5 Traits of Recession Proof Businesses

Christian Woodward - June 26, 2020 - 3 min read

The COVID-19 economic downturn is likely to become the deepest recession since the Second World War. According to the World Bank, as a result of the measures taken by nations worldwide to manage the outbreak, the global economy is forecast to shrink 5.2 percent in 2020. The U.S. economy will contract 6.1 percent, Europe 9.1 percent, and Japan, 6.1 percent.

But, like every other past recession, this one won’t last forever. Times like these call for thoughtful decisions that will impact a business’s success in the long run. To do so, companies need to reshape for the next normal. In the words of Stephen Dover, Franklin Templeton Chief Investment Officer, in a recent webinar, they need to:

Respond to the economic shock that affected their company
Recover as fast as they can
Thrive to move forward.

Of course, not all businesses are suffering from the downturn as severely as others. The so-called recession proof businesses or recession-resistant industries, as many economists prefer to call them, are industries that, due to the essence of their business, prosper or survive unscathed during economic downturns. And although the coronavirus outbreak has impacted pretty much all spheres of our lives, from education to health, several industries that have been stable or even grew during this situation.

Top Recession Proof Industries During the Coronavirus Crisis

We need to keep in mind that the coronavirus crisis is not, as the economic downturns from the 1980s and 1990s, a typical “business cycle” recession. This one was caused by a massive supply shock caused by the outbreak. For that reason, industries that we typically identify as recession proof businesses, like auto repair or college and universities, have not made the list this time.

A good indicator of the level of distress of certain companies is the share price difference between pre and post-COVID. The list below is based on the variations in share price relative to FTSE All-Share Index, from least to most affected.

Businesses in Overwhelming Demand

Businesses in this list had a percentage change in share price between 10 and 20%.

Food and drug retailers
Personal goods
Medicine and biotech research
Gas and water
Mobile and telecommunications
Electronics and electric equipment
Tobacco

Businesses Maximizing New Opportunities

Businesses in this list had a percentage change in share price between 0 and 10%.

Electricity generation and distribution
Household utilities
Beverages
Alternative investment instruments
Forestry and paper
Engineering products
Banking
Healthcare and related services
Industrial chemicals
Food products

Businesses Offsetting Revenue, Declining and Avoiding Costs

Businesses in this list had a percentage change in share price between 0 and -5%.

IT services
Aeronautics and defense
Property
Business services
Media
Financials
Mining
Retailers (except food and drugs)

Businesses Struggling to Survive

Businesses in this list had a percentage change in share price between -5% -30%.

Industrial transportation
Building and materials
Metals
Insurance
Automotive and parts
Tourism and leisure (including air travel)
Fossil fuels products and distribution

The question now is, no matter which industry you’re in, how can you ensure that your business surpasses the current crisis, and thrive in the upcoming years?