The global economy has largely recovered from the COVID-19 pandemic, but according to Bloomberg, dark times may lie ahead.
Economist Scott Johnson of Bloomberg Economics predicts the global economy will grow at 2.4% in 2023, a slowdown from the expected 3.2% growth for this year. 2.4% would be the slowest growth since 1993 – excluding the crisis years 2009 and 2020.
His analysis also shows that the US economy will enter a recession by the end of 2023. A recession is expected for the eurozone at the beginning of this year.
“In the US, with wage increases to keep inflation above target, we think the Fed is moving towards a final rate of 5%, and will stay that way through 1Q24,” Johnson writes. “In the eurozone, meanwhile, a faster fall in inflation means lower final interest rates and the possibility of cuts at the end of 2023.”
The prospect of a recession does not bode well for equities. US GDP showed growth in the third quarter and the S&P 500 is still down 19% year-to-date.
Of course, some companies are more resilient than others. Here’s a look at three companies that can make money through thick and thin. Wall Street also sees significant benefit in this trio.
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Southern (NYSE:SO) is a gas and electricity holding company headquartered in Atlanta. It serves about nine million customers.
The utilities sector is known as a defensive game. No matter how many times the Fed raises rates — and no matter how bad next year turns out — people still need to heat their homes in the winter and turn on the lights at night.
The company’s recession-proof nature also means Southern can pay reliable dividends.
In April, the company increased its quarterly payout by 2 cents per share to 68 cents per share, the 21st consecutive year Southern has raised its dividend.
Look further back and you’ll see that the company has paid steady or rising dividends since 1948.
In the first nine months of 2022, Southern posted adjusted earnings of $3.35 per share, up 9.8% from the same period last year.
On Wednesday, Wells Fargo analyst Neil Kalton raised his price target for Southern from $70 to $77. While he maintained an Equal Weight rating on the stock, the new price target implies a potential upside of 11%.
The economy moves in cycles, but people always have to go shopping. This allows Kroger (NYSE:KR) to make money through the ups and downs of our economy.
That’s one reason why in an era where brick-and-mortar stores are under serious threat from online sellers, Kroger remains a physical beast.
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The company has also expanded its online presence. Kroger’s digital sales in 2021 were 113% higher than two years ago.
You can see Kroger’s resilience in its dividend history: The company has increased its payout to shareholders for 16 consecutive years.
Evercore ISI analyst Michael Montani recently upgraded Kroger from “in line” to “outperform” with a price target of $56 — implying a potential 26% upside from where the stock is today.
Let’s round out the list with Coca-Cola (NYSE:KO) — a classic example of a recession-proof company. Whether the economy is booming or struggling, a can of Coke is affordable for most people.
The company’s entrenched market position, sheer size and portfolio of iconic brands, including names such as Sprite, Fresca, Dasani and Smartwater, give the company significant pricing power.
Add to that solid geographic diversification – products are sold in more than 200 countries and territories around the world – and it’s clear that Coca-Cola can thrive in any circumstance. After all, the company went public more than 100 years ago.
Even more impressive is that Coca-Cola has increased its dividend for 60 consecutive years. The stock is currently yielding 2.8%.
UBS analyst Peter Grom has a Buy rating for Coca-Cola and a price target of $68, about 9% above the stock’s current price target.
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This article provides information only and should not be taken as advice. It comes without any kind of warranty.