During a recession, companies that succeed do not have the best business. Rather, the companies that are successful are those that can withstand the shakeout. Here are three names that have proven brands, proven businesses, and enough money to sustain even the longest of recessions.
Office Depot (ODT)
Businesses that service other businesses never fare too well in recessions. As companies cut costs, especially in the office supply department, Office Depot is one of the hardest hit. Fortunately for the company, it’s also sitting on an incredible amount of cash reserves at nearly $1.40 per share and a trading stock price of just $3.57. It expects to show a loss this quarter; however, it should only bleed about .14 cents per share, which isn’t terrible considering how painful this recession has been to many companies.
The stock looks poised to pop on any rebound in the market. Should corporate spending turn around, this company is ready to profit. With its expected losses of .14 per share this quarter, the company can afford to sit around for as long as 2.5 more years of the same results. At this price, ODT is a bargain should the cyclical economy decide it’s time to pick up.
Sun Microsystems (JAVA)
One of the few companies to escape the tech bubble, Sun Microsystems is unfortunately in a business that doesn’t shine in a recession. Again, with business spending practically falling off a cliff, this company took the brunt of the storm. Last year, earnings were solid and the company maintains a whopping $3.50 per share in cash. Even with negative results this quarter, the stock is a buy for when the corporate world whips out its credit card.
Take this stock while it’s cheap. At $9 per share, the stock is trading at only 2.5 times the amount of cash it has on hand. Recession can’t keep this stock down for long, and you should buy while JAVA is cheap and laugh all the way to the bank when its business picks up. This is one cyclical stock; it’s hot when the economy is booming and ice cold when recession hits, but history suggests this could be an excellent play on the rebound.
Global Industries (GLBL)
This company performs construction on oil rigs and produces products needed for oil exploration. Unfortunately for Global Industries, crude sits at near three year lows. If you think crude oil is heading higher, this is an excellent play, especially considering the $3.60 per share of cash the company has on hand.
After posting a loss last year and showing positive results in its most recent quarter, this stock could be on the rebound already. Oil’s rise from $38 per barrel to $58 certainly helped and analysts expect that the bull run in oil is far from over. This stock is an absolute bargain at $5.83 per share, with much of that valuation coming from its cash reverse. The book value for this company may very well be higher than its share price, though it’s hard to value its holdings during such a deep recession.
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{ 10 comments… read them below or add one }
I’d agree with Sun, but I have to disagree with Office Depot. Corporate spending isn’t going to grow any time soon.
given the current economic situation, does anyone have an educated opinion given the horrifying numbers of jobs lost in nov.2008, how this economy will rebound? and how long it will take to recover? im wondering if people feel like i do that given the numbers that this is a very disastrous situation and that a complete collapse is any day away?
I’ll agree with you Rugby. I think that the overprinting and debt has to implode at some point. Sucks that it’s on my generation to get out of this.
I would have never guessed that Office Depot was faring well in this recession. I was there the other day and they had nearly everything on sale. Very strange indeed.
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it is a nice post with have a nice topic.keep it up…
I doubt anything bad well happen. I think the economy will rebound and things will be fine.
Yes, the economy will rebound, but then we will have a period flat growth which will be very bad. The only way out of this mess is to inflate our currency, which will further drive down the value of our dollar.
What STOCKS do you think will rebound after the economic mess?
I bet my money on the defensive stocks like food, gas, and other essential amenities. Also, the vice stocks (alcohol, beer, cigarettes) do VERY well in recessions because people spend more money on these items during a tough economic time. Right now, the market is pretty high so it’s wise to either wait for a good long position or follow the trend and short term trade for profits.