Value stocks — with low price-to-book values or low p/e multiples — often trade at barga...
The Crow's Nest: Three Recession Proof Stocks
07/09/2020 5:00 am EST
Here’s a quick recap of my favorite recession-proof stocks that should not only hold steady during a possible second outbreak, but should be a part of your overall portfolio as long as you choose to keep them, explains growth and income expert Jimmy Mengel, editor of The Crow's Nest.
Thanks to the recently closed Allergan takeover, AbbVie (ABBV) has become one of the biggest players in the biotech/pharma industry, with sales forecast to come in at well above $55 billion by 2022.
AbbVie’s biggest drug is Humira, which is also the world’s best-selling drug overall, but the company owns a portfolio of other attractive assets as well, especially following its recent takeover of Allergan.
During the first quarter, AbbVie generated a very attractive 10% revenue growth rate, and Allergan’s results were not even included during Q1. This shows that the company’s business is highly resilient, despite the current pandemic-caused crisis, and AbbVie remains on a growth trajectory for now.
AbbVie’s shares are still inexpensive; according to current estimates, AbbVie trades for nine times this year’s profits, and for less than eight times next year’s profits. At the same time, investors also get a dividend yielding 5%. We’re currently up 111%. This is a safe stock that will do well in almost any environment.
Hormel Foods Corporation (HRL) produces and markets various meat and food products in the U.S. and internationally. It produces everything you could imagine.
And I bet that you have at least one of its products in your pantry. Aside from Spam, the company produces non-perishable staples like Skippy Peanut Butter, Dinty Moore Beef Stew, and Hormel Chili.
Most importantly, Hormel is a dividend king and has raised its dividend each and every year for 54 years. It currently yields 2.15%. It’s up 7% this year, and we’re up 50% in the portfolio. This is a solid long-term stock for panic and for a possible recession.
Collector's Universe (CLCT) has been one of the most pleasant surprises of the entire Crow’s Nest portfolio. We hit a h ome run, and are sitting on a 228% gain thus far.
Collectors Universe provides authentication and grading services for collectors of coins, trading cards, sports memorabilia, and autographs. The shares have risen 41% in the past year, giving the company a market value of about $302 million. It’s not well known. It pays a healthy dividend of 2.17%. It’s a moat company with few rivals.
The company could start to see some changes that could catapult it to wild new highs. One of the largest shareholders in Collectors Universe is seeking to replace its board, arguing the company could be worth $100 a share within the next three years under the right leadership. (It’s currently around $32 a share).
Alta Fox Capital Management, which owns a 5.4% stake in the authentication company, argued in a letter to shareholders recently that “there are several levers it could pull to drive operational efficiency, profitable digital innovation, and shareholder engagement.”
I’m not sure how willing the company is to radically shake up the board, but sometimes these “suggestions” can lead to major changes for the better — whether or not you rearrange any major pieces.
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