Recession-Proof Your Portfolio
This column was originally published on RealMoney on Aug. 30 at 2:32 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.
The debate about whether the stock market is going to buckle under the weight of an "imminent" recession seems to have intensified recently.
A reasonable reaction to take with your portfolio might be to sell everything and wait it out. Of course, the worst-case consequence of waiting it out with nothing but cash is that you are wrong and the market skyrockets without you.
I thought it worthwhile to explore a few things that might do well regardless of the U.S. economic cycle, beyond the standard recommendations of health care and staples stocks, although both those areas have merit. In searching out some ideas, I am looking for yield, low volatility, and a low correlation to the U.S. stock market.
Aussie and Swiss SolutionI have in the past written about some stocks or funds that have these attributes. One such stock is Macquarie Infrastructure Trust (MIC). MIC owns things like toll roads, airport parking lots and water utilities. These are all mundane businesses that generate the cash flow that allows MIC to pay a very healthy 6.5% yield. MIC's beta is 0.41, and it has a correlation to the S&P 500 of 0.173 , according to PortfolioScience.com. (Beta is a quantitative measure of a stock relative to the overall market; a beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.) MIC is not without risk.
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