According to the National Bureau of Economic Research, the United States economy entered a recession in February, and many health experts fear that the coronavirus pandemic could resurge as the economy reopens. Investors can help protect their portfolios by investing in coronavirus-resistant blue-chip companies that have a track record of performing well even in uncertain times.
These two stocks that have shown themselves to be resistant to the harsh effects of a coronavirus-related economic downturn have relied on some similar qualities to maintain their growth. The first is Clorox (CLX 0.05%), a cleaning supplies manufacturer that will benefit from the increasing demand for sanitation during the pandemic. The second is Hormel Foods (HRL 1.49%), a consumer staple meat processor with a recession-proof business model.
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1. Clorox
Clorox manufactures and markets non-durable consumer products. The company's heavy focus on household cleaning supplies, bleach, and disinfectant makes it an excellent way for investors to protect their portfolios from a resurgence of COVID-19. Clorox wipes are in high demand right now as homes, businesses, and hospitals seek to sanitize surfaces to slow the spread of the pandemic.
Clorox reported fiscal 2020 third-quarter earnings on May 1, and the results show a surge in coronavirus-related demand for its cleaning products. Net sales jumped 15% year over year to $1.78 billion, driven by a 32% surge in cleaning segment sales (which includes Clorox disinfecting wipes). The company is optimistic that demand will hold up for the rest of the year and projects overall fiscal 2020 sales to increase 4%-6%. The resurgence of the coronavirus could make sales exceed guidance, leading to appreciation in the stock.
But the coronavirus isn't the only catalyst for growth in Clorox stock. The global disinfectant market is expected to expand at a compound annual growth rate (CAGR) of 6.7% through 2025, partially due to increasing healthcare demand and the need to prevent hospital-acquired infections. Clorox is poised to meet growing demand because of its well-established brand and market leadership position in the industry.
Clorox stock has grown by an impressive 40% year-to-date compared to a 6.9% decline in the S&P 500 over the same period. The company also boasts a dividend yield of 2.06% and has increased its annual payout for 42 years running.
2. Hormel Foods
People need to eat, in good economic times and bad. And that's part of what makes Hormel Foods is a top coronavirus-proof stock to watch right now. The food processing company is known for affordable processed meat brands like Jennie-O Turkey and Spam, which could see increased demand from cash-strapped consumers during the recession and pandemic.
While not known for its great taste, Spam has an extremely long shelf life, which makes it ideal for disaster preppers who like to stockpile food during uncertain economic times. According to Hormel's CEO Jim Snee, Spam sales are "through the roof" so far in 2020. And the brand has had record sales for six consecutive years.
Hormel reported 2020 second-quarter earnings on May 21, and the results show resilience in this tough economic environment. Net sales were up 3.4% year over year to $2.42 billion. And the growth was driven by sales volume increases in grocery products like Spam, Skippy peanut butter, and Hormel Chili. The company's Jennie-O Turkey brand also performed exceptionally well, with year-over-year volume up by 19% and net sales up by 12%.
Hormel faces some challenges in its food service business because of reduced restaurant and cafeteria traffic due to coronavirus lockdowns. However, the strong performance of other segments offsets these headwinds and makes the stock a solid, coronavirus-proof investment.
While Hormel stock hasn't performed as well as Clorox during the pandemic, it is still beating the market with a 7% rally year-to-date. The company also boasts an impressive track record of dividend growth with 53 years of consecutive payout increases, earning it Dividend King status. Hormel has a current yield of 1.9%.
Takeaway
Consumer staple stocks are a great way for investors to protect their portfolios during the coronavirus pandemic, as well as the ongoing economic recession. Both Clorox and Hormel Foods have strong business models that can outperform in this uncertain economic environment and deliver value to their investors through their strong stock performance and reliable dividend growth.
