Investors have been worried about the possibility of a recession since last year, but an economic downturn just got a bit more likely. The U.S. Federal Reserve recently predicted a mild recession would hit by late 2023. Other bodies of economists have already made similar forecasts, but it carries more weight when it comes from the Federal Reserve.
Even so, there is no need for investors to panic. Instead, now is as good a time as ever to consider adding shares of companies that can survive a recession and continue performing well long after. Let's look at two stocks that fit the bill, and each can currently be bought for less than $200 per share: Johnson & Johnson (JNJ 0.16%) and Amazon (AMZN 1.80%).
1. Johnson & Johnson
Johnson & Johnson is one of the leading pharmaceutical companies in the world. Therein lies one of the company's major strengths that can get it through any challenging economic period. People won't stop getting sick because the economy is bad, nor will physicians stop prescribing lifesaving medicines. Johnson & Johnson's lineup features products in many different areas, from infectious diseases to oncology and immunology, among others.
The drugmaker boasts plenty of medicines that generate over $1 billion in annual sales. These include immunosuppressants Stelara and Tremfya. In the first quarter, Stelara's sales increased by 7% year over year to $2.4 billion, while Tremfya's revenue of $640 million jumped by 8% compared to the year-ago period. Johnson & Johnson's other key products include cancer drugs Darzalex and Erleada, blood thinner Xarelto, and others.
The company has a rich pipeline, too, with 102 ongoing programs.
Johnson & Johnson can also rely on its medtech division, which adds diversity to its operations. The company offers a range of devices that assist physicians in conducting various critical medical procedures. Some of its products aid with aesthetic procedures, such as breast implants, but others facilitate lifesaving interventions.
That includes a range of devices and instruments that targets stroke treatment. Johnson & Johnson is separating from its consumer health unit, which should help boost its revenue growth rate over the long run. Meanwhile, the company still boasts an AAA rating from Standard & Poor's, which shows how robust its balance sheet is. Johnson & Johnson's business won't go under anytime soon.
And even the thousands of lawsuits it faces won't be enough to stop the pharma giant, recession or not. And that's not to mention the company's outstanding dividend profile. The shares are changing hands for just about $163 apiece as of this writing. Johnson & Johnson can help investors recession-proof their portfolios and deliver reasonable returns and growing payouts long after the predicted economic downturn.
2. Amazon
Amazon encountered a series of issues over the past couple of years. Slowing revenue growth and rising expenses fueled by macroeconomic factors led to a rare net loss for the company in 2022. However, the tech giant is taking steps to improve things. One way it is doing so is by implementing layoffs, among other cost-cutting measures, that should allow it to improve the bottom line and better navigate the coming downturn.
Amazon remains a leader in several important industries, from online advertising to e-commerce and cloud computing. It is one of the most visited websites in the world, which is why its platform is an excellent place for businesses to advertise their services. Amazon also offers thousands of products, many of which with free one-day shipping, for relatively low prices through its e-commerce business.
Last year, Amazon once again topped the list of cheapest online retailers in the U.S., according to a study by the e-commerce analytics company Profitero. In cloud computing, it remains the leader thanks to a portfolio of dozens of offerings and flexible pricing. These industries are somewhat susceptible to economic issues, as we saw last year.
But Amazon's business is strong enough to get out of an economic downturn, perhaps a bit battered and bruised, but definitely in one piece. The company's long-term prospects should be even more important to investors. Recessions don't last forever; once they end, consumers have more disposable income to spend on the products and services Amazon offers.
In other words, online advertising and e-commerce sales will rebound on the other side of the next recession. Both markets still have long runways for growth. Digital marketing offers cost-effective ways to release targeted ads to a broader audience than is typically possible with other forms of advertisement. E-commerce carries similar benefits for retailers: The ability to reach potential clients all over the globe and beyond geographical borders.
And, of course, cloud computing helps businesses become more efficient and productive. Amazon also has a hand in other segments, including video and music streaming. It is investing in other areas, such as healthcare. With all that going on, investors should hold Amazon's shares through the next recession and beyond, especially at just $105 apiece.
