.1 million electric cars. That puts EV sales on track to top 10 million this year. And that would represent growth of more than 50% for the whole year.
- Can you name another industry growing 50% (!) this year?
Tailwinds this powerful don’t come along often in markets.
Stocks, bonds, gold… almost everything is down this year. Not just a little… a lot. A 60% stock/40% bond portfolio is having its worst year since World War 2.
Yet EV sales are soaring to new highs.
Governments are practically begging folks to buy EVs… and it’s working. The Inflation Reduction Act will hand people up to $7,500 for buying an EV.
Not only that… governments are actively banning the competition.
Governments in California, Europe, and China have already banned the sale of new gas-powered cars in the future.
Bloomberg says the global EV market will skyrocket to $46 trillion by 2040.
How’s that for recession-proof?
- Many EV stocks have already handed out explosive gains…
Workhorse (WKHS), which makes EV vans and drones, rocketed 11,511% from December 2018 to February 2021...
Chinese EV maker NIO (NIO) soared 5,529% from September 2019 to January 2021...
And Tesla (TSLA) has handed out peak gains of 22,000% over the past 10 years.
But to capitalize on the next wave of EV profits, we’re looking beyond the traditional opportunities.
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By Chris Wood
© 2022 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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