The debate rolls on about the chances of an economic downturn, but Wall Street analysts said this week there’s plenty of quality companies to invest in if a recession occurs.
CNBC combed through company research to find analysts from different industries singling out stocks in their coverage universes. They cited stocks that are compelling to investors such as Verra Mobility, Accenture, Autodesk, MasterCraft Boat Holdings and A.O. Smith.
Accenture continues to impress analysts at Bernstein. The consulting company reported earnings this week and not only beat expectations on revenue but raised its full year outlook. Bernstein analyst Harshita Rawat said unlike the last recession, this time would be different if there is one. Accenture “is likely better positioned due to diversified revenue growth and higher share of cloud,” she said.
Shares are Accenture are up 0.41 percent, to $175.77.
In new coverage this week, analysts at BTIG initiated Verra Mobility with a buy. The company, which provides toll management to rental car companies, “offers a recession-resistant story at a time when concerns about a potential economic slowdown have arisen among investors,” analyst Mark Palmer said.
The stock is up today 12 percent, to $11.73.
MasterCraft Boat Holdings, which designs and manufactures recreational powerboats, may be of interest to small-cap investors, according to Baird analyst Craig Kennison. This is because many of them have a, “contrarian mindset and assume the next recession could be just around the corner,” Kennison said. “We see exceptional value for investors that can look through a potential downturn,” he said.
Shares are down in early trading 0.87 percent, to $22.43.
Here are some other stocks analysts think would weather a recession:
BTIG- Verra Mobility, Buy rating
“Moreover, we believe VRRM is a timely stock inasmuch as it is driven by secular rather than cyclical tailwinds – the expansion of cashless tolling and the increased adoption of safety cameras – and offers a recession-resistant story at a time when concerns about a potential economic slowdown have arisen among investors. ”
Bernstein- Accenture, Outperform rating
”…What happens to earnings and multiples in a downturn?. … .In a repeat of 2008-09, we see stock downside of ~20-30% – on cyclicality of revenue growth (down -7% cc in the trough 4 quarters in 2008-10), resilience of margins & buybacks, and multiple compression (down 40% from peak to trough in the last recession; though ahead of -ve revisions). Compared to the last recession, ACN is likely better positioned due to diversified revenue growth and higher share of cloud. ”
Baird- MasterCraft Boat Holdings, Outperform rating
“We hosted CEO Terry McNew, CFO Tim Oxley, and VP of Business Strategy George Steinbarger during investor meetings in New York and Boston. Our meetings reintroduced MasterCraft to small-cap investors, many of whom invest with a contrarian mindset and assume the next recession could be just around the corner (although we remain optimistic for 2019). Under 8x EPS, we see exceptional value for investors that can look through a potential downturn. ”
D.A. Davidson- A.O. Smith, Buy rating
“We recently took the time to revisit our investment thesis on AOS, and we remain positively disposed to the name. In short, we believe that AOS possesses a combination of recession-resiliency inherent in the substantial portion of its business (~65%) derived from inelastic, non-discretionary replacement demand, as well as leverage to favorable, long-term middle class equivalent population demographic trends in China. We also favor its strong balance sheet with net cash, as well as fairly attractive relative valuation. ”
Bernstein- Autodesk, Outperform rating
“One of the frequent questions we hear on ADSK is how resilient would it be to an economic downturn. It’s true that the nature of the company’s business and customer base certainly introduce more “macro” risk than some enterprise software and SaaS companies. However, now that 95% of revenue is recurring in the form of subscriptions, we believe the market overestimates the actual macro/cyclical risk to fundamentals. … .In summary, the market values ADSK at a discount to our target price even in a recession scenario, implying that a moderate to severe recession is already priced in.”
