With the Federal Reserve predicting a recession later on this year, you may be worried. You're surely not alone. No one loves those difficult economic times.
But two things should ease your concerns. First, the Fed expects a potential recession to be mild -- with recovery happening over the coming two years. Considering this, we could imagine limited impact on companies. That's good news.
And second, today, there's a way to prepare your portfolio for such times. You can invest in companies that may be less vulnerable to economic troubles. A great place to look for these stocks is in healthcare. That's because there's demand for these players' products and services regardless of the economic situation.
Here are two safe stocks to buy now, to ease your portfolio through any possible recession and offer you growth over time.
1. Pfizer
You may know Pfizer (PFE -0.12%) for its blockbuster coronavirus vaccine. But the big pharma company has a full portfolio of products across treatment areas. Pfizer may face a bit of a near-term slowdown in revenue. That's as demand for its coronavirus vaccine declines and certain older drugs start to face competition.
However, Pfizer actually is in the middle of an exciting period right now. In just 18 months, it aims to launch 19 new products. These potential products should more than compensate for the expected $17 billion in revenue lost revenue from 2025 to 2030. In fact, Pfizer says these launches should result in $20 billion in sales in 2030. And products gained from recent acquisitions should add another $25 billion to revenue in that year.
In addition, the coronavirus vaccine revenue opportunity is far from over. Pfizer expects that product and its coronavirus treatment, Paxlovid, to bring in multibillion-dollar revenue in the years to come. Even if it isn't as high as today's level, this still is a reason to be optimistic about Pfizer. The company says the post-pandemic coronavirus vaccine market may follow that of the flu -- that equals recurrent revenue.
Pfizer also recently reiterated its priority of investing in its business and at the same time sharing success with shareholders by increasing dividends and buying back shares. The company has raised its dividend for the past 14 years. So, during tough times, you can count on Pfizer for passive income -- and look ahead to the company's new wave of growth.
2. McKesson
I like McKesson (MCK -1.35%) because it offers the safety of healthcare without one of the industry's biggest risks: failure of a potential product during development. That's because McKesson doesn't make drugs or devices. Instead, McKesson is a distributor of medical products.
The company has a strong track record of revenue growth. But things may be about to get even better. Over the past few years, McKesson has made moves to focus on its highest-growth and highest-margin businesses. These are oncology and biopharma services.
In oncology, McKesson's practice management business posted its fastest period of growth in the recently ended fiscal year since it bought the U.S. Oncology Network back in 2010. And in biopharma services, McKesson's programs have helped patients save money on medications -- and therefore, they keep filling their prescriptions rather than abandoning them.
McKesson also has streamlined its business to shed areas of lesser growth. For example, it decided to exit its European businesses -- and it's so far divested businesses in 11 out of 12 countries.
McKesson is already seeing the results of its efforts. The company produced record cash flow in the fiscal year. Free cash flow reached $4.6 billion. The company made $558 million in capital expenditures to support growth -- and it rewarded shareholders through share buybacks and dividends.
Importantly, McKesson is optimistic about the future. The healthcare giant said its strategy should lead to "strong levels of operating profit, earnings-per-share growth, and robust cash flow generation."
All this means McKesson is a stock that may weather a potential recession just fine. Even better, the company is set to deliver a new phase of growth that should last a lot longer than an economic downturn.
