Editors' pick: Originally published Feb. 11.
U.S. markets are grappling with a rocky start to 2016 that has dragged broad indexes down nearly 10%, making memories of last year ever rosier and prompting speculation that the U.S. is headed for a recession.
Federal Reserve Chair Janet Yellen says that's unlikely, as do many executives and analysts. While economists at New York investment bank Morgan Stanley are still predicting growth this year -- albeit only slight -- the bank's models indicate the risk of a recession is rising.
If it does come to pass, though, the bank has compiled a list of the 19 best stocks to own during a slowdown, based on a survey of its U.S. analysts.
Here's a look at its recommendations:
The company is benefiting from a strong balance sheet and a collaboration agreement with pharmaceutical giant Celgene, which is bearing the development costs of its leading drug-development programs. Those include luspatercept, which boosts the red blood cell count in patients with rare blood disorders, and sotatercept, used to treat anemia.
"Celgene's financial commitment, along with the $150 million raised via a secondary offering in January, have substantially limited the company's financing risk, critical for development-stage companies should we enter a recession," Berens wrote.
"We would expect Amgen to outperform in a recession scenario as most of its portfolio of drugs is for oncology therapy or directed at patients in Medicare, two groups who are unlikely to limit their use of medicines in a recession," he writes.
"If unemployment were to increase, members would likely shift from commercial insurance to Medicaid, driving growth," Schenker wrote. "In addition, healthcare reform has expanded coverage criteria, ensuring that more potential members would be eligible."
The strength of the company's management team is another asset: It's focused on "controlling the controllable (i.e. expenses), which is key to achieving its $650 million in expense synergies."
Church & Dwight
They include a strong balance sheet and a broad range of products that consumers typically keep buying even during a slowdown, from condoms and home pregnancy tests to cleaning products and cooking supplies like baking soda.
Additionally, the company's brands often benefit from consumer trade-down, she noted, and most of its sales are domestic, so they're hurt less by currency-exchange fluctuation.
Cable will benefit from both broadband growth and improvements in its video services, while broadcaster NBC has a "potential upside from the Olympics in '16" and Universal should see "continued momentum" in its amusement parks.
Comcast's "below-peer leverage and limited international exposure make it more defensive in the event of a global slowdown," he wrote.
The company has a lease backlog on its towers valued at about $20 billion, with about six years remaining on the average contract and built-in annual rate hikes of more than 3%.
"The stock currently yields 4.2%," which is well above industry peers, and the company just raised its earnings forecasts for the year, Flannery noted. Its credit rating was also upgraded to investment level by two ratings firms, he said.
CVS Health (CVS - Get Report) has successfully repositioned itself against rivals by shrinking its consumer-product sales and focusing on its core health-care business, which should account for 89% of revenue this year, analyst Ricky Goldwasser wrote.
CVS will grow earnings per share by about 13% both this year and next, he projected.
Not only does Danaher (DHR - Get Report) have a war chest of as much as $2 billion for acquisitions in the second half of 2016, it has exposure of about 60% to the healthcare industry, through dental and life sciences businesses, analyst Nigel Coe wote.
"This 60% of the portfolio would have experienced only a 3% organic sales decline if it had been a standalone business in 2009," Coe wrote.
First Republic Bank
First Republic's (FRC - Get Report) focus on high net-worth clients and a track record of carefully evaluating borrowers "should allow it to grow -- profitably -- during a recession," analyst Ken Zerbe wrote.
The company's growth is usually internal, coming from either existing clients or customer referrals, he added.
Not only are tax filings relatively resilient -- they declined only 0.4% in 2009, which included some of the worst months of the financial crisis -- the company stands to benefit from increased paperwork related to Obamacare, for which preparers can charge extra.
Demand might actually increase during a recession, he noted, as workers who lost jobs joined insurance exchanges or sought additional exemptions, both of which would affect their tax returns
Tighty-whities are always a solid investment: People take parental advice about clean underwear to heart even during a downturn.
"Underwear is the most staples-like category within apparel and footwear," said analyst Jay Sole, which makes Hanesbrands (HBI - Get Report) a solid bet. The company's dominant market share isn't likely to change much in a recession, he said.
"While sales expectations are already relatively modest as the company integrates the Kraft business," it's likely to top its target of $1.5 billion in cost savings, given its strong track record, Grainger wrote.
Kraft Heinz is a holding in Jim Cramer's Action Alerts PLUS charitable trust portfolio.
"Its large size and scale allow it to leverage products, services, fuel and pharmacy, and the superior technology/infrastructure behind Kroger allows it to truly know its customer base and target promotions," Sinisi said.
Additionally, the company's financial stability would allow continued acquisitions, which it has handled successfully in the past, Sinisi wrote.
The Golden Arches might not be immune to a slowdown, but they should be more resilient than more expensive restaurant chains, wrote analyst John Glass.
"McDonald's highly franchised system generates over 80% of profits through rents and royalties, yielding substantial free cash flow, and the company has committed to a goal of $30 billion of cash return to shareholders" from 2013 to 2016, Glass wrote.
Not only are consumers more likely to opt for cheaper private-label medications instead of brand names, Risinger wrote, the company's consumer business is set to grow with the introduction of generic equivalents to products like decongestant Mucinex.
Perrigo also may be able to take advantage of lower company valuations during a slump to "pursue bolt-on acquisitions," he wrote.
"With a 3.3% dividend yield and above-average earnings-per-share growth relative to utility peers, growth that is not dependent on power-demand fluctuations" and a lower valuation than some of its peers, "we view PG&E as a defensive value play with strong current income," Byrd wrote.
The company has "historically outperformed the S&P 500 during market corrections since 2010," she said. It has done the same "during nearly 90% of trailing four-week periods in which the S&P 500 declined by more than 5%, since the market peak in 2007," she wrote.
Walmart WMT stands to benefit from a recession since cost-conscious consumers are likely to give up shopping at its higher-priced competitors in an effort to save money, wrote analyst Simeon Gutman.
"In addition, at current trading levels, Wal-Mart offers a 3% dividend yield," he wrote.