Comments (112)

Aug 19, 2019

Here are a couple to kick things off:

  • Insurance brokerages: During the GFC, organic revenue growth for the insurance broker industry was between 0% and -2%.
  • Quick service and fast service restaurants: QSR experienced 0.2% same store sales performance in 2009, while FCR saw a -0.2% decline (compared to -4 and -16% for full service restaurants and fine dining, respectively).
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Aug 19, 2019

The cosmetics industry has continued to climb for years

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Aug 19, 2019

From what I've seen theres a huge boom in it rn, and will probably decline just bc the trend right now is a LOT of makeup. I'm assuming this will be followed by a period of less is more

Aug 19, 2019

I think the pet industry is one for sure. People see animals as their family and the purchasing of pets as well as their toys etc has not dropped

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Aug 19, 2019

Yeah I actually just saw an article on that the other day. Peoples spending in that industry has actually skyrocketed because millennials have more pets than prior generations

Aug 19, 2019

Disagree, I interned at a fund that made an investment in a pet-focused business which got clobbered during the financial crisis. Their reasoning was similar to yours and proved to be incorrect.

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Aug 19, 2019

Funeral homes are pretty recession proof.

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Aug 19, 2019

Now that you mention that I would assume the wedding industry is as well. Death, marriage, and pregnancy are the times where I feel like no one really counts their pennies

Aug 19, 2019

Yeah. I can definitely see that. Though I'm sure it's easier to cut back on wedding expenditures (especially the extra lavish stuff). I feel like there's more lavish wedding spend than funeral spend. Most people do basic funeral services, not much room left to cut out any expenses.

Cheap retail usually does well as well (paper products, cups, plastics, napkins, etc).

Aug 20, 2019

Heh.

I used to work in a Hospital on the Finance side. Death and marriage might be recession-proof, but pregnancy is not.

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Aug 19, 2019

I'm not sure this is as true as the conventional wisdom would make you think. Volumes might not get hit during a recession, but funeral homes make their money on upselling to nicer services, floral arrangements, caskets, etc.

Aug 19, 2019

Yeah, looking at performance of the main public players, they get shattered during recession (70+% drop). For sure not recession proof.

Aug 20, 2019

Great point. As a side note, funeral casket manufacturers have seen consistent declines in recent years as there is a growing interest for cremation due to the lower cost.

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Aug 20, 2019

Fair point - I would be curious to know if there would be a slight up tick in death toll during recessions thus offsetting the loss in up sell. Either way people are always dying as morbid as that that

Aug 23, 2019

on that sector though, the traditional funeral service providers are being challenged as people move more to cremation services to cut back costs

Aug 24, 2019

I don't think this is true. Sure, people keep dying, but their loved ones' ticket on mortuary expenses is definitely discretionary. Source: Six Feet Under

Aug 19, 2019

alarm monitoring

Aug 19, 2019

There are some very mediocre answers above. If you don't think spending on pets and weddings would be slashed if we were to hit a big and prolonged recession, you'd be very wrong.

As mentioned, insurance, fast food, and funeral homes would likely do just fine. Booze and cigarettes too. Utilities.

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Aug 19, 2019

In past recessions people were surprised that pet spending went up. I was taking a flyer on the weddings though

Aug 20, 2019

There is literally so much data to evidence of pets being recession-proof you just have to google it... In times of recession, humans will literally lower the quality of their diets to maintain the quality of their pets.

Aug 20, 2019

thats what i've read as well

Aug 20, 2019
TheBigBambino:

There is literally so much data to evidence of pets being recession-proof you just have to google it... In times of recession, humans will literally lower the quality of their diets to maintain the quality of their pets.

I guess this is why I don't own pets. I would literally eat my dog before I reduced my food (or booze) consumption.

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Aug 19, 2019

Utilities

Aug 19, 2019

Yes unfortunately haha

Aug 20, 2019

This

Aug 19, 2019

Alcohol

Maybe I led you to believe that this was a God given gift and not something I worked for, every single day of my life.

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Aug 19, 2019

Yep if anything that probably goes up!

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Aug 19, 2019

It does

Maybe I led you to believe that this was a God given gift and not something I worked for, every single day of my life.

Aug 20, 2019

Not necessarily, as it seems that heavy drinking / smoking seems to decline during recession because of monetary effects though some people may increase their low consumption behaviour compared to pre-recession standards. There are some interesting papers on this topic in regards to health and recession (e.g. Ruhm 2000, 2015 and Jofre-Bonet, Serra-Sastre and Vandoros 2018)

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Aug 19, 2019

Software as a Service (SaaS) was remarkably resilient during the last recession. Companies didn't upgrade hardware during the downturn, but they still had to maintain their software licenses and support agreements to continue to operate. SaaS companies are now able to command higher leverage because of how well they performed in the last downturn.

Aug 19, 2019

Great point. I definitely see that now

Aug 20, 2019

I think this is the best answer in this thread

Aug 20, 2019

Are these all custom negotiated contracts? In recession, is there risk of the incrementally struggling company demanding lower pricing for SaaS? Is there an alternative to mix-down for some services? Those are the risks that jump out to me

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Aug 21, 2019

Solid points. I probably didn't answer the question exactly as asked. SaaS was very resilient, but I'm not sure we could call it counter-cyclical or "recession proof". That said...

Tricky Triangles:

Are these all custom negotiated contracts? In recession, is there risk of the incrementally struggling company demanding lower pricing for SaaS?

These are generally pretty sticky relationships. Consider what it takes for a company to switch software systems in terms of time, energy, and money. High barriers to switching means the customer probably doesn't have a ton of leverage when it comes time to renegotiate a subscription to an already-implemented system.

Aug 19, 2019

Video games: back in the 07/08 crisis call of duty sales hit record highs

Aug 19, 2019

Would argue that it was also a function of the quality of COD's. COD 4 released in late 2007 was (and might still be) one of the best COD's made.

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Aug 19, 2019

Video games will not do well in the next recession

Aug 19, 2019

why do you think that? genuinely curious to hear the conflicting opinions

Aug 19, 2019

how does healthcare fair in a recession?

WSO's COO (Chief Operating Orangutan) | My Linkedin

Aug 19, 2019

Pretty well. People always get sick (perhaps more so in stressful times) and still need drugs and hospital services. In countries with national health services, recession may lead to cut backs but that may simply mean an increase in the use of generics (still good if your company has a generics arm) and more careful about giving out expensive exams like MRIs and so forth.

Aug 19, 2019

Depending on if you mean hospitals, medication, etc or new biotech inventions.

I think @The Pharma Guy got it right. people will always take care of their health and as long as insurance can pay it off then that area should b safe

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Aug 20, 2019

My opinion is that the true beta of healthcare is understated. The average healthcare monthly expense (whether paid by self or by employer) is almost as high as average housing bill nowadays and continues to inflate high single digits. This might not be able to survive a recession, especially with laid off folks having to pay out of pocket. Political backlash could be the catalyst. And lots of players in the industry are over-earning so there is room to give up returns.

Aug 24, 2019

Hospitals historically got clobbered on non-collectible accounts for emergency room visits, etc. Healthcare expenses have been a leading cause of bankruptcy. Not sure if Obamacare has improved this. It may have taken some beta out of the hospital industry, but reimbursements are probably lower in general. Meanwhile health insurance costs have continued to soar.

Aug 19, 2019

I'm guessing the food industry ?

Sure people may not eat out as much or get delivery but supermarkets and fast food restaurants wouldn't really suffer that much.

Aug 19, 2019

Probably the industry as a whole will be okay but I do think a lot of brands will struggle if they are a more lux product that people can't afford to buy

Aug 24, 2019

You have to think in terms of both unit volumes and ASP. Higher priced, higher margin products may suffer driving down total sales.

Most Helpful
Aug 19, 2019

I think a broad way to see this is based on price elasticity. If you're in an industry where the product or service in price elastic then you may not do very well e.g. tourism or travel. If you're tight on money you don't travel. If your industry is price inelastic then you'll probably be ok for the most part e.g. fast food or pharmaceuticals. You can't spend as much on food? Fast food is still your cheapest option. Dying of cancer? You still need that life-saving drug.

Now there are some exceptions to this rule but they tend to be replacement industries. Video games are relatively price elastic (if the price of Fifa went from say $50 to $80 fewer people would buy it) but since video games replace other activities in times of recession, such as going out or going on holiday, they are semi protected.

You also need to look at the fragmentation of the industry and if there are tiers of luxury. Someone above mentioned cosmetics, but the main tranches doing well are lower-end and luxury cosmetics. Why? Because the rich will continue to buy luxury cosmetics as they are barely affected and the average person will have to spend less on their $40-50 cosmetics and drop to the $20-30 ones. This is the same principle that applies to fast food joints - they are at the budget end of the "eating out" industry.

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Funniest
Aug 19, 2019

How i feel being able to understand your post after taking intro to microeconomics this past semester

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Aug 19, 2019

did you search "LSD trip" for this picture hahaha

Aug 19, 2019

Dollar General and Wal-Mart are already smashing earnings. Discount box retailers will do ok as everyone pares back their spending and figures out what they can downgrade to (Target -> Wal-Mart, Wal-Mart -> Dollar General, etc.).

I think the Wal-Mart "consumer exuberance" or "confidence" or however they put it is a little overstated, and I'd be interested to know how many unique customers they had vs. revenue.

Definitely agree with Pharma Guy that it is all about price elasticity.

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Aug 19, 2019

I wonder how amazon will be affected by it. I mean amazon is massive so I can just look at the whole thing and guess. Grocery delivery might go down but other things might go up.

Will be interesting to monitor

Aug 19, 2019

How do FIGs fair?

Aug 20, 2019

not good - reliant on economic and consumer welfare growth. Most FIGs, such as banks and asset managers, depend on money flowing in from customers which will be decimated during a downturn. However, certain forms of insurance companies may fare ok.

Aug 20, 2019

Wouldn't this cause banks and thrifts to consolidate?

Aug 20, 2019

If you want to make 80k a year guaranteed become an elevator mechanic in a major city

Aug 20, 2019

porn

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Aug 20, 2019

I've bought Telecom Argentina bonds after the primaries, so that's that.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

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Aug 20, 2019

Parking assets seem to do relatively well during recessions. Its an interesting sub sector in real estate that I feel gets overlooked more times than not.

Aug 20, 2019

If I had extra money I would literally own a storage building and a few parking lots. It pays for it self with low maintenance cost.

Greed is Good!

Aug 20, 2019

Inferior or inelastic goods my man. We're talking frozen pizza, pies and beans. Poor middle class families..

Aug 20, 2019

COAL, STEEL, AND AUTOMOTIVE

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Aug 20, 2019

booze?

Aug 20, 2019

People were saying yes and no on this one. I would assume that as well

Aug 20, 2019

My understanding is volumes are unaffected or even go up, but consumers pivot towards lower-priced products. Premium brands suffer, economy brands thrive.

What we haven't seen yet is how alcohol responds in a recessionary environment where marijuana is legal. There's already question about whether pot will steal share from alcohol. Will be interesting to see consumer reaction during a downturn with this new factor in play.

Aug 20, 2019

Low-end probably sees increased demand

Mid- and high-end get destroyed by mix down of demand I'd guess

Aug 20, 2019
  • Professional services like legal, auditing, accounting - the global firms may lose revenue on all the tacked on services that they provide, but mid-market firms usually provide pretty sticky services.
  • Certain property managements services like basic cleaning and maintenance, repairs, window cleaning
  • Veterinarian chains
  • Therapists
  • Security services, including private security

You may notice all of these are services and not product - people can delay the purchase of products or switch to cheaper ones, but certain sticky services are usually harder to let go of. That's also why as someone else mentioned, SaaS (especially day to day SaaS providers for enterprise clients, not bells and whistles ones like a lot of martech) can do well in a recession. I guess we'll find out about that

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Aug 20, 2019

Large aircraft lessors - Contractual revenue streams on critical assets for airlines, lasting years into the future that provide significant visibility into their future earnings.

Consumer staples such as toothpaste, and toilet paper.

Aug 20, 2019

I'll tell you what won't do well - all these tech unicorns with negative cash flow selling unnecessary but convenience based products largely to DINKs and HENRYs - Uber, Doordash, Blue Apron, etc.

Will be kinda funny when all these post 2010 college grads accustomed to free lattes, ridiculous free food (ie braised duck and gnocchi for lunch), work remote abilities, and unlimited vacation days experience the realities of a recession.

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Aug 20, 2019

did someone wake up on the wrong side of the bread today?

What concert costs 45 cents? 50 Cent feat. Nickelback.

Aug 20, 2019

Ha. Nah. Does sound overly bitter, just making a joke.

Aug 20, 2019

Plenty of hedge funds are going to get blown up too, considering the average hedge fund doesn't even outperform the S&P 500 after fees...

Aug 20, 2019

Don't hedge funds tend to perform better in down markets?

Aug 20, 2019

Cable / telco, utilities, mission-critical SaaS, healthcare / pharma, waste management, funeral homes, dollar stores?

Aug 20, 2019

McDonalds

Aug 20, 2019

Apartments catering to the middle-market, waste management/collection, debt collection, alcohol/marijuana/tobacco, bankruptcy consulting/attorneys, fast food, utilities, discount stores, temporary hire agencies, self storage facilities, and RV/trailer parks.

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Aug 20, 2019
InVinoVeritas:

Apartments catering to the middle-market, waste management/collection, debt collection, alcohol/marijuana/tobacco, bankruptcy consulting/attorneys, fast food, utilities, discount stores, temporary hire agencies, self storage facilities, and RV/trailer parks.

totally agree but it makes me fucking depressed

Aug 20, 2019

Finance often makes me fucking depressed. High finance at the top involves a tiny amount of people gobbling up all of the assets producing cash flow streams which serve the bottom base of Maslow's hierarchy of needs pyramid. Price inelasticity and lack of substitute product is king.

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Aug 20, 2019

Trades - plumbing, etc. just a wild guess

Aug 20, 2019

Would imagine a lot of trade work like plumbing is done on new construction, so not sure if that would translate well when no one is building

Aug 21, 2019

I'd say Healthcare is the most obvious one here. Investors currently stock up on their healthcare assets as they view them as the safe haven in the upcoming recession and we therefore see a lot of activity here in Europe right now. PEs basically jump at every HC opportunity they can get and pay well above avg control premiums, especially in the care homes and hospitals space.

Aug 21, 2019

Nothing is 'recession proof' but I think some good 'recession-resistant' industries include healthcare (all forms, especially healthcare delivery and basic pharmaceuticals),, utilities (water, power), and many food commodities.

Aug 21, 2019
  • Second-hand cars: people need different cars but can't afford new ones, quite straightforward.
  • High-end luxury goods (think Hermes, for example): top 0,1% tend to keep spending pattern, usually for top quality luxury goods.
  • Debt recovery agencies, distressed asset investment firms (think Cerberus): enough said...
  • If in countries that also have high inflation and high interest rates, probably larger supermarkets: they tend to earn more through their treasury desks than operating income.
Aug 21, 2019
  • CMBS. The housing market is rock solid. Can't see any possible downside. Lever up suckers.
  • Oil & Gas. America runs on gas, not going to change in a recession.
  • Travel & Hospitality. Even the schmucks of the world need to get take a break from being poor in the midst of a recession, in fact, most people probably need to blow off more steam during one.
  • Automobile Industry. Self-explanatory. No matter how broke I become I'm not taking the train to head back to CT for the weekend just so I can catch my brother's lax game at Taft.
Aug 23, 2019
FratLord:

* CMBS.

FratLord:

The housing market

Aug 23, 2019

Maybe I missed it, but Prison REITs would likely do very well.

Aug 23, 2019

Car parts distributors.

  • People buy less new cars. The subcontractors for the automakers try to ramp down their production lines, but end up spinning off a ton of extra parts that aren't being used in new cars that aren't being made.
    • Simultaneously, people with old cars, who would otherwise upgrade to something new, look for discount spare parts when making out of warranty repairs.
    • I've seen distributors with substantial growth through the recession.

Saw someone else comment here, but funeral homes are solid - people have less expensive funerals, but no one stops dying. Downside cases for them are pretty low.

Similar situation with assisted living on the high end. People might let mom or dad move in instead of sending them to a home if they're "with it". For places that deal with Alzheimer's and dementia though, the inflow never stops. I've seen places that will actually get put liens on children's houses when the parents a checked in if their overall financial picture isn't strong enough - the home is getting foreclosed on before mom/dad gets pulled out.

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Aug 24, 2019

healthcare hands down. Always safe .
Also relationship advisory business - recession or not people will always break up with their spouses, girlfriend, dog , wtf.

Aug 24, 2019

I imagine liquidation companies clean up. Does anyone know of any pure play public liquidators?

Aug 24, 2019
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Aug 26, 2019
Aug 24, 2019
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Currently applying to medical school.

Sep 12, 2019
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Sep 12, 2019