5 Double-Dip Recession Winners

Uh-oh. The term "double-dip recession" is starting to creep back into the vernacular of those who dissect the market.

It's easy to be fearful right now. The Greek tragedy, the military jockeying in Korea, and the wobbly trading days we've recently seen are rattling the worrywarts' cages.

Now, I'm no economist, but I do remember the "Be Prepared" motto from my scouting days. If there's a chance that our baby steps toward economic recovery could come undone, investors should be brushing up on their due diligence for the companies that rocked during the last recession.

Let's go over five companies that should hold up reasonably well if we head back into an economic funk.

AutoZone (NYSE: AZO  )
You know you're rustproof when you score 15 consecutive quarters of double-digit earnings-per-share growth. The chain of 4,309 auto-parts stores ran like a dream during the downturn, as drivers held on to their cars a little longer and did their own maintenance.

Even as auto sales have bounced back, the good times haven't stopped. AutoZone's stock hit a new all-time high yesterday. Yes, yesterday. It's hard to ignore a retailer that posts a 7.1% surge in domestic comps.

It's hard to imagine that AutoZone would falter in a double-dip scenario. Drivers with aging cars would need to spend more to keep them running. Owners of newer cars would be likely to trade down from costly dealership service departments and learn to change their own oil and top off their fluids.

Wal-Mart (NYSE: WMT  )
The world's leading discounter may seem like a no-brainer of an investment, but let's apply a fresh coat of bargain-priced paint on this story.

Comps at Wal-Mart's stateside stores fell during the retailer's latest quarter. It wasn't much of a dip -- just a 1.1% slide, marked down to 0.5% if you back out gasoline purchases -- but it was a surprising contrast to the showing from other department-store chains that are gradually bouncing back these days.

The likely theory is that consumers who traded down to Wal-Mart from pricier retailers are now returning to their traditional merchandise marts. If discretionary income tightens again, Wal-Mart will be there to welcome shoppers back with a greeter's open arms.

Netflix (Nasdaq: NFLX  )
Couch potatoes have plenty of reasons to turn to the popular movie-rental service when money's tight.

  • A month's subscription for unlimited rentals is roughly the price of a movie ticket in some markets.
  • The widening catalog of streaming content comes at no additional cost, enhancing the already solid value proposition of the service.
  • Mail-delivered or streaming convenience makes a "staycation" all the more bearable.

In 2008, when things really hit the fan, Netflix managed to grow its subscriber base by 26% for the year. Revenue, earnings, and free cash flow all saw similarly impressive gains. The service has now grown to 14 million subscribers, inching higher through good and bad.

Green Mountain Coffee Roasters (Nasdaq: GMCR  )
The company behind the Keurig single-cup brewers and the premium coffee K-Cup portion packs that serve as refills was roasting during the recession. While Starbucks (Nasdaq: SBUX  ) was shuttering stores, laying off baristas, and coping with declining comps, Green Mountain was a winner. Comps at Starbucks fell by 3% in fiscal 2008 and an even steeper 6% in fiscal 2009. Yet Green Mountain didn't miss a step.

The value proposition certainly helped. Flavored K-Cup servings cost just pocket change per serving. At a time of high unemployment, kitchen-based convenience has been a big plus, too.

Starbucks has bounced back along with the hopes for an economic recovery, but Green Mountain hasn't missed a step in this part of the cycle, either. It continues to grow, and its success during the market's darkest hours bode well for the allure of Keurig single-cup appliances if the economic upswing fails to pan out.

Amazon.com (Nasdaq: AMZN  )
Another homebody play that had no problem improving its fundamentals through the recession is the world's leading online retailer.

In that dreadful 2008, most bricks-and-mortar chains struggled, but Amazon managed to grow its net sales and earnings by 29% and 36%, respectively.

One can always try to combine the dot-com savvy of Amazon with the bargain-driven attraction of Wal-Mart to buy into Overstock.com (Nasdaq: OSTK  ) , but it didn't do so well during the downturn. It's only now that Overstock is truly shining -- and if you didn't check out its latest blowout quarter, you probably should. Amazon.com, on the other hand, has been gobbling up market share during thick and lean times alike. It's the worthy winner of recession-resistant e-tail performance.

So what are you waiting for, my fellow investor? Start shifting your portfolio into stocks that will do well no matter which way the economy heads from here.

Do you have other stocks that should thrive in a double-dip recessionary environment? Share your thoughts in the comments box below.

Wal-Mart is a Motley Fool Inside Value selection. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers pick. Amazon.com, Netflix, and Starbucks are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. He owns no shares in any of the other stories in this article and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On May 26, 2010, at 3:40 PM, sid2286 wrote:

    I think now is the time to take cover in the sin stocks. Molson Coor (TAP) has good profit margins and would clean up as people feel the need to drink while watching the economy collapse. Also, a 2 percent dividend could be worse. And the old safety net... MO.

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