Every day, hundreds of “financial gurus” claim that the next recession is right around the corner. While the vast majority of these claims will prove false, it’s a simple fact that one will eventually be right. So will your portfolio be ready?
Just as it is impossible to predict when exactly the next recession will hit, it is impossible for a stock to be fully recession-proof. Every recession is unique, none will be like the last, and each industry will be affected differently. The best we can do is search for a stock that is recession ready — a company whose services will not be overly disrupted by economic turbulence.
These two companies have stood through past recessions and are certainly ready for the next…
1. American Tower
American Tower (NYSE:AMT) is a real estate investment trust (REIT) that owns and operates wireless and broadcast infrastructures throughout 17 different countries. You may not have heard of this company, but whenever you use your phone, you are more than likely availing of American Tower’s services.
American Tower is a business of the future. Not only will it be in a prime position to take advantage of the mass rollout of 5G in 2019, but it has created a massive barrier to entry for competitors. By owning over 170,000 cellular towers and leasing out to some of the biggest names in communication, American Tower has established itself as one of the market leaders in communication infrastructure.
What makes American Tower ready for the next recession, however, is that its services will not be disturbed by the economic climate. Like haircuts, people will still need phone signal meaning towers will still be rented — no matter how many points the Dow Jones has dropped.
In his 2018 letter to shareholders, CEO James Taiclet attributes American Tower’s historical performance to the company’s resilience, even through the financial crisis of 2008-2009.
During the crash of 2008, revenue increased 8% for American Tower, showcasing how its long-term contracts are a winning strategy. This growth has continued into the present day with 20,000 towers being added to the portfolio in 2018 in conjunction with an 11% increase in revenue.
American Tower’s geographical diversification, lease structure, and strong balance sheet ensure that it will remain — and potentially thrive — throughout the next recession…
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