A recession proof business

You may have heard that S&P has broken a record that it has reached the longest bull run milestone last week (Aug 29 to be exact). It is indeed an amazing record that the market has gone up nonstop in the past 9.5 years. Very likely it will be over 10 years as I think this bull market still has some up leg to run. Having said that, don’t expect we will see another 10 years to go or even 5 years. As I have said many times now, I think a major bear market is very likely to hit us in a way making the last 2008/09 recession like a beach walking. I think the chance is very high that this may occur within the next 5 years, probably much sooner. So while we should still enjoy the last melt-up phase of this bull run as much as possible in the next 1-2 years and we will likely see many new highs in the course, just don’t be too complacent thinking that we will continue the uptrend for 5-10 years more.

Naturally it will be interesting to many folks what to do for a long lasting recession if it indeed materializes. Towards this end, I have been asked and will be more talking about stocks that could be recession proof to the extent that you can safely hold without fear in any economic cycles. But don’t be confused about recession-proof vs price fluctuation. When the market is indeed very devastating, virtually no stocks will be immune to price decline. But recession-proof stocks are usually those that you don’t need to worry that their business will be permanently damaged and their dividends are extremely safe to continue. Personally I’m even more interested in those with a long track record of increasing dividends regardless of the market conditions. Even if their share prices may go down, usually they fair much better than the market in general, i.e. declining much less than general stocks. Just check what MCD and WMT were doing during last financial crisis in 2008/2009. They were the only few stocks that actually were going up when most of others were tanking by 20-50% or even more. So don’t just judge stocks by their share prices. Actually lower share prices will be more beneficial to you for long term dividend reinvestment with recession-proof stocks.

Last week, I shared my thought about farmland and IR twoweeks ago. Other more recent recommended ones that could fall into this recession-proof category could be TGT (see here) and LOW (see here), both of which were sold hard due to some temporary setback or fear of Amazon intrusion but have fought back strongly lately with new highs in the work. If you want more, then you may consider this house name stock, McCormick (MKC). I don’t have time to too much in details but this is really the top brand for Americans when coming to shop for spices. The widely recognized brands besides its namesake spices include Old Bay, Lawry's, and Schwartz. They are so popular that there is no need to do much marketing actually. And people will still go to buy them even if the whole economy slips into a recession since their products are part of basic necessity for many people’s daily life. Talking about the recession-proof! Fundamentally MKC is a cash machine as it generates tons of free cash flow and has grown its revenues 28 out of the past 30 years. That’s why it can afford to increase its annual dividend payment every year for 31 consecutive years. While I think the chance is high that we will go into a prolonged recession in the next 5-10 years, holding MKC with DRIP can make you sleep well at night as you know it is extremely safe regardless how the market is doing and lower share prices will be even doing better for you by reinvesting its dividends.