We’ve have been under the threat of recession for more than a year. We’ve also been dealing with stubbornly high inflation along the way. And unfortunately, Americans are strained. However, there’s still opportunity to be found in some of the best stocks for non-recession recession.
Nvidia (NASDAQ:NVDA) is the clearest choice among stocks to buy if we don’t experience a major downturn. The firm once famous for GPUs and more recently known for AI has taken off in 2023.
By now, it’s old news that Nvidia is the best AI stock of 2023. Even prior to Q1 earnings NVDA shares more than doubled, moving from $124 to $305. Then, on May 24 the company released earnings that included guidance that blew previous expectations out of the water. Sales for Q2 are now forecast to reach $11 billion, well ahead of the $ 7.2 billion Wall Street had been expecting. That news skyrocketed prices to near $400 where they now sit.
Investors have grown shaky at Nvidia’s valuations following the upswing. But Nvidia has cornered the market for AI chipsets and supplies a market no other firm can. These are Wild West days for Nvidia and AI but I’d bet against NVDA slipping, absent a recession.
Google (NASDAQ:GOOG,GOOGL) is my other AI stock pick at the moment. Why? Because it has more upside in relation to AI than its primary competitor, Microsoft (NASDAQ:MSFT). While Microsoft has received a lot of positive attention related to AI thus far, Google has not.
Google didn’t make a massive investment into OpenAI and ChatGPT. Microsoft did. So, round one clearly went to Microsoft. But Google has made up ground, recently releasing AI tools publicly. The balance of attention is shifting in its favor. Investors have a reasonably good idea of Microsoft’s AI positioning. They’re just beginning to understand where Google is positioned.
That places Google in an enviable position in the coming months. If it shows promise in relation to AI investors should expect it to appreciate quickly. Google is also leaning out operationally which promises to boost its value. All of this threatens white-collar workers within and without the company, sure. But it stands to benefit Google investors.
Phillip Morris (PM)
I’d argue that Phillip Morris (NYSE:PM) is one of the best stocks to invest in right now. That assertion holds true whether a clear recession emerges or not. PM shares offer value in both instances.
Phillip Morris manufactures and sells cigarettes although it is pivoting toward a smoke-free business model. The point here is that cigarette companies have historically been one of the most inflation-resistant industries. People smoke when the economy is strong and when it isn’t they smoke more. During the last recession in 2008 tobacco firms boomed. In short, that gives reason to believe that a similar trend could emerge again.
And if no recession occurs Phillip Morris remains a strong investment. It currently offers a dividend yielding 5.6% and an average target stock price above $112. It trades at $90. That means that with dividends included PM shares have 29% upside. Investing is therefore arguably a win-win situation.
Deere (NYSE:DE) stock continues to confound investors. Most signs suggest it should be flying high. However, it continues to trend downward. Sales increased by 34% to end the company’s second quarter and net income increased from $2.098 billion to $2.86 billion. Deere is a fundamentally sound firm to be sure. Agricultural equipment operating profits doubled to $2.2 billion year-over-year. In its construction business that same metric grew from $814 million to $834 million. Yet share prices are falling. Some analysts attribute declining prices to fear that things can’t get better for the company. Others continue to worry about a recession.
I believe DE stock is simply a bargain right now. Its P/E ratio is nearing a decade low and currently stands below 12. DE stock has a lot of upside built into share prices. The company is positioned to benefit from an infrastructure buildout and any push to increase U.S. agriculture. Further, worldwide sales increased by 30% this quarter so Deere is relatively insulated.
Brown-Forman (NYSE:BF-B) is an alcohol stock that should do well in a variety of situations. The company sells liquor, wine, and ready-to-drink cocktails. Like Phillip Morris, Brown-Forman can be classified as sin stocks which generally are recession resistant.
And Brown-Forman is doing quite well currently in the non-recession. The company’s top line is growing albeit somewhat slowly. That said, its ready-to-drink category is clearly a strength with 12% growth fueled by Jack Daniels mixed drinks. And bourbons including Woodford Reserve are growing at a much faster pace.
Overall, Brown-Forman is not an exciting stock nor should investors expect it to provide rapid gains. It’s more of a capital preservation stock with decent upside in good times. Investors get a dividend that doesn’t yield much at 1.33% but one that also hasn’t been reduced since 1985. It’s a hedge against the worst that provides modest upside if the worst doesn’t materialize.
American Express (AXP)
Investors looking to take advantage of record credit card debt should consider American Express (NYSE:AXP) first. It has obvious benefits as credit card debt reaches historic highs while also benefiting from its premium status.
U.S. credit card debt is at all-time highs and is currently approaching $1 trillion. The average credit card interest rate is also at the highest levels on record. It doesn’t take much to understand how credit card companies like American Express stand to benefit from the current situation. That argument applies to all other credit card stocks too, though. So why should investors choose American Express over other firms?
The answer lies in its higher-income customer base. They are spending on travel and other services and goods that lower-income credit card users might pull back on. Further, they’re lower risk overall and tend to carry better creditworthiness. That shields American Express relative to other credit card stocks as its top-line results continue to grow.
Dollar General (DG)
Dollar General (NYSE:DG) stock was the go-to retail investment during 2022 for the idea that an impending recession would gut purchasing power. The company did see strong growth as shoppers sought discounts.
But 2023 has been different and Dollar General is facing a new set of problems as lower-income households are getting hit. Lower tax refunds are hurting Dollar General’s core customers. Theft, too, has been a real issue for the retailer.
The result is that management now expects growth to be flat at best through the year and as low as -8%. Previous estimates pegged growth between 4-6%. But look at it differently and an opportunity emerges. Dollar General is suffering from negative expectations. It simply has to find any growth at all over the next 6-7 months and it will appreciate. Prices fell from $200 to $160 because of the news. It’s arguably an overcorrection that investors should seize.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.