Even though the Dow remains above the 12,000 mark, it would do investors well to consider the impact a renewed recession might have on their portfolios. It might be tempting to move to an all-cash position, but before you make such a hasty move, take the time to look at stocks that have the ability to hold up in tough times.

I used the Motley Fool CAPS supercomputer to look for companies that have proved to be less volatile than the market but have also been reporting strong revenue and earnings growth over the past few years. With a beta of 1 or less, these companies ought to react less violently to any market swoon.

By adding in a measure of cheapness -- these stocks also carry a P/E ratio that's less than average -- we build in a margin of safety. However, with the CAPS community according them high ratings, we're getting companies that are expected to outperform.

Below are a handful of stocks that look as though they could do well in any extended downturn.


CAPS Rating (out of 5)


3-Year Average Revenue Growth

3-Year Average EPS Growth

P/E Ratio

Google (Nasdaq: GOOG)






Hatteras Financial (NYSE: HTS)






ICU Medical (Nasdaq: ICUI)






Source: Motley Fool CAPS screener.

Searching for an answer
Search king Google does some things so especially well, you marvel at the genius. The company generates some $31 billion in revenues annually, the vast majority of which comes from advertising. It sometimes branches out into seemingly head-scratching territory -- purchasing travel-information company ITA Software, for example -- but the end result is usually that Google leverages its strengths in search.

But then at other times, it does some really goofy stuff that makes you wonder what's going on over there. I mean, investments in underwater power transmission lines or wind farms? Along with Citigroup, Google just doubled down on a California-based wind-energy facility where it will funnel a $102 million investment on top of a previous $55 million contribution. Sure, Google uses a lot of electricity moving everything to the cloud, but it's an interesting use of resources to say the least.

Speaking of the cloud, Google's new Chromebook computer is another eyebrow-raiser. Basically, you're able to do little or nothing locally on it, while programs, data, and storage are all kept and performed in the cloud. If Google thought it would be a serious challenger to the iPad or even its own Android-based rivals, it was probably disappointed when influential tech writer Walt Mossberg labeled it "limited and buggy."

Yet Google's search dominance -- which is attracting antitrust crusaders here and abroad -- lets many investors forgive its dalliance in side projects. As CAPS member Shaneypoo notes, sometimes it hits paydirt: "Google shall always be on top of their searches, advertisements, and so on. Lets not forget they own the largest video streaming website as well, YouTube, they'll be successful for a very long time."

Share your thoughts on the search engine's search for diversity on the Google CAPS page or in the comments section below.

Price is what you pay
It was also genius for mortgage REITs such as Hatteras Financial and American Capital Agency (Nasdaq: AGNC) to bet tat taxpayers would bail out homeowners.

The REITs bet big on Fannie Mae and Freddie Mac, investing solely in the mortgage-backed securities they issued. With the government taking them over, it was the taxpayer who would foot the bill to ensure the whole housing house of cards didn't come crumbling down. Whatever one feels about the takeover of the system, you can't blame Hatteras for its smart financial acumen.

With the housing and mortgage markets dead -- officially things are now worse than during the Great Depression -- analysts are forecasting that earnings will fall for rivals such as American Capital and Capstead Mortgage while growing an anemic 2% for Annaly Capital (NYSE: NLY). So investors will rely on the dividend at Hatteras that currently yields 13.8%.

CAPS member MHenage says Hatteras' focus on adjustable-rate mortgages means a hit to performance now but success later on: "[Hatteras] is different from many other REITS as they specifically focus on ARM investments. This short term hurts their yield but longer term protects them somewhat from interest rates."

Add Hatteras to the Fool's free portfolio tracker, and follow along to see how much longer the housing foundation holds.

Stick it to 'em
You have to like the prospects of medical-supply company ICU Medical. It makes the Clave, a needleless IV connection device that helped drive first-quarter sales 11% higher, generating a 90% jump in profits. And although ICU hasn't always been enjoying expanding margins, international growth opportunities have helped set aside concerns that competition from Becton, Dickinson (NYSE: BDX) or Baxter International (NYSE: BAX) might eat away at its base.

Still I have some concerns. The Clave accounts for more than a third of its revenues (35% in 2010), and 44% of its sales come from Hospira. Too many times, product or customer concentration leads to a blowup when on or the other -- or both -- slip.

Yet 90% of CAPS All-Stars say the medical-supply company will beat the market indexes. And if you're interested in learning more about ICU Medical, add the stock to your watchlist to get all the Foolish news and analysis about it.

Take a recess

Market downdrafts can wreck havoc, but there's no reason to hide your money in the mattress. These three recession fighters look to have the goods to keep your portfolio on the upswing, but it pays to start your research on these stocks on Motley Fool CAPS. Then weigh in with your own thoughts on which stocks you think can keep the dogs of recession at bay.

The Motley Fool owns shares of Annaly Capital Management and Google. Motley Fool newsletter services have recommended buying shares of Becton and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Rich Duprey has no financial position in any of the stocks mentioned in this article. You can see his holdings. The Motley Fool has a disclosure policy.