[HN Gopher] Ask HN: What tech companies/industries will do well ...
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Ask HN: What tech companies/industries will do well in a recession?
It's been a while since the last recession. If there was another
one, which companies would do well? "Do well" could mean succeed or
grow meaningfully, or "do well" as in not be hurt as badly
Author : themoops36
Score : 108 points
Date : 2022-04-27 14:44 UTC (8 hours ago)
| dgs_sgd wrote:
| Ed tech - when people lose their jobs they want to upskill
| themselves
| zerkten wrote:
| There is no exact answer to this question, just a set of factors
| that contribute towards doing better than someone else.
|
| First, do you directly make money for a company, or directly
| reduce costs? The closer you are to core activities that generate
| income, or increase efficiency, then the more protected you will
| be from being laid off. This applies to companies too in a way.
|
| Companies need core services like email or ERP. Chat like Slack
| is now core compared to the situation in 2008. This core software
| is going to be the last thing that companies want to change. What
| they will focus on eliminating is all of the nice-to-have
| software that has been deployed in their organization. SaaS costs
| add up at the department and company levels and companies will
| look to eliminate low hanging fruit.
|
| If something has low usage numbers, that'll go. When some product
| has a nice UX, but there is an alternative within some other
| product, then the nice UX won't win out (e.g. use Jira instead of
| Asana.)
|
| These are examples of software, but the same patterns play out
| across other categories. What's worth considering, is how can
| these things come out of a recession? At the start of the
| recession, contingent staff or contractors were often let go
| before employees. As the economy recovered, hiring contractors
| was a safer bet during the uncertain window when it wasn't clear
| that we had turned a corner. SaaS started to become a viable
| option because you could get started cheaply and didn't have to
| stump up funds for implementation. We take SaaS for granted now,
| but a lot of the growth came out of the last recession when you
| could make arguments for it.
| mooreds wrote:
| +1 for being close to the money. Prefer the revenue side over
| efficiency if possible.
| epberry wrote:
| Ones that save you money: https://vantage.sh and
| https://mainstreet.com are ones I've used.
| m0ngr31 wrote:
| Video streaming
| pesfandiar wrote:
| During the 2008-2009 episode, analytics companies did well.
| Apparently a lot of their customers were interested in trimming
| the fat and needed analytics software for it. I'd guess any tech
| company that directly helps cut the enterprise costs will be in a
| good position.
| leftnode wrote:
| Home service businesses (contractors, electricians, plumbers,
| HVAC, roofers, etc). Even houses owned by banks/investment groups
| need repairs done. It's a huge industry that desperately needs
| employees.
| blihp wrote:
| These are among the first businesses to get hit by a recession.
| Sure, you may call the plumber to fix a leaky pipe but that
| bathroom remodel project is on hold. New construction, where a
| lot of contractors make the bulk of their money, also dries up.
| ushakov wrote:
| > What tech companies/industries will do well in a recession?
|
| every company that's not driven by hype (example: crypto,
| chatbots) and not focused on growth as primary objective
| sofixa wrote:
| In the (potentially) incoming recession? Anything related to the
| basics, food and military, and those serving them, are _sure_.
| Everything else - it depends.
| samfisher83 wrote:
| Faang companies are printing cash. Instead of making 50bil maybe
| they will only make 45.
| gazarullz wrote:
| faang like facebook or netflix? I think it's time people stop
| using this acronym
| screye wrote:
| FAANG companies have P/E ratios orders of magnitude higher than
| 'traditional' industries. They are expected to make a 'lot of
| money'. Making 'good money' will lead to stock crashes as we
| saw with Meta and Netflix.
| mikikian wrote:
| Sites targeting distressed or bankruptcy assets like:
| https://www.inforuptcy.com/
| DelaneyM wrote:
| "Recession" is a bit ambiguous. To identify winners and losers in
| any economic climate you need to consider the specific factors at
| play, and the winners of previous "recessions" may or may not be
| winners in the next.
|
| In this case _my_ assessment is that we're facing a prolonged
| period of high inflation partially fueled by factors which can't
| be mitigated by Fed actions (COVID lockdowns in China, global
| transportation backlogs, European conflict, food shortages) and
| perpetuated by high household savings levels. I don't think we're
| going to face significant slowdown of consumer spending this
| year.
|
| In that economic environment, consumer staples which do their own
| production and have the ability to quickly respond to inflation
| are favoured. I'm in a sector ETF for this.
|
| I also believe profitable tech which is ad-funded is at an
| advantage - anything where prices are set by auction and ROI is
| demonstrable/visible is golden, as are industries like cloud
| computing which have natural deflationary economics. This implies
| Meta/Goog/MSFT (and in this I'm betting on specific tactics and
| am choosing specific companies).
|
| Those are my bets, you should form your own hypothesis and
| extrapolate appropriately.
|
| Also note that these are systemic factors, but will always be
| dominated by idiosyncratic realities. Individual stocks are only
| loosely correlated with sector movement, if you think you have a
| winner or asymmetric knowledge about a specific company don't let
| larger trends dissuade you (or vice versa).
|
| Finally, a corollary to the above: when you invest on
| macro/sector trends, do so through sector/strategy ETFs. If
| you're investing on asymmetric knowledge or insight, invest in
| specific equities. Combine the two strategies at your peril.
| dharmatech wrote:
| > In that economic environment, consumer staples which do their
| own production and have the ability to quickly respond to
| inflation are favoured. I'm in a sector ETF for this.
|
| What are some example ETFs in that space?
|
| Commodities oriented ETFs?
|
| ---------- UPDATE ----------
|
| OK, nevermind. :-) Googled "consumer staples etf" and a bunch
| of examples came up.
|
| https://www.investopedia.com/top-performing-consumer-staples...
|
| ---------- UPDATE ----------
|
| Top 10 holdings of IYK
|
| Procter & Gamble PG 16.91%
|
| Coca-Cola KO 11.10%
|
| PepsiCo PEP 10.40%
|
| Philip Morris PM 6.95%
|
| CVS CVS 4.04%
|
| Altria MO 3.60%
|
| Mondelez MDLZ 3.40%
|
| Colgate CL 3.00%
|
| Archer Daniels Midland ADM 2.44%
|
| Kimberly-Clark KMB 2.34%
|
| ----------
|
| Consumer staples -> consumer poisons. This leads to upward
| pressure in healthcare.
| DelaneyM wrote:
| > Consumer staples -> consumer poisons.
|
| When you're sampling the top-10 you get a biased set - "sin"
| stocks usually face increased consolidation pressure
| (certainly true for PM, MO, KO). If you expand your view to a
| full breakdown, a consumer staples ETF broadly represents
| "stuff people buy at supermarkets".
|
| ETFs based on indices do not have opinions or intelligent
| design, they attempt to accurately represent a well-defined
| sector or thesis. A lot of people buy a lot of unhealthy
| stuff, so that shows up here.
|
| If this is important to you, could I suggest screened indices
| (https://www.ishares.com/us/products/investment-
| goals#/funds?...) or a social impact fund
| (https://www.ishares.com/us/products/286007/)?
| jansen555 wrote:
| whiplash451 wrote:
| Are you asking in the context of investment or job search? The
| answer may vary significantly based on this.
| thenerdhead wrote:
| Any company that has an unsexy middle of the line offering. Those
| companies usually sit on tons of cash anyway and will be fine
| through the duration.
| dvrkt wrote:
| Netflix
| egberts1 wrote:
| at $60/month? That'd be the first for me to drop, if pressed
| further.
| vmception wrote:
| Organizations with lots of cash on hand and very little
| debt/leverage.
| wintermutestwin wrote:
| That sounds right, but look at CSCO for a counter example.
| Plenty of cash, minimal debt and traded down through every
| recession.
| [deleted]
| vmception wrote:
| I didn't interpret OP's question as a stock picking question.
| More about how to weather or avoid massive layoffs. But its
| not clear what they're asking.
| omair_inam wrote:
| Because workers have more time to upskill in a recession,
| companies that offer services in this area (e.g. SIS systems,
| etc.) might also do well. From what I can recall, one of my
| former employers (https://moderncampus.com) has traditionally
| done well during an economic downturn.
| altdataseller wrote:
| Outsourcing firms like Upwork
| subsubzero wrote:
| I would say its more based on companies than industry. If the
| company is not profitable, has <6mo runway(startup) than it most
| likely will be one to avoid.
|
| Big companies that make money, google, apple, etc will be fine.
| For medium sized companies if you involved in a unit that makes
| the company money or run core infrastructure you should also be
| fine. For smallish companies if they survive you better hope you
| are single point of failure and if you left things would be in a
| bad state.
| givemeethekeys wrote:
| Large companies have rounds of layoffs to trim the fat during
| the good times. This goes into overdrive during bad times.
| nomilk wrote:
| Related question: which tech products are 'inferior goods' -
| goods whose demand rises when incomes fall
| https://en.wikipedia.org/wiki/Inferior_good
| blamazon wrote:
| Non-car modes of powered transit - small petro scooters,
| e-bikes, etc.
|
| People always need to get around in a non sweaty way but a car
| is both a lead weight financially and a potential windfall when
| car prices are artificially high.
| ThunderSizzle wrote:
| I don't see these being true unless you live in an area where
| getting around on a bike is actually realistic. Basically not
| USA, even the metro areas, except for maybe a handful.
| erdos4d wrote:
| Torrent clients and generally any open source alternative to
| paid software would be my guess.
| maerF0x0 wrote:
| how about things like intuit mint or nerd wallet where people
| will turn to try and reduce expenses?
| jihadjihad wrote:
| One might be software substitutes for physical software
| engineers. Automated QA software instead of QA Engineers, for
| example.
| jallen_dot_dev wrote:
| Pay-as-you-go phone plans. Early model phones. Phone/pc repair.
| joezydeco wrote:
| People downscale their food choices during recessions.
|
| They drop Five Guys and go back to McDonald's. Panera vs Subway,
| Chipotle vs Taco Bell, etc.
| rpx78 wrote:
| Platforms like airBnb/Uber. The house always wins.
| princevegeta89 wrote:
| Except there is no house during a recession. People don't
| travel nor look for vacation rentals to stay in.
| egberts1 wrote:
| or people look to airBnB as a cheaper alternative to hotels.
| blululu wrote:
| Except that an AirBnB now typically costs more than a hotel
| for basic travel (a private bedroom & bathroom with wifi
| and maybe some basic kitchen supplies for coffee).
|
| AirBnB also uses a bunch of dark patterns (service fees and
| taxes are not listed in the default nightly rate...) and
| you don't always get what you thought you were getting.
| I've been burned enough times with deceptive AirBnB
| listings to not trust the sticker price (hotels are
| typically less hassle).
| boringg wrote:
| Both @ IPO prices. In a recession both of their main offerings
| drop as people don't use the service - to keep their share
| prices up they need to up their rev share combined with equity
| prices dropping as a hole. Strongly disagree with this opinion.
|
| If the argument is for working at them - I think any large tech
| corp with a voluminous employee size is probably relatively
| safe (layoff risk always abound).
| ilaksh wrote:
| Military.
| beebmam wrote:
| Probably most, if not nearly all; tech is eating everything.
| wutbrodo wrote:
| I agree with you at the industry level, but a characteristic of
| a burgeoning industry is that it's overextended on the margins.
| There are plenty of individual companies that are sustainable
| during flush times but not during a recession.
| ardit33 wrote:
| From all the FAANGMULA companies, only Apple and Facebook haven't
| had layoffs during a recession.
|
| Yes, even Microsoft had some layoffs back in 2008-2009, and
| Google had some 'stealth' closures. Also they did a hire freeze
| as well back then. Just right now they laid off the GCP customer
| support team. We know all the others (Uber, Airbnb, Lyft, etc,
| had all layoffs as well).
|
| It really depends on the CEO's mentality. Some companies, even if
| their balance sheet is fine, they will use as an excuse to cut
| some fat.
|
| So far only Apple and Meta are the exceptions.
| VirusNewbie wrote:
| I'm not sure that means anything. Large companies do layoffs
| all the time, as it avoids risk of lawsuits. They often solicit
| managers to voluntarily include some of their people to be
| included in the layoffs (folks who might be PiPed, etc.) rather
| than going through a longer process.
|
| It's a really blunt instrument that I don't agree with, but at
| all of these companies there are going to be people coasting,
| and layoffs are one way to sort of make people re-interview for
| their own jobs.
|
| Source: Happened to my division at bigco, lots of people were
| RIF'ed, but then allowed to transfer to other teams, I and
| other teammates got offers from other groups only after we
| 'interviewed' with them.
| amateurdev wrote:
| Power Systems or certain companies in the healthcare space? I was
| working in a company making software for utilities and oil & gas
| companies (think competition to GE, Siemens etc). Don't think
| this will ever be slowed down or have to lay off people
| specifically due to a 2008-09 like recession
| bee_rider wrote:
| How was it? I've always vaguely wanted to work for the power
| company. Seems like it would be a pretty stable field, and in
| the end it is a product that really helps people.
|
| For a while now I've had a vague suspicion that if we poured as
| much analysis into (broad strokes) smart grid stuff as we do
| advertising/the stock market, issues like renewables'
| intermittence would start looking like less of a big deal.
| (Although I'm aware there are already lots of smart people
| working on keeping the grid reliable!)
| bombcar wrote:
| They can - but they can also be so loaded with debt that a
| slight downturn flips them over.
|
| The _company_ then goes bankrupt and continues as if nothing
| happened, but the shareholders are wiped out and the debtors
| own the company. Happens in airlines all the time.
|
| So "essentials" companies that have a low debt load may be
| interesting, especially if boring.
|
| Berkshire Hathaway may do decently well.
| bluesquared wrote:
| I'm a EE/hardware engineer, so this may be a bit different than
| a pure SWE perspective.
|
| I worked in computer hardware for oil & gas, there was a
| turndown around 2014-2015 that slowed the demand for a lot of
| our products. Not quite enough for layoffs or anything, but
| that industry can slow down quite a bit depending on market
| cycles.
|
| Healthcare is also a tricky one, I'm in that now. You'd think
| it's safe because "everybody needs healthcare", but hospital
| capital equipment sales slowed a good deal due to lots of
| elective procedures being cancelled for months on end during
| different periods of the pandemic. New product launches
| delayed, incessant supply chain headaches on everything
| electronics (and other stuff too), it's a rough time for
| low/mixed volume manufacturers like you see in most healthcare.
| tubalcain wrote:
| I suppose we could also frame the question as which tech
| companies and industries will NOT do well during the recession.
|
| I think that streaming services will not do well. People will
| return to torrenting and piracy. Same with crypto trading
| platforms. Basically any place where Joe Average can't afford to
| spend more than he has on hand. Tesla will see a big drop too, as
| people will cash out to buy their groceries.
|
| As for what will: free for the end user services that get by on
| ad revenue and data mining. Alphabet, Facebook, stuff like that.
| echelon wrote:
| > ad revenue and data mining
|
| Ad spend will go down when companies have less to sell.
|
| > I think that streaming services will not do well.
|
| Entertainment does well in time of recession. People want to
| take their minds off their problems.
|
| Most people do not know how to pirate films. Piracy won't be a
| huge deal.
|
| Netflix is losing out to Disney and HBO. Traditional media
| caught up and pulled the plug, and great content has never been
| a core part of Netflix's DNA. They're more algorithmic than
| taste makers, and unfortunately they've got a low dimensional
| projection of what people really want.
| Bjorkbat wrote:
| AI/ML is a bit of a wildcard for me.
|
| On the one hand, I'm certain many companies will be eager cut
| costs through automation. On the other, investors will likely
| grow cold if the results just can't live up to the hype fast
| enough.
| whiplash451 wrote:
| And the hype won't deliver fast enough. What has not been
| automated today will not be automated (robustly) in two years
| time.
| Melatonic wrote:
| I would disagree - when average Joe loses his job due to a
| recession they are going to need some form of entertainment to
| fill their now wide-open schedule. People here might find
| torrenting and piracy pretty trivial but the average Joe is
| going to find it a much bigger hurdle than simply logging into
| Netflix and pressing go.
| laverix wrote:
| But how does average Joe pay for the account, if the prices
| for groceries, electricity, heating and transportation
| explode? If things go really south, average joe will be happy
| if he can afford food and heat his rented flat at least a
| little bit in winter.
| Melatonic wrote:
| He probably will keep paying for a single service he really
| likes and share it with a bunch of people/family and split
| the costs. But yeah of course if it is between beans and
| rice and Netflix the person is gonna choose food. But that
| would be extreme poverty
| yywwbbn wrote:
| We already know that governments are likely to just start
| throwing loads money in every direction if they believe
| that things are going to go 'really south'.
| whiplash451 wrote:
| Average Joe will use the cheaper, ad-based plan that
| Netflix is working on.
| Robotbeat wrote:
| Torrenting and piracy will do well in part because streaming on
| Netflix now sucks compared to what it was 10 years ago.
|
| Whether Tesla does well depends on partly why the recession
| occurs. Persistent high energy costs can cause recessions, but
| high gasoline costs benefit Tesla.
| bluefirebrand wrote:
| If Tesla wasn't a luxury car brand, maybe.
|
| Most people will go for cheaper electric cars, which aren't
| plentiful but do exist.
| nebula8804 wrote:
| The three cars OEMs are capable of producing have already
| been accounted for.
| screye wrote:
| Speaking of a recession, I hope the recession isn't another
| massive redistribution of wealth into the hands of an older
| generation.
|
| Housing has continued shooting up, as those in the 30s find
| themselves with fewer assets to buy it with. The low interest
| rates amortize the costs allowing affordability, but the older
| generation still gets a massive payout. Then when the economy
| start recovering back up, the older generations find themselves
| with all of this liquidity to exploit, while the younger
| generation is stuck paying off mortgages.
|
| Housing is controlled politically, and holds safety, convenience
| and schooling hostage. It doesn't play the supply-n-demand game.
| Thus, it gets to stay unaffected by recession as long as default
| rate stay low. I am not sure what the mechanism for it is, but I
| do selfishly wish that housing prices and interest rates will
| back down to normal sometime soon.
| [deleted]
| giantg2 wrote:
| "Speaking of a recession, I hope the recession isn't another
| massive redistribution of wealth into the hands of an older
| generation."
|
| It will be. They're the demographic that has the most in their
| 401ks and the most capital/assets in general.
| yobbo wrote:
| > The low interest rates amortize the costs allowing
| affordability
|
| Negative real interest rates devalues income from work and up-
| values ownership of assets. Inflation is not in the interest of
| workers.
|
| > housing prices and interest rates will back down to normal
| sometime soon.
|
| Mortgage rates needs to rise until the real interest rate is
| positive - ie interest rate is greater or equal than housing
| appreciation.
| screye wrote:
| Oh yes, I misspoke.
|
| > back down to normal
|
| I agree. By down, I meant going back to being 2-3% higher
| than inflation and not being literally 'free money' by being
| behind inflation.
|
| > Inflation is not in the interest of workers.
|
| Agreed. I think my next sentence clarified that, but yes. In
| isolation, it does look like I am supporting inflation. My
| bad.
| konfusinomicon wrote:
| fintech SaaS companies. the banks have all the money, so those
| companies who provide services to them should thrive. regardless
| of the economy, people need bank accounts, credit cards,
| mortgages, etc. a recession just makes competition more fierce,
| and players in the vertical require technology to stay
| competitive
| throwaway6734 wrote:
| The defense sector, but you'll eat lower payments until a
| recession
| TaylorPhebillo wrote:
| I'm not totally sure, but I suspect quantitate finance/market
| makers, of which tech is a big part, would do well during
| recessions- profits there seem correlated to volatility and
| volume of stock trading, which I'd guess would be high during a
| downturn and recovery?
| [deleted]
| spaetzleesser wrote:
| A recession will probably lead to even more consolidation. The
| big companies will get bigger and smaller companies will die or
| be bought. The whole economy is increasingly favorable toward
| bigger players.
| no_wizard wrote:
| I work at a startup currently and am wondering if it's time to
| start job hunting at the big companies because I worry about
| stability. There will be some flood of labor soon I can feel it
| in the air and I want to get in before that
| UncleOxidant wrote:
| Build up your emergency fund to at least 6 months of living
| expenses.
|
| > There will be some flood of labor soon I can feel it in the
| air and I want to get in before that
|
| I'm currently still getting several recruiter emails per day. I
| realize this could change quickly, but so far we're still very
| much in the talent aquisition and retention phase (in tech,
| anyway).
| _3u10 wrote:
| It's always the time to be job hunting. Stay hungry.
| greymalik wrote:
| Big companies have layoffs.
| no_wizard wrote:
| Some also insulate really well especially with shorter
| recessions. Like Apple, or Shopify, or Microsoft. They are
| very insular in many ways
| gunfighthacksaw wrote:
| I'd argue that a startup which just got a major cash infusion
| is the best to ride out an imminent recession.
| toomuchtodo wrote:
| Keep a robust emergency fund on hand, always be networking,
| just be prepared for the separation call. Low burn rate +
| emergency fund + unemployment insurance = safety net during a
| recession. If you have any health issues you've been putting
| off having addressed, do it now while you have insurance.
| nobodyandproud wrote:
| By unemployment insurance, do you mean state run
| unemployment?
|
| Or are there reputable private insurers?
| toomuchtodo wrote:
| Yes, state unemployment systems.
| hulitu wrote:
| Support the arms industries. War is peace.
| ZYinMD wrote:
| I think the answer is Berkshire Hathaway. But the problem is
| whether you can afford to buy one share.
| missedthecue wrote:
| I knew of an online company that caters toward attorneys. They
| publish bankruptcy notices. They do very well in every economic
| downturn. But that's pretty niche isn't it.
| lamontcg wrote:
| Don't invest for the winners in the recession.
|
| Invest near the depths of the recession for the winners of the
| recovery where everything looks like its on a firesale.
|
| The problem is of course timing the bottom. And resisting the
| emotional urge to think nothing could ever recover.
|
| The 2020 extraordinarily V-shaped recovery surprised me a lot.
|
| Given that nothing financial is really popping that hard and a
| lot of the headwinds we're facing now are just high commodities
| prices, bullwhip effects from the pandemic, and China is shutting
| down again, all of those factors are likely to be temporary so
| any near-term recession is likely to be V-shaped as well.
|
| I suspect this is just a correction and we're close to maximum
| pessimism and investors should start looking for what to buy in
| the near term. And if you didn't already sell then you're
| probably too late and would be looking at locking in any losses
| that you had and missing the rebound.
|
| But this is a description of conditions as they are today, not a
| crystal ball of the future. If something detonates tomorrow
| everything could change (and literally if Russia launches some
| nukes at Kiev tomorrow everything may change in an instant -- but
| I'm more considering a financial detonation).
| maerF0x0 wrote:
| > The 2020 extraordinarily V-shaped recovery surprised me a
| lot.
|
| Printing and living on monopoly money really helped. Instead of
| running faster we simply made the ruler shorter.
| iancmceachern wrote:
| I took the question differently, but I may be wrong. I took the
| question as which tech industries will do well in the coming
| recession so as to work for them and have solid dependable
| employment during the recession, not how to invest to take
| advantage of it. I suppose I took it that way because that's my
| place in the world (a worker not an investor).
| boringg wrote:
| Any company that is pre-revenue or is subsidizing growth by under
| charging for their services will be in a bad spot (unless they
| have a long run way).
| sydthrowaway wrote:
| Hmm.. how about instacart?
| skrbjc wrote:
| "Instacart slashes valuation by nearly 40% to $24 bln"
| https://ca.news.yahoo.com/instacart-slashes-valuation-
| nearly...
|
| I'd be worried if I worked there...
| josh_carterPDX wrote:
| In every recession we have seen a big uptick in startups being
| created. If you look at the last big one in 2008 a number of
| notable startups got their start including Twilio. So I would
| imagine the same will happen if we dip into a big recession. We
| are starting to see some of that happen now. I read a report that
| in 2021 VCs invested in double the SaaS companies than they did
| in 2020. However, 2020 was a bad year for all VC funding, but it
| says something that the growth in VC backed SaaS companies grew
| so drastically while the market has struggled for the past two
| years.
| throwaway24124 wrote:
| Startup creation / funding is closely correlated with near-zero
| interest rates. When money is cheap, venture capital is more
| lucrative. This correlates closely with the early 2000s bubble,
| the 2008 crash that dropped interest rates and allowed for
| extreme amounts of venture capital, and the 2020-2021 surge in
| startup investment. Venture capital in theory becomes a far
| less lucrative choice in a high-inflation, rising interest rate
| market. While we've definitely seen a bit of a pullback in VC
| funding over the last 6 months, it remains to be seen whether
| that was another temporary dip like in Feb/March 2020 or a
| larger shift in the market.
|
| Personally, I think the entire economy has shifted to focus on
| SaaS revenue growth above all else, and it will be impossible
| to "pull back" from venture capital because of that inertia,
| but in theory based on historical trends there should be a
| pull-back.
| theandrewbailey wrote:
| We're arguably in a recession right now:
| https://en.wikipedia.org/wiki/COVID-19_recession
|
| Companies offering free services or cheap ownership of things
| should do well I think, but any company that relies on
| subscriptions or upgrades would be hit hard.
| wintermutestwin wrote:
| >any company that relies on subscriptions or upgrades would be
| hit hard.
|
| Fingers crossed that this would reduce the obnoxious trend of
| pay a sub for locally run SW. I recently looked in to apps that
| would help my workflow out on MacOS and all the ones that might
| have helped were leachware.
| nightski wrote:
| Usually it's defined as two quarters of negative GDP growth
| which we haven't seen since the beginning of the pandemic.
| boringg wrote:
| That's the technical definition - though with our robust
| demand for labor participation right now we will blow though
| any technical recession back to growth unless global
| macroeonomic situation deteriorates heavily
| afpx wrote:
| Why arguably? I thought a recession just had to meet a certain
| criteria.
| dragonwriter wrote:
| > I thought a recession just had to meet a certain criteria.
|
| (1) the actual criterion is "NBER names it a recession, which
| usually happens significantly retrospectively, and start and
| end dates are often adjusted after initial determination."
|
| (2) the casual rule of thumb criteria, which is more
| objective at the starting end ("a period starting with two
| consecutive quarters of negative economic growth and
| ending...sometime later") can also only be applied
| significantly retrospectively with regard to the starting
| point.
|
| So, yes, under either standard, whether or not we are
| _currently_ in a recession is generally an assessment made on
| the basis of trying to predict the future.
| whiplash451 wrote:
| Companies that make it easier/faster to onboard new customers.
| contingencies wrote:
| Anything with solid fundamentals based on a legitimate,
| defensible USP or captive audience within a sector having
| recession-proof demand.
|
| Food, drugs and administration.
|
| Add to that deep science and technology ventures that would do
| well anyway and don't care if it's a recession.
| cj wrote:
| Someone from Wells Fargo was on CNBC earlier this week. I liked
| his viewpoint:
|
| They're bullish on a subset of tech that's specifically focussed
| on efficiency and process automation.
|
| I think the same category would do well in a recession. If money
| is tight, you'll trim down your workforce and you'll cut out
| "nice to have" goods and services from your budget, but you
| probably won't cut services/tools that help you get things done
| faster with fewer people.
| mistrial9 wrote:
| business schools have a name for this ... high beta or
| something like that .. it literally is the sector of business
| that does well with massive unemployment and similar.. shopping
| clubs with lower prices for members are one example.
| heurist wrote:
| It varies depending on the context of each recession. For the
| likely upcoming recession, energy/industrial/agriculture/real
| estate. In other words, hard assets, manufacturing, and
| commodities.
| thisisnico wrote:
| How does real estate make sense when interest rates are rising?
| skrbjc wrote:
| If there is a softening in real estate prices, coupled with a
| slump in securities, those with cash may want to put their
| money in real estate in the hopes of seeing a good returns
| when the recession turns around.
|
| Even with rising interest rates, if someone locks in a loan
| where they can break even with renters, they can sit on the
| property waiting for the market to recover.
|
| This looks particularly attractive in the scenario where high
| interest rates combined with a recession creates difficulties
| for many people to purchase a home, in which case they will
| rent and be paying off someone else's loan/giving them a
| return on their invested cash.
|
| Unlike companies, property doesn't go bankrupt. It can
| devalue, but there is often inherent value in the fact that
| it can be rented out, so there is decent stability. I guess,
| though, if there is a major regional shift where the property
| is located, like a manufacturing plant in the midwest
| shutting down, there could be a drop in housing prices and
| rental demand that would be very difficult to recover.
| blululu wrote:
| Any citations or rationale for this? _Real Estate will have to
| deal with exorbitant valuations and actual interest rates for
| the first time in a decade._ Agriculture makes sense (people
| need to eat just as much now as ever and there are some global
| supply issues which will help producers in certain countries).
| _Industrial (this is too big to call a sector). Automotive will
| have a tough time as consumer spending drops and loans start to
| actually cost money. Semiconductor is a crap shoot (a lot of
| uncertainty). Aerospace is looking grim, but government support
| is typically forthcoming._ Energy. The forecast is bright for
| energy right now, but we are currently in a moment of high
| inflation, low unemployment and a war involving a large
| petroleum exporter. If unemployment rises, then energy becomes
| less promising. Times are good now but not always.
|
| On a historical note, I would add: Biotech: Development times
| are long. Products will come online that were developed during
| the peak. Also startups become more affordable when competing
| industries flag. Entertainment: the movie business has
| historically weathered most recessions pretty well. They can
| release things that were already made during the fatter years.
| Education: Historically this has done well during recessions
| (people who lose their jobs go back to school). Unclear if this
| will be as likely at this stage since the prices are not
| exactly favorable.
| enjoyitasus wrote:
| Not hurt badly: Already free cash flow positive ones.
|
| Success or Grow meaningfully: not sure. There's also other risks
| (geopolitical, supply chain). It also depends on what it means by
| growth. Growing revenue? Is success measured by external measures
| (stock price) or other intrinsic factors (profitability)
| yobbo wrote:
| Anything that assumes low interest rates might be negatively
| affected. Capital intensive things based on renting/leasing
| (e-scooters?) are in the cross-hairs.
|
| Credit/pay-later services will have greater credit losses, higher
| risks and higher rates.
|
| Viewing hours on ad-based tech might not be negatively affected,
| but that doesn't translate linearly to revenue.
| UncleOxidant wrote:
| Probably military-related will be the most insulated in the
| upcoming recession given the current events in Europe.
| throwaway4good wrote:
| None. Tech is highly cyclical.
|
| Maybe some are closer to government spending which maybe will
| rise in a recession but they will all be hurt.
| boole1854 wrote:
| During the 2007-2009 recession, I worked for a software
| development company that provided custom software development
| services to local and state governments. My understanding was
| that their sales rose during the recession because replacing
| government agency staff with our software was a cost saving
| measure.
| bush-bby wrote:
| Any company who's customer is the government. There's only one
| entity that spends money in a recession, and that's the
| government. Safest job you could have is one working for the
| federal government. Everything else is speculative and subjective
| to whatever is influencing the economy at any given point.
| maerF0x0 wrote:
| > There's only one entity that spends money in a recession
|
| in a recession consumers still spend, but they often shift from
| high price to lower price.
|
| iirc it's a depression where things get really vicious cycle
| w/o gov't
| giantg2 wrote:
| I would add that industries that contract with or supply tools
| for the government work would be good. Things related to
| infrastructure would likely be good. However, they already had
| an infrastructure bill and companies like CAT might be over
| bought.
| kodah wrote:
| Companies that cater mostly to luxury clients
|
| Anything energy related.
|
| Geography also plays an important role. Places like the valley
| saw very little impact while the place I was living at in the
| South basically had it's software ecosystem gutted. It did bounce
| back within a year though, so just make sure you have enough
| funds to ride a recession out in the worst case.
| spenvo wrote:
| > Companies that cater mostly to luxury clients
|
| Nah - look at what happened to the Boating industry in 2009.
| The values of jetskis, sailboats, etc took a major hit as
| demand dried up. Boats are considered luxury items
| kodah wrote:
| You have a valid point, I was thinking luxury retail.
| bdamm wrote:
| Why would luxury retail be a good harbor in a recession?
| Usually luxury spending goes down.
| vilius wrote:
| Depends on the luxury level. At the very top the customer
| base consists of the most recession-proof people in the
| World. I assume they just carry on with their habits
| recession or not.
| kodah wrote:
| I don't think that's true. I worked for a luxury retailer
| right after 08/09 and I looked at their revenues. They
| were about even, if not moderately higher. I went to work
| for another shortly after that, and it was a similar
| story. Now, net sales may go down, but luxury retailers
| have a pretty wide latitude in what they sell their
| products for because they're often artificially
| controlling inventory (similar to the way Nintendo does).
| I think that's what really affects the bottom line.
| achillesheels wrote:
| There is a significant population on Planet Earth that
| are "permahedged" from any material anxieties. Clearly,
| we are talking about annual consumption trends of $500K
| per individual, and not in the luxury yacht race. (They
| likely already have access to one if needed).
|
| This is the market to cater to. The question is: _with
| what truly novel good?_
| neverartful wrote:
| I would think the important distinction would be luxury
| products that cater to the extremely wealthy (as opposed to
| luxury products bought by people that can barely afford it).
| stickfigure wrote:
| What kind of luxury products cater to only (or even
| primarily) the extremely wealthy? Superyachts, airplanes,
| maybe some exclusive villas/hotels, what else? Even
| supercars are bought by the merely "very" wealthy, who may
| be affected.
| neverartful wrote:
| I don't entirely know because I'm very far from being in
| that demographic. Despite that, I'm sure that there are
| some super expensive luxury home furnishings.
| bluetomcat wrote:
| For a watch analogy, consider Tissot vs Omega. The former
| is considered an "entry-level luxury" brand with many
| offerings around the $1000 mark, while the latter is a
| true luxury brand with most offerings in the range of
| tens of thousands of dollars. Pretty much any broke
| person can get a Tissot to appear well-off, if they want
| it hard enough.
|
| For a car analogy, consider BMW vs Aston Martin. Many
| people in an unfavourable financial sitation can get a
| well-specced 3-series and appear well-off, while a $200k
| DB11 is well out of reach for most "pretenders".
| stickfigure wrote:
| Hmmmm... I'm not terribly familiar with watches, but a
| $200k car is well within the reach of most people with 7
| or low-8 figure net worth. Those people aren't so wealthy
| that their spending habits are recession-proof.
|
| What percentage of Aston Martin buyers are 7-figure
| buyers as opposed to 9-figure buyers? I'm _wildly_
| guessing it 's a big percentage, since there just aren't
| as many 9-figure buyers? Do we have any way to know?
| [deleted]
| lghh wrote:
| > Anything energy related.
|
| The oil and gas industry would say otherwise.
| throwaway4good wrote:
| No energy will do badly; go back to 2008 and see what happened
| to energy companies after oil had its 150 USD price spike.
| haskhell wrote:
| One I've yet to see mentioned here is Security.
|
| It's an industry built on top of a cat and mouse game and so will
| always be required in some capacity, and things like breaches and
| fines are recession invariant.
|
| Skimp on security at your own risk.
| darksaints wrote:
| Telecom and Military
| aaronrobinson wrote:
| Look for companies and industries that can pass rising costs onto
| customers more easily. So typically staples over discretionary.
| Fuel, food, medicine.
| laverix wrote:
| Just have a look which companies did good during corona, or
| which businesses were not affected by the lock down. Those are
| the real essential ones, which will be safe in a recession.
| reducesuffering wrote:
| Walmart barely had even a hiccup.
|
| https://finance.yahoo.com/quote/WMT/
|
| Look at the 5y chart and see if you can even tell when the
| 35% drop to the rest of the stock market was.
| whiplash451 wrote:
| This is a very different setup than 2020. Governments are
| done dumping trillions of dollars on the problem.
| roland35 wrote:
| If you're wondering what to invest in, I would stick to
| VTI/ITOT/etc. Some people will definitely be lucky but nobody
| knows nothing!
| bombcar wrote:
| Depends on what you're looking for? Stability in employment? Hard
| to say, even successful companies can have rounds of layoffs
| during a recession.
|
| As for investing, you're probably best off with the bog-standard
| 'invest in everything' index fund - during a recession is when
| you get to pick up shares at lower prices, but it's hard to time
| the bottom.
|
| Even "big names" like Berkshire can be affected by a recession.
| mateo411 wrote:
| Why has it been a while since the last recession. Wasn't there a
| recession in 2020 due to the pandemic?
| _3u10 wrote:
| What do you mean by well? Like stock increases, profitability,
| etc?
|
| I guess what I'm asking is are you looking for stocks to invest
| in or a job to ride out the storm kinda thing?
| bityard wrote:
| If anyone could predict this with any reasonable accuracy, there
| would never be another recession. Ergo, there is no answer to
| this.
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