The technology sector is an excellent place to find high-growth stocks with promising prospects. However, it is a cyclical sector that doesn't perform as well when the economy tanks. It's critical for investors to diversify their tech holdings, perhaps by putting their money into more defensive industries that behave differently during downturns.
One such industry is healthcare. And here are two healthcare stocks to consider for diversification, if you are heavily invested in tech stocks: AbbVie (ABBV 0.72%) and Johnson & Johnson (JNJ +0.37%).
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Recession-resistant businesses
AbbVie and Johnson & Johnson are both pharmaceutical leaders. Between them, they develop and market drugs across several therapeutic areas, including oncology, neuroscience, immunology, and more. Many of their products address serious, life-threatening, or chronic conditions -- not the type of thing people will cut first when they need to save money. Even as demand for tech-related products and services fluctuates significantly, theirs remains fairly stable.
That's why AbbVie and Johnson & Johnson tend to perform comparatively well in recessions. Now, none of that means they won't have their own problems. Patent cliffs, competition, and legal troubles (as with Johnson & Johnson's lawsuits related to its talc-based products) can all hinder their progress.
NYSE: ABBV
Key Data Points
However, AbbVie and Johnson & Johnson have demonstrated their ability to develop newer and better products to circumvent patent cliffs and generate growing revenue and earnings despite competition, and they have achieved this even in recent years. AbbVie overcame the loss of patent exclusivity for Humira, while Johnson & Johnson is performing well despite losing patent protection for Stelara. Johnson & Johnson has another quality investors should take note of.
It boasts a higher credit rating than the U.S. government and the highest overall. While some may worry about the legal headwinds it has faced in recent years, Johnson & Johnson's rock-solid balance sheet means it is unlikely to hit serious financial troubles even in a severe economic downturn.
NYSE: JNJ
Key Data Points
Impressive dividend programs
Here's something else that makes AbbVie and Johnson & Johnson great options to diversify a tech-heavy portfolio: their outstanding dividend track records. When accounting for the time it spent as a division of Abbott Laboratories, AbbVie has increased its dividend payouts for 54 consecutive years, while Johnson & Johnson's parallel streak stands at 63. That means both are Dividend Kings, or companies that have increased their dividends for at least 50 consecutive years.
That is a great sign of a business that can navigate any challenge. And that's another reason these are excellent stocks to buy for diversification purposes, especially as the regular, growing payout can help smooth out market losses in a downturn.
