5 Classic Stocks That Have Weathered at Least Two Recessions

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These classic stocks have adapted to some major downturns and delivered strong returns over the long haul.

The U.S. economy is doing well by many accounts right now. Wages are increasing, unemployment is low, and an in-demand labor force has enabled many workers to leave their current positions for better ones. 

Meanwhile, the stock market has been running red-hot after a quick plummet in early 2020. But some experts think the market could be too hot and that a cooldown is inevitable.

After all, the economic recovery from the COVID-19 pandemic still feels fragile. Supply-chain disruptions are common, some small businesses are struggling to find workers, and inflation is at a forty-year high. 

For long-term investors who want to plan for the worst (while hoping for the best), there are some fantastic stocks that have proved their mettle during difficult times. The stocks on this list have gone through at least two official recessions — and have easily put up larger gains than the S&P 500. 

5 Classic Stocks That Have Weathered 2 Recessions

Here are 5 classic stocks that have weathered 2 recessions.  

  1. Microsoft
  2. Home Depot 
  3. Alphabet 
  4. Target
  5. Nike

Microsoft (NASDAQ: MSFT)

  • Microsoft (NASDAQ:MSFT)
  • Price: $333.2 (as of close Dec 21, 2021)
  • Market Cap: $2.457T

There was a time when the classic stock Microsoft seemed to have lost its innovative edge. But in the past few years, the company has returned to being a leader in the tech space. It’s also a great classic stock for weathering recessions. 

Take the recession we saw in 2001. It was caused by the bursting of the dot-com bubble and the terrorist attacks of September 11 and lasted until November 2001. During that period, the S&P 500 lost nearly 13% of its value. Meanwhile, Microsoft’s stock price jumped 3%.

Microsoft’s stock wasn’t immune to the next economic downturn, however. Its share price slid 30% during the Great Recession. Still, its stock outpaced the broader market’s fall over that time, and most importantly, Microsoft’s share price has gained more than 1,400% since the Great Recession ended. 

Share price gains aside, Microsoft deserves a spot on this list because the company has reinvented itself during some difficult times. 

Shortly after the Great Recession ended, Microsoft officially launched its commercial cloud computing service, Azure. It has since become the second-largest cloud computing service, behind Amazon’s AWS, and was a turning point in the company’s future. 

Today, Microsoft is worth more than $2.5 trillion, up more than ten times from its market cap at the beginning of 2010. With the company already a cloud computing leader and a fantastic stock despite three recessions in 20 years, investors would be wise to keep Microsoft on their shortlists.

Home Depot (NYSE: HD)

  • Home Depot (NYSE:HD)
  • Price: $390.47 (as of close Dec 21, 2021)
  • Market Cap: $407.744B

It may seem odd to have this home improvement retailer on a list of companies that have withstood economic downturns, considering that the 2008 recession was the result of a collapse in the housing market.

During that time, Home Depot’s share price fell by 17%. That’s a significant drop. But it was better than the S&P 500’s 38% plummet.  

Let that sink in for just a second. During a housing market collapse, Home Depot’s stock was still a safer bet than the broader stock market.

Better yet, just two years after that tumultuous economic time, Home Depot’s share price was making huge gains and the stock started a growth curve that hasn’t stopped. Sure, there have been some drops along the way, but the stock has gained an astounding 1,000% since 2010 — nearly four times the broader market’s gains.

Of course, some of those tremendous share price gains have come during the COVID-19 pandemic, as home buying and house projects have soared. But even if you ignore those pandemic-influenced gains over the past two years, Home Depot’s stock still beat the market by more than three times between 2010 and 2019.

The company recently reported very strong third-quarter results, in which sales increased by nearly 10%, comparable sales were up 6%, and earnings spiked 23%. And there’s no indication that demand will slow down anytime soon. 

No stock is truly recession-proof (every company feels some effects of a recession), but Home Depot has proved for more than two decades that its business can handle major downturns and come back stronger than ever. 

Alphabet (NASDAQ: GOOGL)

  • Alphabet (A shares) (NASDAQ:GOOGL)
  • Price: $2928.3 (as of close Dec 21, 2021)
  • Market Cap: $1.909T

The classic stock Alphabet is the parent company of Google. The company made a name change back in 2015 so it could differentiate its Google business from the long list of other businesses the company owns. 

For example, Alphabet is also the parent company of the self-driving car company Waymo, the cloud services company called Google Cloud Platform, and a host of other companies and services ranging from the Android operating system to Pixel phones. 

Alphabet has long been a staple of the investing world, earning a place among the popular FAANG stocks, which also include Meta (formerly Facebook), Amazon, Apple, and Netflix. 

One reason for the company earning a spot among these other tech giants is its incredible performance. 

Since its market debut in 2004 — weathering two economic downturns — Alphabet has outpaced the S&P 500’s gains by nearly three times. 

Alphabet’s stock took a temporary haircut in 2020 during the pandemic-led recession but has since bounced back. That recession officially ended in April 2020. Since then, Alphabet’s stock has skyrocketed 162%, compared to the broader market’s 88% returns. 

Like many other companies during the pandemic, Alphabet transitioned most of its employees to remote work — a difficult task, considering the company employs nearly 135,000 people. 

But Alphabet hasn’t just weathered this shift. It’s also grown its business. In the third quarter of 2021, Alphabet’s sales were up 41% year-over-year and net income skyrocketed 68%. 

However, Alphabet isn’t just a fast-growing tech stock. The company is a behemoth — with a market cap of $1.9 trillion — that has put up fantastic gains for investors since its inception. 

Past stock performance is no guarantee of future results. But investors can take the company’s tremendous growth since it went public in 2004 as a good indicator that Alphabet can likely withstand nearly any uncertainties coming down the road. 

Target (NYSE: TGT) 

  • Target (NYSE:TGT)
  • Price: $217.74 (as of close Dec 21, 2021)
  • Market Cap: $105.441B

Target is a successful retailer that’s been able to set itself apart from the competition with an intense focus on branding. And when shoppers were desperate for deals during the Great Recession, Target had to ensure that its stores could keep up with larger discount retailers.

To do that, Target introduced its 5% discount for Target RedCard holders in 2010. While the recession was technically over by this point, Americans’ pursuit of lower costs was not.

One year later, the company had millions of new accounts because of the RedCard. Target then added an additional benefit for cardholders: free shipping on online products, with no minimum spending on orders. By 2013, sales using Target’s RedCard accounted for 19% of all transactions. 

While Target’s stock was slammed during the Great Recession — as was nearly every other stock on the market — the company’s share price spiked by 50% in the five years following its end. And Target’s new focus on online sales helped it become a major player in the e-commerce space. 

Fast-forward to the company’s most recent quarterly earnings call, when CEO Brian Cornell said this about the company’s digital sales and same-day services: “Third-quarter sales through these services have expanded by nearly 400% or $2 billion over the last two years. Through the first three quarters of the year, sales through these services have grown by more than $6 billion since 2019…”

In short, Target came through the Great Recession and made some key changes that helped it grow in the following years. And then it leaned on its digital foundation during the pandemic-fueled recession and proved it could withstand yet another unprecedented obstacle. 

The result for its share price has been more than two times growth since 2000, compared to the S&P 500’s gains.  

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Nike (NYSE: NKE)

  • Nike (NYSE:NKE)
  • Price: $165.44 (as of close Dec 21, 2021)
  • Market Cap: $263.745B

Nike may seem like an odd company to have on this list because the retail industry doesn’t always handle downturns all that well. But Nike has proved that the company can withstand some very difficult times and still come out ahead. 

For example, during the eight months following the dot-com bust, the company’s stock actually gained 28%. At the same time, the S&P 500 dropped 12%. And while Nike’s stock took a major dip during the Great Recession, it still managed to be a better investment than the broader market. 

More recently, Nike had to close many of its stores because of the pandemic. In addition, the international retailer is dealing with unprecedented supply-chain issues. Yet Nike has been laying the foundation for its direct-to-consumer sales, which include Nike stores and digital sales, that have helped the company weather this most recent storm. 

In the most recent quarter, direct-to-consumer sales (as opposed to sales of Nike products through other retail locations) jumped 28% from the year-ago quarter. These sales are particularly important because the company can earn more money from them, as they don’t involve paying any wholesale companies.

The growth of the company’s direct sales has caused Nike to be very optimistic about future long-term revenue and earnings growth. Nike management recently raised its revenue growth target percentage for fiscal 2025 to a range between the high single digits and the low double digits. Additionally, it increased its earnings-per-share growth estimates to the mid- to high-teen percentages for the same time frame.

The company also estimates that its direct sales will account for 60% of all sales in 2025, up from 40% right now.

What’s amazing is that Nike’s management is aiming high during a very uncertain time and, even more impressive, its optimism is rooted in the company’s reality of its direct-to-consumer and digital sales opportunities. 

For long-term investors, Nike’s ability to stay strong during tough times has been evident in the company’s share price performance. Since 2000, the company’s share price has smashed the market’s returns by more than eleven times. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Home Depot, Microsoft, and Nike. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.