If last week's market sell-off was a dagger, the fumbled S&P credit downgrade that followed was a twist of said dagger.
Things don't look pretty, folks.
Waning confidence and economic uncertainty can thrust us back into a recession faster than you can say "double dip."
Investors historically gravitate to all-weather value stocks during times of market strife, but I'm not going to be loading up my portfolio with high-yielding utility stocks or slow-growing equities. The next time a recession rolls around -- and that may come next week, next year, or maybe even next decade -- I'm going to ride out the downturn on growth stocks that stand to benefit the most from the trends.
Let me go over five stocks that may not seem cheap by traditional valuation metrics, but they are positioned perfectly for a financial maelstrom.
One of the few stocks to close out brutal 2008 higher than where it started was the California-based flick buffet operator. Investors didn't get rich with Netflix's 12% gain that year, but they trounced the free-falling market averages.
Netflix had a solid 2008, while so many other consumer-facing companies went the other way. It closed out the year with 9.4 million subscribers, a 26% spurt during the year. Free cash flow more than doubled.
Why did Netflix grow so well during the darkest recessionary stretches? Well, think about the model. Netflix offered couch potatoes unlimited celluloid delivered right to their mailbox. It was also the first full year of streaming, though at the time it was largely limited to PC viewing. Either way, Netflix offered cheap escapism entertainment without having to drive out to the local multiplex or DVD rental store.
Green Mountain Coffee Roasters
If Netflix isn't cheap at 35 times next year's projected profitability, Green Mountain isn't any less expensive at 37 times next year's bottom-line target. However, the company behind the Keurig single-cup brewers and premium coffee K-Cup portion packs is built for recessions.
If pesky unemployment rates and finicky discretionary income keep us closer to home, Green Mountain will be the one satisfying the caffeinated cravings.
Shares of Green Mountain slid 5% in 2008, but that's materially better than Nasdaq's better-than-40% slide that year.
In its fiscal 2008, which ended in September, Green Mountain saw its net sales and earnings soar 46% and 74%, respectively. Pit those results against Starbucks
Starbucks and Green Mountain are partners now, which means that the next market downturn will give premium coffee drinkers the opportunity to brew Starbucks K-Cups from their Green Mountain single-cup machines.
We're not all java sippers. For folks who prefer root beer to Frappuccinos, SodaStream's portable soda makers will be a popular indulgence. The company's namesake product offers a battery-less appliance that carbonates still water. Folks can then choose between dozens of SodaStream syrups to create flavored soft drinks.
SodaStream is an Israeli company that has had strong success in Europe for years. It now has 20% market penetration in Sweden. However, its biggest feat has been rolling into leading houseware retailers in the soda-happy United States last year.
SodaStream had a strong holiday quarter, but it's no seasonal fad. Revenue and adjusted earnings climbed 50% and 141%, respectively, in this year's first quarter. It sold 592,000 starter kits during the period, boding well for future sales of higher-margin carbonators and syrups.
The value proposition of SodaStream isn't on the same level as Green Mountain relative to barista-tended brews, but its convenience and health benefits over canned or bottled pop are hard to ignore.
My first three recessionary growth stock suggestions play into a homebody trend. If we spend more time at home, we will seek out cost-effective alternatives to entertainment and beverage consumption outings.
Let's shift into a new gear for this next pick. Zipcar runs the country's largest -- by far -- auto-sharing service. There are now nearly 605,000 members sharing Zipcar's fleet of 9,480 cars. A low hourly rate covers gasoline and basic insurance.
Zipcar's popularity in densely populated metropolitan markets and college campuses has generated strong growth. Revenue revved 34% higher in its latest quarter. Now let's factor in a cash-crunching recession where car payments, buoyant prices at the pump, and costly insurance bills make automobiles an easier big-ticket item to nix in Zipcar's rapidly expanding markets.
Coinstar is the company behind the namesake automated kiosks that turn pocket change into gift certificates, but its biggest business these days is renting out cheap DVDs through its Redbox machines.
Consumers can appreciate renting DVDs for $1 a night -- and Blu-ray discs and video games for a little bit more -- through Redbox. It accounted for nearly 84% of Coinstar's revenue in its latest quarter, with Redbox revenue climbing 34% to $363.9 million during the period.
Despite the round-trip hassles in the rental process, Redbox is going to become even more popular as money gets tighter. Netflix's move to split its streaming plan from its mail-delivered DVD plan will also generate greater interest in Redbox.
In short, all five of these companies are positioned to not only survive during an economic downturn, but actually thrive.
Do you have other stocks that should thrive in a double-dip recessionary environment? Share your thoughts in the comment box below.
The Motley Fool owns shares of Zipcar and Starbucks. Motley Fool newsletter services have recommended buying shares of Netflix, Zipcar, Starbucks, Green Mountain Coffee Roasters, Coinstar, and SodaStream International. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Longtime Fool contributor Rick Munarriz is already part of the way there. He owns shares of Netflix and Zipcar. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.