Stocks in a Recession

As it stands right now people are very worried that we are going to be headed into a recession. The main reason that people are worried about the US heading into a recession is because of all of the signs that are pointing towards a recession. But no matter what signs you might see that are pointing towards a recession the only way to truly tell if we are in a recession is if numbers from the growth rate of the domestic product. As long as those numbers come in on the positive side our economy is not considered to be in a recession, but once the numbers come in negative for two quarters in a row the economy is considered to be in a recession. This is true even if the number that comes in is only -1%.

So with the thought that we are going to be facing a recession many people are worried about their current investments and the investments that they might make in the future. The reason for this is that during a recession the stock market is an unstable market because of the actions of various investors. But the good news is that even if we are in a recession you can still pick stocks that are what some investors consider recession proof. Here are the things that you are going to want to look for in a company when it comes to picking stocks during a recession:

• Double digit growth or even triple digit growth
• Undervaluation, this is based on assets on the balance sheet and a stable cash flow. The reason for this is that even if the company's cash flow declines they are still going to be able to stand out in a recession because of the strength of their balance sheet.
• Economy independence, this is where a company is going to actually flourish in either a good economy or a tough economy. The reason for this is that they don't rely on the economy for there business, which means that regardless of what is going on consumers need to use their services, such as debt collection agencies.

Something else to think about when it comes to the economy being in a recession is the fact that many people don't want to try and name individual stocks that are going to do well. Instead they would much rather focus on certain industries because it is less risky for them to tell you what industry does well versus a specific company that you should invest in. There is even more truth in this since the Dow Jones has plunged 225 since the beginning of October and more and more people are concerned about what is going to happen next.

Many professional investors will tell you that the best thing that you can do when it comes to investing in stocks during a recession is to choose companies that are involved in consumer staples or companies that provide health care. The reason for this is that these two industries provide something that consumers cannot do without. Meaning that no matter what is going on in the economy and how much cost cutting consumers so they are still going to have to spend money on things like food, soap, shampoo, etc. But they are also going to need to spend money on healthcare and healthcare products. So with this in mind it is also a safe assumption that you can invest in low end retail stores such as Wal-Mart because as people cut costs they are going to shop less at the expensive stores and more at the discount stores so that they can get more for their money.

Here are some of the stocks that you should consider looking at during these tough economic times:

• H&R Block - even though they are in the middle of a lawsuit over some IRA accounts that lost money this is going to be a really good stock to invest in, but you might want to want to wait until it declines further so that you get it at a great price. But the reason that this is going to do good during a recession is that despite the recession you are still going to have to pay taxes. And because people are trying to save money rather than paying a private accountant a ton of money they are more likely to go with a retail chain that has been around long enough to prove themselves, not to mention the lower cost that it provides.
• Fred's - although dollar stores have actually gone downhill since Wal-Mart has decided to compete with them, meaning that before Wal-Mart did not feel that dollar stores were a threat but have since discovered otherwise. So people who shopped dollar stores are starting to turn to Wal-Mart because they can get the same value in most cases. But as the recession hits people are going to start going back to all kinds of dollar stores as they try to make their money go further in tough economic times. And in most cases during recessions dollar stores tend to gain in value while bigger stores drop.
• Gap - when times are tough many people look for ways that they can cut back on spending and one area that tends to get hit the hardest is clothes. People stop shopping at high end stores because of the high prices that they charge. Not to mention that in other cases rather than replace clothes because they are out of fashion people tend to wear the clothes until they wear out or outgrow them. But rather than shopping the high end stores they will go to middle rate stores like Old Navy or Gap for the basics and to satisfy their shopping needs.
• Pep Boys - when times are hard the last thing that people think about is going out and buying a new car. The reason for this is that when you buy anew car you end up having to pay a monthly car payment and you also get hit with higher insurance rates, which means more money out of pocket no matter how low of an interest rate you can get with the interest rates dropping every time you turn around. But so what people do instead is fix their old cars so that they can get every last mile out of them. They tend to go to auto repair places that allow you to buy your own parts and fix them yourself. This avoids costly repair costs that you will face at an auto repair shop but also avoids you having to trade your car in. Not to mention that during tough times people cut costs so changing your own oil compared to paying to have it done is often cheaper. So more money is being spent at auto part stores.

• Career Education - during the times of a recession many people find themselves unemployed, usually it has nothing to do with them but they faced downsizing due to the struggling economy. So when they are unemployed they tend to have more time on their hands so they think about what they can do to make themselves more valuable to companies. At times like these people tend to go back to school so that they can better their skills and improve their education so that their resumes look better. This important for when the recession is over and people are back to applying for new jobs, but it is also important during the recession because the more skills that you have the more useful you are to a company.
• Johnson & Johnson - no matter what is going on people need to buy soap, shampoo and other toiletries to help keep themselves clean. So no matter what store they go to they are going to end up buying these products because they are considered a necessity. But they are most likely going to buy these products at a lower priced discount store rather than at a grocery store or even a higher priced drug store.
• McDonald's - in our society we are constantly on the go so eating out has become something that we consider normal. In fact most families eat out at least twice a week, if not more. But with the economy in crisis people are cutting back the money that they spend on eating out, but this doesn't mean that they are going to cut back on eating out. Instead what they are going to end up doing is reverting more to fast food places that offer a lot of food for very little money rather than going to sit down restaurants that cost more for less food.

But no matter what happens when it comes to investing in stocks during the recession you are going to want to make sure that you do your homework and research the stocks carefully and gather numerous opinions about the performance of the stocks before you make your final decision.