London, UK — Inflation is one of the most difficult challenges for economists and government officials, and it is one of the factors boosting the threat of a US recession. In May, the annual inflation rate in the United States reached 8.6 %, the highest level in 41 years. Consumers experienced dramatic price increases for a wide range of products and services as high demand collides with ongoing supply shortfalls.
With rising prices, excessive inflation reduces company earnings. It causes businesses to be concerned about the future and stop recruiting, lowering people’s standard of life, primarily those on fixed incomes. High inflation is also associated with terrible equity returns. In high inflation periods, the value equities surpass growth companies, whereas growth stocks outperform during low inflation periods. Due to this reason, investors are now searching for organizations that can survive a future recession. However, it can be difficult for investors because inflation affects both the industry and stock prices. Investors must sift through the uncertainty to make sensible selections on how to invest during periods of inflation since there is no proper solution. According to Noelle O’Connor, a Stocks Expert at FinancialCentre, during periods of rising inflation, certain stocks tend to do better. Companies with high profits and minimal debt appear to be a solid option.
Following is the list of five stocks having the operational and financial stability to endure a recession.
- Logitech international
- Sanderson Farms
These companies have acquired a return on capital of 17% or higher in the previous year and have a debt of 10% or less of shareholders’ equity. These stocks are a smart investment because of their expected growth based on firms’ expected future profitability and interest rates.
1. Moderna Inc. (MRNA)
In August 2018, the firm changed its name from Moderna Therapeutics, Inc. to Moderna, Inc. The company was established in 2010 and has headquartered in Cambridge, Massachusetts.
It is a biotechnology corporation that finds, develops, and publicizes messenger RNA medicines and vaccines to treat several diseases. In addition, the company provides systemic secreted and cell surface medications and cancer vaccines. It initially earns public attention when it created a vaccine against Covid-19, approved in early 2021.
In 2019, Modern’s revenue was under $60 million. It was more than 300 times higher than the previous four quarters, $22.6 billion. Many traders believe that once the Covid-19 pandemic passes, so will MRNA’s profits. That is why the stock trades at a meager four times revenues. However, its executives believe that messenger RNA technology is applied to many other diseases. If they are correct, the potential rewards are enormous, and the company has the potential to hold up in the recession.
2. Teradyne Inc. (TER)
Teradyne, Inc. is an American designer and producer of automated test devices. Its headquarters are in Boston, Massachusetts, in the United States.
The company creates designs, manufactures and distributes automated test systems for semiconductors, wireless goods, data storage, and complicated electronics systems. Its divisions include Electronics Test, System Test, Circuit-Board Test, and Automation Systems. The company also oversees operations connected to the design, manufacture, and marketing of interactive robotic arms, automated mobile robots, and innovative robotic control software.
Teradyne has grown its sales on average by 12% every year over the last decade. Its profitability ratio exceeded 52% last year and 34% in the previous quarter. Because there is now a worldwide scarcity of semiconductors, it is likely for Teradyne’s profits to remain high even during a recession.
3. Logitech international SA (LOGI)
Logitech International S.A. is a multinational American-Swiss producer of computer accessories and software. It has headquartered in Lausanne, Switzerland, and Newark, California.
The company manufactures, develops, and sells devices that link people with music, gaming, video, computer, and other digital channels. It operates in the peripheral segment and sells its items to a network of local and international clients, including direct sales to shops, e-tailers, and intermediaries.
Logitech International SA has an outstanding track record of profitability. In 11 of the last 15 years, the profit on invested equity has been greater than 17 %. The stock was on the pricier side a year ago. However, it is now worth below 15 times earnings. It means that a recession may affect profits for a period, but with no debt on its balance sheet, it would do well.
4. Sanderson Farms Inc. (SAFM)
Sanderson Farms is an American poultry company and the third-largest chicken producer in the US and has headquarters in Laurel, Mississippi, the United States. It yields 13.65 million chickens every week.
Sanderson Farms, Inc. prepares, processes, markets, and distributes fresh and frozen chicken. It also processes and distributes processed and partially cooked chicken foods. The poultry products section of the company distributes whole, cut-up, and boneless chill-packed, ice-packed, bulk-packed, and frozen chicken to retailers, distributors, and casual dining operators in the United States and clients who resale frozen chicken into overseas markets.
It has two sections, Processing Division and Processing Division.
- The Production Division is in charge of raising chickens to the broiler size.
- The Processing Division is responsible for processing, selling, and distributing chicken products.
Sanderson Farms has a nearly 10% market share. Last year, it decided to be bought for $203 per share by a joint venture of Cargill and Continental Grain. Furthermore, the stock has risen to $208. If the company maintains its independence, it is an excellent investment because its debt is barely 1% of its capital, and the stock trades at only five times its income.
5. Mueller Industries Inc. (MLI)
Mueller Industries is an American manufacturing corporation founded in 1917. Its headquarters are in Memphis, Tennessee, the United States, and activities in the US, Mexico, China, South Korea, Great Britain, the Middle East, and Canada.
Mueller Industries, Inc. is a manufacturing company that produces copper, brass, aluminum, and plastic products. This Company manufactures several products, including copper tubes and fittings, line sets, brass forgings, PEX plastic tubes and fittings, compressed gas valves, steel nipples, refrigeration fittings, aluminum forgings, pressure vessels, coaxial heat exchangers, and insulated flexible duct systems.
It has three sections, the Piping Systems, the Industrial Metals, and The Climate.
- The Pipeline Systems section consists of Domestic Piping Systems Group, Jungwoo-Mueller, Heatlink Group, European Operations, Great Lakes Copper, Trading Group, and Mueller Middle East.
- The Manufacturing Metals section has Brass Rod, Impacts & Micro-Gauge, and Brass Value-Added Products.
- The Climate section has Refrigeration Products, Westermeyer, Turbotec, Flex Duct, and Linesets, Inc.
Mueller has been profitable for at least 30 consecutive years, including the 2008-2009 Renowned Recession. Because of its diverse manufacturing lines and high reputation, this firm has the financial and operational ability to survive a recession successfully.
Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.