Inflation Continues: 2 Recession-Resistant Stocks

The 8.3% increase announced this week in the consumer price index for the month of August compared to the previous year shook up the markets once again. Investors are weighing the impact that further interest rate hikes could have on the economy and the pressure they could put on the Fed to raise rates at a faster pace. This does not bode well for economic growth. What does all this mean for investors? Where can we invest our money in a tougher economic climate?

In value-based, recession-proof games, I like healthcare. It’s quite simple. In times of economic uncertainty, what do we all need even if we don’t want to pay for it? Medical treatment.

Image source: Getty Images.

Insurance never goes out of style

It may not be as exciting as Zoom Where Oktabut everyone needs health insurance. UnitedHealth Group (A H -0.36%) has been one of the most reliable insurance companies in terms of expanding its business and earnings on a yearly basis. Total revenue grew by 11.3% in 2021 alone. That’s an impressive number for a company of this size. UnitedHealth Group is no exception in translating this growth into meaningful shareholder value. Over the past four years, diluted net earnings per share have experienced consecutive double-digit growth rates.

The momentum doesn’t seem to be slowing down. Despite being an absolute juggernaut with nearly $300 billion in annual revenue (2021), UnitedHealth Group continues to generate solid earnings on a quarterly basis. In the second quarter, revenue jumped 13% to $80.3 billion, operating profit also rose 19% year-over-year. In the first half of the year, premium revenue grew 14.5%, representing the core business at $128 billion over the period. And with the announcement of a 10-year partnership with Walmart, revenue will likely continue to grow. It seems UnitedHealth can’t be wrong, which is likely why analysts are forecasting 14% annual earnings growth for the next five years.

A titan of pharmacy

CVS Health Corp (CVS -0.24%) is a diversified player across a wide range of healthcare and insurance sectors. A few years ago, we saw the pharmaceutical giant dive headfirst into insurance through its merger with Aetna. Now the company has made headlines more recently for its announced takeover deal Signify Health Inc. (SGFY -0.10%) in an $8 billion deal.

This Signify deal would help CVS acquire data tools that can be widely applied to the healthcare world. Signify allocates data and technology to help physician groups, health systems, and more. based on home care, but I could easily see CVS using it to complement the other elements of its primary care business, which already includes 1,100 walk-in clinics.

Take all of CVS’s assets together, and the company becomes a juggernaut in all things medicine. Pharmacies and prescription drug coverage, health plans through Aetna, retail purchases for a large scale of products, and medical needs rolled into one, CVS is a one-stop shop.

The CVS criticism is a combination of the loss of momentum in COVID testing/vaccines, as well as the planned closure of 900 stores. Overall, I think targeted expansion within primary care offers a much more attractive business. Additionally, the growing use of online ordering means that fewer stores may be needed to operate the business.

Primary care and pharmaceuticals are things consumers need regardless of the economic situation, and I like the stock as a long-term investment. Full-year revenue continues to grow and second-quarter revenue grew 11% year-over-year to $80.6 billion, while some of its key patient care initiatives progressed. MinuteClinic, the company’s retail clinical services arm, reported a 20% increase in scheduling during the second quarter, and since its launch earlier in the year, six million people have signed up to the board. CVS health edge.

Solid performers with success stories

As long as we exist, healthcare is an industry that will simply never go out of style. Even though inflation is driving up costs, many consumers still need prescriptions to survive. As a society, we will always need medical care – accidents happen and illnesses occur. It’s just a part of life, which makes companies like CVS and UnitedHealth Group also a part of life.

Both of these stocks have generated price gains of more than 20% over the past 12 months as investors have begun to shift their portfolios towards safer value plays versus some of the riskier high-growth tech investments. which have dominated the markets over the past half-decade. . Given their proven track records, with very few apparent tailwinds, I believe both companies can continue to post strong earnings growth over the next few years and provide some protection against the impact that a possible recession may have. on other industries in 2023 and beyond.

David Butler has no position in any of the stocks mentioned. The Motley Fool recommends CVS Health, CVS Health Corporation and UnitedHealth Group. The Motley Fool has a disclosure policy.

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