Despite the calm market environment, there are many lingering threats that could negatively impact the stock market. Recently, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon has been in the headlines, bringing attention to potential market risks. One major risk is stubborn inflation that causes higher for longer rates or, even worse, forces the Federal Reserve to reverse policy and return to rate hikes.
Another risk that the market is currently ignoring is the volatile geopolitical landscape. The Russia-Ukraine war can escalate at any time and spill over to the rest of Europe, drawing the U.S. into the conflict. Moreover, the Middle East and China-Taiwan are other wildcards that could erupt anytime.
These risks, plus the normal end of a business cycle that results in a recession, mean you should be buttressing your portfolio. These recession-proof blue-chip stocks to hold can help you weather any economic weakness.
Walmart (WMT)
As the largest global retailer by revenue, Walmart (NYSE:WMT) is built to outperform in a recessionary environment. After all, regardless of the economic situation, people must eat and need household essentials.
Structurally, Walmart can grow sales even in a recession since its revenues are highly geared towards necessities, especially groceries. Today, groceries account for 58.8% of total sales in the U.S. Therefore, the retailer has sales stability even in volatile times.
Another characteristic that makes Walmart one of the top blue-chip stocks to hold is its everyday low-price strategy. Essentially, it focuses on offering customers value. Its immense scale as the largest global retailer further enhances this advantage. Thus, it can leverage its economies of scale to provide the lowest prices compared to competitors such as Target (NYSE:TGT).
Recent quarterly results highlighted this advantage as Walmart exceeded estimates while Target disappointed. Management highlighted that they benefited from more value shoppers as budgets shrink due to persistent inflation and falling pandemic savings.
Walmart’s value proposition lies in its lower prices and broad selection. This formula worked in 2008 and 2009 when the company grew sales during the Great Financial Crisis. It’s the perfect recession-resistant stock.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) is among the blue-chip stocks to hold through a recession. This fast-food giant can minimize your drawdown during a downturn.
The restaurant sees robust sales during recessions because it is synonymous with budget meals. Typically, consumers drop expensive chains, opting for cheaper meals. The value menu enables the chain to profit at the expense of more expensive chains.
Indeed, McDonald’s is committed to always serving the low-income consumer. Even when times are good it focuses on its budget customers. It’s no surprise that the company is currently planning to launch a $5 value meal. This deal comes amidst a pullback in restaurant traffic across various chains.
Value and affordability have always been core features of Golden Arches. With over 40,000 restaurants globally, it has the scale and capacity to drive affordability to an extent that few chains can. That’s why it’s the perfect answer for a budget-constrained consumer.
After dropping from $300 to below $260, this recession-resistant blue-chip stock is back in value territory. Buy shares here at 19 times forward earnings for market-beating returns throughout the economic cycle.
AutoZone (AZO)
Lastly, another recession-resistant industry is auto parts retailers. It’s no secret that during recessions, new car sales decline due to constrained budgets and job losses. As a result, consumers drive their older cars for longer, which necessitates more repairs due to wear and tear.
Due to this dynamic, auto parts retailers like AutoZone (NYSE:AZO) and peer O’Reilly Automotive (NYSE:ORLY) managed to grow domestic same-store sales during the Great Financial Crisis. AutoZone grew domestic same-store sales in 2008 and 2009 by 0.4% and 4.4%, respectively. As a result, revenues grew 5.7% and 4.5%.
The ability to grow sales in one of the greatest recessions reinforces why AutoZone is one of the best blue-chip stocks to hold. Today, it operates 6,300 stores in the U.S., 740 in Mexico and 100 in Brazil. These stores sell an extensive range of automotive and non-automotive parts for cars, vans, sport utility vehicles and light-duty trucks.
Moreover, over the years, management has proved to be a great steward of capital. They have consistently returned free cash flow to shareholders through buybacks. Since FY2014, it has reduced its share count by almost half, from 33.9 million to under 18 million shares.
Weaker economic conditions mean more sales for auto parts retailers as customers own their vehicles for longer. AZO stock is a bargain at 17 times forward earnings.
On the date of publication, Charles Munyi did not hold (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.
Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.