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Worried About a Stock Market Crash? Buy These Recession-Proof Tech Stocks

Worried About a Stock Market Crash? Buy These Recession-Proof Tech Stocks

Sure, the stock market is booming now, but remember that it was also booming in January of this year — right before the quickest market crash of all time. Meanwhile, Congress is at an impasse on a new stimulus deal, even though leading Federal Reserve officials are pleading for more fiscal help.

A sudden market turnaround isn’t out of the realm of possibility. You can prepare for it and reduce your risk by investing in recession-resistant businesses. Investing in recession-proof stocks lets you sleep well at night and hold for the long-term, no matter what craziness is going on in the real economy. While no stock is 100% immune to the real economy, some companies have better business models for dealing with downturns, even in the high-flying technology sector.

Some recession-resistant companies offer needed goods or services that must be bought in good times and bad. Others cater to a mass-market audience, providing a good or service at lower costs than competitors. That second type of stock may actually benefit during recessions by scooping up market share.

That’s why the following four recession-resistant tech stocks look like fine buys today, even if the stimulus lags and the economy double-dips.

A person leans back in a desk chair with their hands folded behind their head, staring out the window at a city skyline.

Image source: Getty Images.

Amazon

It’s Prime Day! That means deals, deals, deals on a wide variety of goods and services from Amazon (NASDAQ: AMZN), the dominant player in U.S. e-commerce. Amazon was the first mover in e-commerce. Today, its massive scale and distribution network allow it to offer unbeatable selection, prices, and one-day delivery, which the company rolled out last year.

Even in tough times, it’s really hard to give up your Amazon Prime membership, which counted more than 150 million members worldwide as of last year. Given the importance of Amazon’s services amid the pandemic, that number is

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Worried About an Economic Slowdown? Fastenal’s Earnings Won’t Help.

Worried About an Economic Slowdown? Fastenal’s Earnings Won’t Help.

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Boxes of hardware at a Fastenal distribution center in Pennsylvania


Luke Sharrett/Bloomberg

Fastenal’s quarterly earnings report, which sent shares of the industrial distributor sharply lower on Tuesday morning, makes a difference beyond the implications for the stock itself.

Fastenal (ticker: FAST) is one of the earliest industrial companies to report numbers. Larger, better-known industrial companies start disclosing their third quarter earnings in a couple of weeks.

More important, Fastenal is a distributor of thousands of small, lower- priced items used by businesses around the U.S. every day. Its sales trends are a good, real-time indicator of what is going on at the shop-floor level. The figures offer clues for investors about the coming earnings season and about the health of the U.S. economy.

“I find Fastenal to be a great bellwether for the industrial side of the U.S. economy,” said Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, via email. “The tone of the third quarter of 2020 can best be described as one of normalization following the heavily pandemic-influenced second quarter of 2020.”

For the third quarter, Fastenal reported 38 cents in per-share earnings, one penny ahead of Wall Street consensus estimates and one penny more than the company earned in the third quarter of 2019. Sales, however, just missed expectations.

Growth in average daily sales decelerated to 2.5% from more than 10% in the second quarter. Third-quarter growth was also below daily sales growth in the first quarter of 2020. The “surge activity eased in [the third quarter],” reads Fastenal’s quarterly presentation. “But demand for pandemic-related products remains elevated, contributing to 34.4% growth in safety supplies.”

Baird analyst Dave Manthey said that while figures on September sales and profit margins might have disappointed the Street, he still likes the stock. “Results were strong despite the

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Worried About a U.S. Stock Market Drop? Buy Alibaba Options.

Worried About a U.S. Stock Market Drop? Buy Alibaba Options.

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The Alibaba building in Beijing.


Gilles Sabrie/Bloomberg

China might be the best hedge for U.S. stocks.

Key Chinese indexes and stocks are outperforming their U.S. counterparts, and investor sentiment suggests that Asia might even emerge as an economic haven, as America and Europe are still struggling with the Covid-19 pandemic.

The

Xtrackers Harvest CSI 300 China A-Shares

exchange-traded fund (ticker: ASHR), a proxy for mainland China’s stocks, is up 18% this year, compared with 6% for the

S&P 500 index.

Shares of

Alibaba Group Holding

(BABA), one of China’s most important companies, are up 36% this year. Alibaba, given its broad scope, might just help investors insulate their portfolios at a time of unusual duress in U.S. history—acting in the role once occupied by fixed income when it was an effective offset to equity weakness.

When President Donald Trump surprisingly ended stimulus negotiations with a Tuesday tweet, U.S. stocks sank. Many Chinese stocks, notably Alibaba, held up.

Hedging U.S. portfolios with Chinese stocks, particularly Alibaba, might seem outlandish, but Susquehanna Investment Group, a top options-trading firm that seeks out noncorrelated U.S. equity investments, has significant China exposure. The secretive trading company owns a huge piece of ByteDance, the parent company of TikTok, that could be worth more than $15 billion. The investment would probably dwarf anything the firm’s partners have ever realized in a long history of extraordinary success.

Alibaba will never protect a portfolio the way traditional hedges, such as S&P 500 options, do, but Alibaba’s options premiums and stock price aren’t as distorted ahead of the bizarre U.S. presidential election. Trading volumes on the

Cboe Volatility Index,

or VIX, are stunningly anemic during the oddest trading year since the 2008-09 financial crisis, suggesting that investors have little faith that VIX derivatives will work as expected.

But

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