Equity markets have performed well this year despite several challenges, including a shaky geopolitical landscape and rising energy prices. But how much longer will this run last? Not much, according to some economists, who predict that a market downturn and a recession could happen by the end of 2027. These experts may be wrong. It wouldn’t be the first time. However, it’s still a good strategy to buy shares of companies that can navigate downturns fairly well and deliver competitive returns long after the downturn. Here are two stocks to buy that may fit those criteria: AbbVie (ABBV +0.72%) and Amgen (AMGN +0.66%).
Image source: The Motley Fool. Image source: The Motley Fool.
1. AbbVie
No company is fully immune to recessions or market crashes, but drugmakers like AbbVie are comparatively well-positioned to handle them. The pharmaceutical leader has a deep portfolio of medicines across several therapeutic areas, including oncology, immunology, neuroscience, and more.
Many of these products treat chronic or life-threatening conditions. For instance, AbbVie’s biggest growth drivers, Skyrizi and Rinvoq, target a range of autoimmune conditions. The company’s Venclexta and Imbruvica treat several forms of cancer each, while Qulipta is a migraine medicine.
These are the sort of products for which demand remains high regardless of economic conditions, allowing AbbVie to generate fairly consistent revenue and profits. Of course, the drugmaker has to deal with patent cliffs, but it has also shown that it can overcome those.
Today’s Change
Current Price
AbbVie returned to top-line growth the year following the U.S. patent expiration of Humira, an immunology medicine and once its most important growth driver. The good news on the patent front is that AbbVie won’t face significant losses of patent exclusivity through the end of the decade.
And when the next wave of major patent expirations comes, the company should be ready. AbbVie has a deep pipeline and has recently strengthened it through acquisitions. In September, AbbVie acquired Apogee Therapeutics for $10.9 billion in cash, getting access to zumilokibart, a highly promising investigational medicine for eczema.
Based on clinical trial results so far, zumilokibart could offer competitive efficacy while reducing the number of injections per year compared to many therapies in this lucrative field. Zumilokibart might fail in Phase 3 studies, but AbbVie’s deep pipeline could help it find heirs to its current biggest growth drivers, eventually allowing it to perform well over the long run.
Finally, AbbVie is a great dividend stock. It has increased its payouts for 54 consecutive years, including the period it spent as a division of Abbott Laboratories (ABT +0.90%), its former parent company. That makes AbbVie a Dividend King, or a company with 50 or more consecutive annual payout raises.
Regular dividends can help smooth out market losses during downturns and boost returns over the long run. It’s another reason why AbbVie is a great stock to buy to prepare for a market crash and hold onto.
2. Amgen
Amgen has sometimes performed well even as broader equities were losing significant value. For instance, in 2008, the company’s shares gained a little over 24% amid the major market meltdown that happened that year. The same thing happened in 2022. Amgen gained about 16% that year while equities crashed.
Of course, these past performances don’t guarantee anything. And on other occasions, Amgen couldn’t withstand market crashes. Still, the drugmaker may outperform most in downturns because it has a strong underlying business. Consider that Amgen’s revenue and earnings are growing at a good clip this year.
In the second quarter, the top line increased 10% year over year to $10.1 billion, while the company’s non-GAAP earnings per share climbed 4% year over year to $6.29. That’s a strong performance Amgen pulled off despite facing challenges from various sources.
Today’s Change
Current Price
For instance, the company’s rheumatoid arthritis medicine, Enbrel, is experiencing lower sales due to government-led price negotiations in the U.S., its most important market. Amgen also lost patent exclusivity for denosumab, a medicine used to treat certain bone-related conditions, last year.
Amgen’s ability to perform well amid these headwinds speaks volumes, making it a great stock to buy in preparation for a recession or downturn. Further, the company also has a deep pipeline and should launch important products over the next few years. One of the most promising is MariTide, an investigational weight loss therapy that could be administered monthly.
Lastly, Amgen is also an excellent dividend stock. It offers a forward yield of 2.5%, and it has increased its payouts by 152% over the past decade.
