Whether it’s from tariffs, or from DOGE cleaning the USG house, recession odds have elevated since President Trump’s inauguration. At the beginning of the year, JP Morgan (NYSE:JPM) tagged recession chance at 30%, upgrading it to 40%. This is nearly the same level as Polymarket odds, at 41%.
Likewise, Moody’s Analytics now places the odds at 35%, from the previous 15%. In the meantime, the tariff-driven uncertainty plunged the S&P 500 (SPX) index to September level, having gone down nearly 5% year-to-date.
Yet, it is now more apparent why Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) accumulated record $325 billion cash reserves as dry powder. After all, this is how wealth is made, buy low and sell high.
Here are three stocks that are not only more resistant to price slumps during recession, but tend to outperform S&P 500 during such periods. For retail investors still holding some dry powder, these are among the safest stock picks.
Walmart
Near the end of February, the largest US employer reported an expectation of 3-4% increase in net sales in Q1, as well as for the full year 2025. Oriented towards budget-conscious consumers, Walmart Inc (NYSE:WMT) is the first place they think of when the economy tightens.
And regardless of economic conditions that reduce discretionary spending, consumers need staple goods, from household supplies and groceries to healthcare. Owing to economies of scale, the company mastered the negotiation to lower prices for consumers, in addition to having a sophisticated supply chain and distribution network.
It is also notable that Walmart can experiment with anti-theft measures more than its competitors. It is estimated that Walmart suffered record high retail theft losses at $6.5 billion in 2023, up from “just” $3 billion in 2021. However, as the bulk of these came from self-checkout lines, which themselves were introduced as a cost-saving measure, the company is readying to launch a new type of scanning.
In partnership with Digimarc (NASDAQ:DMRC), Walmart’s new embedded hidden codes into packaging are invisible to the human eye, resulting in “customers no longer have to search for barcodes, making self-checkout smoother”. If deployed as a new standard at scale, Walmart stock is yet to price in this significant advancement in retail theft arms race.
Per WSJ forecasting data, the average WMT price target is $110.10. The low estimate is significantly higher than the present price, at $98, while the ceiling price is estimated at $120 per share. Given this favorable distribution, WMT exposure is one of the safest bets at such uncertain times.
NextEra Energy, Inc.
Just as Walmart provides essential goods at competitive prices, Nextera Energy Inc (NYSE:NEE) provides electricity from diversified sources. This ranges from renewables and nuclear to natural gas. For eco-conscious investors, the utility company added 12 GW worth of renewables during 2024.
NextEra’s largest subsidiary is in Florida, the Florida Power & Light (FPL). Interestingly, Florida is the state with a steady inflow of new citizens, at an average growth rate of 3.7% per year. This is one of the reasons why the company expects high single-digit EPS growth up to 2027.
As most utility companies with stable cash flows, NextEra gives shareholders a 3.12% dividend yield, presently at $2.266 annual payout per share. Given that worsened economic conditions cannot significantly lower people’s demand for electricity, NextEra is not only a good recession resistant stock, but one that has a strong track record of dividend growth.
Per WSJ forecasting data, the average NEE price target is $85.89 per share. The low estimate is $52 while the ceiling is $103 per share. NEE shares are rated as “overweight” which means they are expected to outperform the market average benchmark.
Synopsys Inc.
In times of uncertainty, it bears remembering the wise words of former Defence Secretary Donald Rumsfeld:
“There are known knowns, things we know that we know; and there are known unknowns, things that we know we don’t know. But there are also unknown unknowns, things we do not know we don’t know.”
The business model of Synopsys Inc (NASDAQ:SNPS) falls into the first category of known knowns. The company is the world’s leading provider of Electronic Design Automation (EDA) tools, as well as the second semiconductor Intellectual Property (IP) leader. Consisting of both hardware and software, EDA tools are critical for chip foundries like TSMC and Intel (NASDAQ:INTC) to follow through from design and verification to manufacturing.
But unlike their business models, which are cyclical, Synopsys is in a secular market, typically persisting upward over at least five years. In the age of AI demand and upcoming chip miniaturization pushes like Intel 18A, it is safe to say Synopsys is a solid long play for investors.
In the latest investor presentation at the end of February, Synopsys projects revenue growth rate of 10-11% for FY25. Although lower than 15.2% growth rate for FY24, the company’s long-term play is to elevate its operating margin to mid 40s, which is double from Q4 2024.
At present price level, SNPS stock is rated as a “buy”. The average SNPS price target is $635.32 per share. The low estimate is higher than the present price level, at $520, while the ceiling is not too far from the average, at $690 per share.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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