There's nothing like a bear market to drive home the importance of investing in resilient stocks that are capable of succeeding no matter what's going on with the economy or the wider market. While it isn't realistic to look for investments that are 100% insulated from external influences, it's entirely within your control to find a few companies that are tougher than average when adversity comes knocking.
Let's take a few minutes to learn about two such businesses so that you can judge whether they might be a good fit for the more conservative portion of your portfolio.
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1. Thermo Fisher Scientific
Over the past three years, the total return of Thermo Fisher Scientific's (TMO -0.21%) stock rose by 77%, eclipsing the market's gain of 51% even in the midst of a pandemic, inflation, and a general environment of extreme economic uncertainty. To accomplish that, Thermo didn't need to do anything outside of its norm. It just continued to profitably sell goods like laboratory reagents and chemicals, cell analyzer devices, and disposable glassware to its massive base of customers in the biopharma sector -- just as it always has.
Thermo is a resilient stock because most biotech and pharma businesses depend on its products and services to do any kind of research and development (R&D) work, without which they can't really make money.
Sales to biopharma account for 55% of its revenue, which totaled $44.9 billion in 2022, and 46% of its revenue is from recurring sales of consumable goods that customers need more of in perpetuity. So even if there's an economic downturn, they'll still need to keep buying if they want to avoid work grinding to a halt. This means that Thermo's investors are somewhat insulated from fallout.
Even during the Great Recession and the financial crisis, the company continued to add to its quarterly revenue and earnings, and its quarterly profit margin actually increased from 2007 to 2010. While it's true that it has a handful of major direct competitors, like Becton, Dickinson, it's competing for a share of quite a few growing sub-markets in biopharma, and there's little to suggest that it's facing much in the way of headwinds or fierce competitive pressures.
Though its forward dividend yield of just 0.2% isn't about to impress anyone, the fact that its payout has grown by 106% in the last five years alone is yet another sign of enduring financial stability, and another piece of evidence supporting its resilience.
2. Apple
Apple (AAPL -1.32%) is a company that needs no introduction, and much like Thermo Fisher, it's one of the sturdiest stocks around.
Over the last 15 years, its quarterly net income rose each year by an extremely impressive average of 29.4%, with its annual earnings reaching a grand total of $99.8 billion in 2022. Even when the market crashed in early 2020, Apple quickly regained its footing and went on to outperform the market.
In the last three years, the total return of its shares skyrocketed by 148% thanks to consistently strong sales of its iPhones, iPads, computers, software subscriptions, and peripheral devices.
In tougher economic conditions, people probably won't buy a new phone or laptop every couple of years, but they'll surely continue to pay for their iCloud subscription to ensure that they can keep using their old devices. That's a factor supporting this company's ongoing strong performance.
Apple also has a few less-well-known factors driving success for its shareholders, starting with its penchant for buying back absolutely mind-boggling amounts of its stock using its excess free cash flow (FCF). For reference, last year it reported FCF of more than $111 billion, and in the first quarter of this year alone, it spent $19 billion on repurchasing its shares.
From its fiscal 2012 through Q1 of this year, the tech giant returned upwards of $740.3 billion to shareholders in the form of buybacks and dividend payments.
To state the obvious, that is a really stunning sum of money. It went directly to investors, and more's almost guaranteed to be on the way. If the stock falls due to market phenomena or pessimism about the economy, that just means management gets a deal when it's time to buy back more shares. The constant repurchasing activity also helps to sustain higher prices for the sake of investors.
Thanks to consistent effort with expanding its product offerings, including most recently with its foray into payments and savings accounts, Apple has a well-proven ability to bounce back and stay relevant. That's why it's a good bet for weathering most storms without its stock tanking. Of course, it's still possible that this business will take a hit if there's another unprecedented economic crisis, and eventually there likely will be.
Likewise, Apple's exposure to geopolitical instability in Taiwan is very significant as it manufactures a lot of its hardware there. But it's already taking action to mitigate that risk by relocating some of its manufacturing sites into less exposed countries like India and Vietnam, so it'll be able to weather any issues that occur in the future too.
