5 Stocks to Beat the Recession

With the Dow below the psychologically significant 12,000 mark, investors should consider the impact a prolonged recession might have on their portfolios. It might be tempting to move to an all-cash position, but before you make such a hasty move, take the time to look at stocks that have the ability to hold up in tough times.

I used the stock screener at our investor-intelligence database Motley Fool CAPS to look for companies that have proven to be less volatile than the market, but have been reporting strong revenue and earnings growth over the past few years. With a beta that's around half that of the S&P 500 (or even less), these companies ought to react less violently to any market swoon.

By adding in a measure of cheapness -- these stocks also carry a P/E ratio that's less than average -- we build in an additional margin of safety. However, with some CAPS investors rating them at four or five stars, we're getting companies that are expected to outperform.

When I ran the screen, it returned 35 stocks. Below, I've listed five that look like they could do well in any extended downturn.

Source: Motley Fool CAPS Screener.

Bright opportunities
Barrick Gold's management rightly noted that escalating costs from commodities and pressures from inflation are in fact what's driving the price of gold higher. That doesn't mean management isn't going to take actions to minimize the impact rising costs have on its operations. The world's largest gold producer said it was acquiring oil and gas assets from Daylight Resources to complement its acquisition of Cadence Energy last month. Together, they'll represent about 30% of Barrick's annual fuel consumption and form a hedge against rising energy prices.

Those rising costs are also what's causing rival Newmont Mining (NYSE:NEM) to consider its stake in an Australian joint venture it co-owns with Barrick. The mine was afflicted with a 74% increase in costs, partially as a result of lower-grade ore. Barrick isn't saying whether it might buy out its partner, though.

With shares pulling back recently as commodities have cooled, CAPS member sohmah42 finds such signals misleading.

Undervalued, Market sell off in [commodities] are completely wrong and misleading, recent [bounce] in financials are just a trap doesn't their earning and balance sheets [tell] the story?? Stick with gold, copper, [Barrick Gold] has solid earnings and balance sheet, this is another trick of wall street to fool us.

Snooze control
Famous investor Peter Lynch recommended that when looking for quality investments, the less sexy the better. Anixter International is that in spades because it manufactures wire and cable connectors for the communications industry. Yet don't let its boring profile fool you: Its broad range of customers across a wide geographic area allowed it to boost profits 4% in the latest quarter despite the difficult economy. Also, the recent acquisition of two rivals is expected to add to earnings in the first year.

Rival WESCO International (NYSE:WCC) was also able to beat expectations, but reported more modest increases in earnings and margins compressed by costs.

CAPS member slimpickins2 saw the benefits of a basic business when he picked it to outperform.

I like this stock to out-perform due [to] its track record, low P/E and decent growth rate for that PE. They will benefit when our economy turns around, they have a pretty basic business, and I like the fact that they serve the technology sector as well, because there is always growth & development on that front and a need for more products and supplies.

Take a recess
Market swoons can create havoc for your portfolio, but there's no reason to hide your money in the mattress. These five recession fighters look to have the goods to keep your portfolio on the upswing, but it pays to start your research on these stocks on Motley Fool CAPS. Use the screener, read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Then weigh in with your own thoughts on which stocks you think can keep the dogs of recession at bay.