Five Stocks for Playing a Recession Safely

Back in June, I wrote a column titled: Nine Stocks for Playing the Long Side Safely. At the request of numerous readers, I'm following up that article today. But first, I want to give you a new list of trading ideas.

With all of the recession talk lately, my theme today is screening for potential winners that should hold up regardless of what happens in the economy, be it a soft landing, reacceleration or full-blown slowdown.

Kicking around different sector ideas that looked unusually strong, one of my partners recalled recent CBO congressional testimony on infrastructure spending. We pulled up the testimony on Public Spending on Surface Transportation Infrastructure before the Committee on the Budget U.S. House of Representatives. Given the recent bridge collapse in Minnesota, and the natural tendencies of congress members to promote public works programs in their districts, it's quite likely we will see robust growth in this sector.

This testimony in particular caught our eye: "Spending on surface transportation infrastructure by all levels of government in 2004 was $191 billion (in 2006 dollars), or 1.5 percent of gross domestic product (GDP)." The rest of the testimony discusses how these levels are likely to rise in the coming years.

I love it when a macro "big picture" theme is confirmed by quantitative work, and that's what happened as I scrolled through several stocks in the engineering R&D services group. Many of the companies in this group are involved in infrastructure design, repair and maintenance. We can expect this group will continue to see revenue and profit growth regardless of how the economy progresses over the next year.

---

At the time of publication, Ritholtz was long CBI, MOS, SCHW and SXE, although holdings can change at any time. Barry Ritholtz is the chief market strategist for Ritholtz Research, an independent institutional research firm, specializing in the analysis of macroeconomic trends and the capital markets. The firm's variant perspectives are applied to the fixed income, equity and commodity markets, both domestically and internationally. Other areas of research coverage also include consumer, real estate, geopolitics, technology and digital media. Ritholtz is also president of Ritholtz Capital Partners (RCP), a New York based hedge fund. RCP is driven by the analysis performed by Ritholtz Research. Ritholtz appreciates your feedback; click here to send him an email.