President Trump's trade policies are sparking concerns about a potential recession. Though it's hard to predict an upcoming economic downturn, it's never a bad idea for investors to buy shares of companies that can perform relatively well even in bad times. These corporations often have robust underlying businesses built to deliver consistent results and superior returns over the long run.
Here are two great examples for investors to consider: Zoetis (ZTS 3.07%) and HCA Healthcare (HCA 1.74%).
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1. Zoetis
Zoetis, a leading animal health company, has faced some challenges over the past year. The company's recent financial results weren't great, and it is dealing with increased competition for some of its growth drivers, including Apoquel, a medicine to treat allergic itch in dogs.
However, as Zoetis points out, there is significant whitespace in this niche. It estimates that 13 million dogs are eligible for the medicine but aren't on any prescription, and another 7 million are undertreated. The company currently treats 12 million dogs with Apoquel and Cytopoint, a similar medicine.
Although Zoetis markets products for livestock, poultry, and other animals, the company's work with pets, particularly cats and dogs, is one of the primary reasons it can survive a recession relatively unscathed. People view their pets as family members and are more than willing to pay a significant amount to ensure they are well cared for.
The increased humanization of pets should also be a significant long-term growth driver for Zoetis, a trend that is particularly prevalent among younger generations, who are less likely to have children than older ones. It might be pushing it to say that pets are the new kids, but it's not too far from the truth for many pet owners.
NYSE: ZTS
Key Data Points
The rest of Zoetis' business grants it significant diversity. The animal health leader generally grows its revenue at rates faster than the industry average, something it has been able to do for a while, despite competition, through the continuous development of newer medicines. Two of its more recent important approvals, Solensia and Librela that treat osteoarthritis pain in cats and dogs, respectively, are becoming key growth drivers, too.
So, despite being slightly in the red over the trailing-12-month period, Zoetis is well-equipped to handle a recession if one is coming, while delivering strong returns in the long run. Lastly, the stock is also an excellent pick for income seekers despite its unimpressive forward yield of 1.2%. Zoetis has increased its payouts by 502% in the past decade. Whether it's for dividends or growth, the healthcare specialist is a great option.
2. HCA Healthcare
HCA Healthcare's business remains in high demand even in recessions. The company is a leading hospital chain in the U.S., and even during economic downturns, people still require critical medical care. True, some procedures performed in the company's facilities are optional. Even for those that aren't, patients may sometimes postpone them when things get tough. So, there will be an impact on the company's results, but it should be fairly minimal.
Over the past year, the company has faced another source of headwinds. Various natural disasters, including hurricanes, impacted its financial results in some areas, resulting in lower revenue than anticipated. Still, HCA Healthcare continues to deliver decent updates. In the first quarter, the company's revenue increased by a modest 5.7% year over year to $18.3 billion. Its earnings per share came in at $6.45, up 8.8% compared to the year-ago period.
NYSE: HCA
Key Data Points
Despite this headwind, HCA Healthcare's long-term prospects are attractive. An aging population that will require more medical care should lead to increased spending on precisely the kinds of services it offers. HCA Healthcare has also deepened its relationships with physicians, patients, and third-party payers over time, partly through the adoption of more services. It would be challenging for any newcomer to seriously challenge HCA Healthcare, considering the ecosystem it has already built, which arguably grants it a network effect.
Although there is competition, HCA Healthcare has generally increased its market share over the past decade. The stock should continue delivering superior returns long after the next recession hits, whenever that happens.
