I have some good and bad news for the investing community.
The first thing to know is that, over time, every single stock market crash and recovery has been erased by a bull market revival. You have an excellent chance of increasing your wealth if you buy outstanding firms and are patient
Now for the downer news: On the economic front, change is sweeping through the United States, with a recession increasingly likely.
Here are two stocks that might be useful to investors if this occurs.
Electric utility NextEra Energy is the first stock begging to be bought if the United States enters a recession ( NEE 0.29%).
Utility stocks are extremely predictable, which isn’t a bad thing during an economic downturn. You must have electricity to live comfortably whether you own a home or rent. This leads to a very consistent demand from year to year as well as highly transparent cash flow.
NextEra Energy’s focus on renewable energy development and support is what sets the company apart from its competitors, besides its industry-leading market capitalization. In the United States, no utility is generating more capacity from solar or wind power; and NextEra Energy isn’t likely to be dethroned, with between $50 billion to $55 billion put aside for capital expenditures between 2020 and 2022.
The company has also benefited from historically low lending rates in recent years. Over the last decade, a surge in cheap capital and dramatically reduced energy production expenditures have aided propel its compound annual growth rate to the high single digits. For context, most electric utilities see growth of less than 10% on an annual basis.
Finally, NextEra Energy’s traditional utility operations that aren’t run on renewable energy are overseen by the state.This ensures that the business is unable to pass along price hikes at any time, which protects it from unpredictable wholesale electricity costs. This is another component of the NextEra puzzle that helps to ensure its consistent cash flow.
If the United States enters a recession, specialty biotech stock Vertex Pharmaceuticals ( VRTX 0.89%) is an easy no-brainer investment. Healthcare companies are similar to utilities in that they are extremely defensive and provide a fantastic investment opportunity in the case of an economic downturn. Since we can’t prevent catching a sickness or acquiring an ailment, there’s always a demand for prescription drugs, medical devices, and healthcare services in every economic climate.
Vertex’s product portfolio focuses on cystic fibrosis (CF), which is a hereditary genetic illness characterized by excessive mucus production that can obstruct the lungs and/or pancreas. While there is no cure for CF, Vertex has developed four generations of FDA-approved medications for sufferers and is now working on the fifth-generation therapy in clinical trials.
In October 2019, the FDA approved Vertex’s newest blockbuster CF drug, Trikafta, five months before its anticipated approval date. Trikafta, because it targets the most frequently occurring CF mutation (F508del), it can be given to approximately 90% of CF patients six years and older. In 2022, Trikafta is expected to generate more than $6 billion in net product sales.
Vertex is also working on a few other therapies beyond its CF franchise. CTX001, which will be produced in collaboration with CRISPR Therapeutics for the treatment of severe sickle cell disease and transfusion-dependent thalassemia, and VX-880, which is aimed at type 1 diabetes, are among them. Vertex has plenty of cash on hand to do further research, which is fueled by the firm’s colossal cash pile. At the end of 2021, Vertex had more than $7.5 billion in cash, cash equivalents, and marketable securities.
Vertex is a cash-rich, profit-generating company that is increasing sales by double-digit percentages, but it may be purchased for just 17 times the estimated profits in 2022.