Just a couple of days ago I posted about the top five sectors to own in a recessionary downturn like the one it appears we are in right now. These sectors and the stocks inside them should outperform the overall market because these companies are not tied to the economic cycles the way the overall market is. The number one group on the list was the drug stocks, which will be tonight's top 5 list.
Top 5 Drug Stocks to own through recession
- Johnson and Johnson (NYSE:JNJ) The best of the breed in this sector. JNJ has a pristine balance sheet that no one else in the sector can match. The company has extremely consistent growth rates and continues to raise its dividend each year. The fact that JNJ is a market leader in so many different product spaces allows it to be extremely immune from a recession.
- GlaxoSmithKline (NYSE:GSK) This one might be a surprise for most people in the 2nd spot, but GSK has some very strong products that should continue to grow in the future. Advair, its massively popular asthma drug continues to get good reviews and grow its sales. GSK is yielding an amazing 5.9%, which is a huge bonus to holding the stock through a recession.
- Pfizer (NYSE:PFE) Pfizer is not the high-growth company it once was, but this is still a major pharma company that can be counted on in poor economic times. It still has the cholesterol money making drug Lipitor, and has a few possible big hits in its pipeline. PFE is currently yielding 6.2%.
- Sanofi-Aventis (NYSE:SNY) This is another drug company from outside the US that is growing a little faster than most in this space and has some exciting drugs that should keep growing nicely through the coming years. Allegra and Ambien provide them with two major drugs in areas that have untapped growth potential.
- Medco Health Solutions (NYSE:MHS) I completely realize that this isn't your typical big cap drug stock, which is why I dropped this one to fifth place on the list. Having said that, MHS is a great pharmacy benefit manager that is excelling at what it does. The company has strong cash flow and a nice balance sheet.
The drug stocks should be perfect places to hide during a recession. As I said in the intial post it makes complete sense that these companies would not be economically sensitive since consumers need medicine regardless of the broader economic picture. These are not fast growers, but they are exactly what you want to fight a recession with. If you see a recession coming, you would do well to buy these stocks and appreciate the fact they hold up well and pay some nice dividends.
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