Costco, Microsoft Are Stocks Fit For Recession: Goldman Sachs

[Bong Hwan Ahn]

Costco, Microsoft Are Stocks Fit For Recession: Goldman Sachs

If the economy has a hard landing, Goldman Sachs strategists expect the S&P 500 to drop 21% to 3,150.

• DAN WEIL

• 15 HOURS AGO

Many economists and investors believe the Federal Reserve’s interest-rate increases will produce a hard landing for the economy – a recession.

Economists at Goldman Sachs predict a soft landing. But if there is a hard landing, they expect the S&P 500 to fall to 3,150, a 21% drop from the recent level of 3,988.

With that in mind, Goldman Sachs strategists put together a list of 36 stocks that should benefit from a hard landing.

The roster consists of large-cap, profitable Russell 1000 companies that pay dividends and are in a defensive industry. The stocks trade at a forward price-earnings ratio below their five-year median and have an Altman z-score above the Russell 1000 median.

The Altman Z-score is a formula for determining whether a company is headed for bankruptcy. The higher the score, the less chance of bankruptcy.

The list is heavy on software, food & beverage, and tobacco stocks. Stocks on the list have a median market-cap of $37 billion and a median forward P-E ratio of 22 versus a five-year median of 24.

Here are 10 stocks on the roster, grouped by industry.

• Activision Blizzard ATVI, the video game publisher
• Home Depot HD, the home improvement retailer
• Costco COST, the food and staples retailer
• Kroger KR, the grocery-store chain
• Altria MO, the tobacco company
• Tyson Foods TSN, the chicken/beef producer
• Pfizer PFE, the pharmaceutical giant
• Danaher DHR, a scientific instrument maker
• Microsoft MSFT, the software titan
• Visa V, the credit card colossus