Best Depression Stocks

Investing during a period of economic depression or recession can be daunting. However, choosing the right depression stocks can help you weather a period of uncertainty and protect your financial interests. Today, we’ll be taking a look at a few stocks you may want to consider investing in if you believe that the market will take another downturn. 

Quick Look at the Best Depression Stocks:

• VAALCO Energy, Inc.
• Synopsys
• Netflix
• Campbell Soup
• IBM

Overview: Depression Stocks

A depression is a period of extreme economic downturn that often lasts for several years. During a depression, prices and world trade fall, unemployment rates rise and the economy sees a consistent negative gross domestic product (GDP) growth. Many economists define depression as a drop in real GDP that exceeds 10%. A depression is a more severe form of a “recession,” which is usually defined as 2 consecutive quarters of decline in quarterly real GDP. A recession may lead to a depression if the recession goes on for at least 2 years.

Though the U.S. has experienced several recessions, there has only been 1 major depression. Often referred to as “the Great Depression,” the stock market crash of October 29, 1929, caused the GDP of both the United States and foreign countries to decline sharply. GDP fell by an estimated 15%, crop prices plummeted over 60% and unemployment rates rose to 25.6% during the peak. 

While the depression caused many companies to go out of business as layoffs were made and consumers tightened their belts, some stocks survived — and a few even increased in value. Many of the stocks that rose during the Great Depression were defense stocks like Electric Boat, now a defense subsidiary of General Dynamics (NASDAQ: GD). This was because the U.S. was gearing up to enter World War II and drastically increased its defense budget. 

We can learn from the innovation and commitment to versatility that these companies showed to predict which stocks will best survive through future economic downturns. 

Best Online Brokers for Depression Stocks

No matter if you’re searching for long-standing stocks to protect your investment during the next depression or you’re only interested in stocks under $5 to day trade, the most important tool at your disposal is a reputable brokerage account. If you aren’t sure where to open an account, consider a few of our top choices below. 

Features to Look for in Depression Stocks

Not every stock is equally as equipped to handle a depression or recession. By examining the aftermath of the stock market crash of 1929, we can identify a few key characteristics of companies that survive periods of economic uncertainty. If you’re looking for investments for the next depression, you might want to consider stocks that exhibit these fundamental qualities.

• A long history that spans multiple markets: You won’t find many stocks under $20 on our list of the best stocks to survive a recession. Companies with long histories that have withstood both bull and bear markets are more adequately equipped to handle a new period of depression when compared with new companies and those with a negative earnings per share value.    
• Innovation and quality: During the depression that began in 1929, companies like Electric Boat and Bulova Watch were able to stay afloat in part due to their reputation for creating quality products and devoting a large percentage of their budgets to cutting-edge innovations. Search for companies with large research and development budgets and that make efforts to keep up with the changing tastes of the modern consumer. These companies are more likely to have the tenacity needed to make it through a depression.
• Wholesale and discount retailers: Another sector that tends to do well during recessions and depressions is the discount and wholesale industry. During an economic downturn, unemployment rates and consumer confidence both have a tendency to plummet. This means that discount retailers are at a unique advantage as families cut back and save as much money as possible. 

Preparing for Economic Uncertainty 

Though many companies lose value during economic depressions, downturn can also present a great opportunity to pick up stocks below their fair value. Some of the world’s most successful investors (including Warren Buffet and John Templeton) used periods of economic downturn to enhance their portfolios and bring their investments to new heights. The key to successfully investing through a depression is to choose stocks with rock-solid company fundamentals. From providing a unique value to customers to continuous innovation, the companies that survive depressions know how to adapt to a changing market. 

Frequently Asked Questions