Bear Markets and RecessionsWhile bear markets and recessions are two different things, the two are intertwined. Bear markets usually happen as a result of a slowing economy, which often becomes a recession. For this reason, in this post I’ll mix references to the bear market that was in full force the entirety of 2008 with the recession which overlapped with the bear market and financial crisis. Read my related post How to Know If Stocks Will Go Up or Down.
Shopping Habits During RecessionsI recall from prior bear markets that the stocks of companies that sell very low priced products, such as Dollar Tree, tend to hold up better in bear markets. This is because people who bought medium priced products before the related recession switch to lower priced products. And low net worth consumers who already bought low priced products continue to buy low priced products during recessions.
Consumer Staples During RecessionsThere are certain things that humans need to maintain a quality life even during recessions, such as toothpaste and food. Such items are known as consumer staples. The stocks of companies selling consumer staples tend to drop the less than sectors during bear markets and related recessions. For example, during the dot.com stock market crash from March 2000 to October 2002, consumer staples actually rose 1.2% amidst the falling overall stock market. Consumer staples didn’t do as well in the financial crisis from October 2007 through March 2009. The consumer staple category fell a huge 28.5%. This sounds bad until you remember that S&P 500 dropped over 56% in that time frame. Selling consumer staples is a good reason several of the stocks that rose in 2008. Read my related post What Goes Up When Stocks Go Down?
Stocks That Went Up in 2008 and WhyThe following stocks went up in 2008 for various reasons. You’ll notice sector themes but a few surprises, too.
Companies That Sell Low Priced Products
Ross Stores – ROSTRoss stores rose 17.6% in 2008 as consumer’s cut their spending on clothes and household items by shopping at this discount retailer.
Walmart – WMTWalmart was up 20% in 2008 outperforming the S&P 500 by 58.5%. This stock falls into the category of selling low priced products as explained above.
McDonald’s – MCDMcDonald’s rose 8.5% in 2008 beating the S&P 500 index by 47%. Their solid dividend was given credit for the stock’s good performance. It makes sense that diners saved money by moving from fuller service restaurants to cheaper McDonald’s. Revenue and income both grew in 2008. People must eat to live, and they eat cheaper food during bad financial times.
Dollar Tree – DLTRLike Walmart and Ross, consumers shopped at lower priced stores. Dollar Tree’s stock returned 60.8% in 2008 beating S&P 500 stocks by 99.3%. The company doubled the store count accepting food stamps which helped increase store traffic and thus, sales.
Consumer Staples Stocks That Rose in 2008These companies provide products and services consumers just can’t do without, even after cutting spending.
Church & Dwight – CHDChurch & Dwight had a total return of 4% in 2008. This consumer staple company sells indispensable product names including Arm & Hammer, Oxiclean and Trojan (uh-hem). Sales grew in both 2008 and 2009 for this dividend paying company.
AutoZone – AZOIn most of America, we must have our cars. But AutoZone can also fairly be called a countercyclical company. Like me, you may remember when many older cars were on the road for several years after the 2008 recession as consumers cut back on major purchases. (That’s when I bought our two “new” used cars!) The automakers were suffering but AutoZone was doing just fine selling parts to keep those older cars running. It also helped that AutoZone regularly repurchased shares of it’s companies. This would support falling prices. And it also allowed the company to buy it’s own shares at cheap prices. By the way, now, I’ve noticed sparkling new luxury cars are plentiful, at least in Austin. It’s enough to make me wonder why someone hasn’t created a used car indicator to predict bear stock markets.
H&R Block – HRBDeath and income taxes are a fact of life. In 2008, tax preparation was another thing US consumers couldn’t forego even during hard financial times.
Strategies That Increased EarningsSome companies were just smart despite the recession. Dollar Tree and AutoZone took steps to increase stock value in 2008. Here are two more companies that did, too.
Budweiser – BUDBudweiser was up 39.4% outperforming the S&P 500 by 77.9%. Budweiser is another company that had triple benefits in 2008. First, people drink more to numb the pain during bad times. Second, Budweiser is cheap. My guess is that many more expensive imported beer drinkers switched to Bud. Third, Budweiser bought Anheuser-Busch, thereby increasing their market enormously.
Hasbro – HASIt surprised me to find that Hasbro went up in 2008 since children’s toys are not a major priority. Toy maker Hasbro rose a very respectable 16.8% in 2008. It may have not been so much that people buy their kid’s toys no matter what as other factors. During the year they acquired Cranium and signed an agreement with Universal Pictures to produce several films. They also had good performance from their licensed brands. Plus, like beer, movies are a great escape during bad times. And it’s cheaper to watch a movie than many other forms of entertainment.
Pharmaceutical StocksAmericans need their medicine, perhaps to counter all the increased hamburger and fries consumption in 2008. And again, the fact that insurance companies (or the government) pay for most medicine helps sales during recessions. (What an interesting society we live in.)
Amgen – AMGNFor example, Amgen was up 24.3% beating the S&P 500 by 62.8%. Revenue was up 3% in 2008 since consumers need medicine regardless of the economy. Amgen, however, smartly bought back their stock shares during the financial crisis helping boost the stock price. Amgen’s stock rose in 2008 due to both the demand for medicine and the share buybacks.
Celgene – CELGCelgene’s revenue grew 59% in 2008 demonstrating again that medicine is one thing consumers won’t go without.
Gilead – GILDHere’s another case of people requiring medicine even when times are hard. I did notice that in 2006 Gilead bought both Corus Pharma and Raylo Chemicals. In 2007 they entered a licensing agreement with Parion for respiratory therapy products. Like most of the companies here, management was actively taking steps to improve revenue despite the recession. Read my related post How to Evaluate an Investment.
ETF’s That Went Up in 2008Picking individual stocks likely to do well in a bear market or recession can be like picking a needle in a haystack. Picking a sector ETF (Exchange Traded Fund) can be an easier investment to make ahead of recessions. ETF’s can be bought and sold in your brokerage account just like stocks making them an excellent stock alternative. ETFs also provide instant diversification which lowers the investment risk that comes from a single stock. Since stocks as a whole were down in 2008, stock ETFs were down with the exception of short stock ETFs which are for very advanced investors only and not covered here. But there are ETFs in other sectors that did extremely well in 2008 as addressed next. As long as you’re looking at stocks that went up in 2008, you may want to check out these defensive sector ETFs. Read my related post What Are the Risks of Bonds?
Treasury Bond ETF’s in 2008Treasury bonds and gold based ETFs tend to do well during stock bear markets. This makes these sectors a good place to begin your research for investments that did well in 2008. For example, in 2008 Vanguard Extended Duration Treasury Index, EDV, returned a huge 55.46%. This ETF tracks a zero coupon extended-duration US Treasury bond index. Another plainer vanilla Treasury bond ETF that was up in 2008 was TLT, the iShares Barclay 20+ Year Treasury Bond ETF. It returned 33.77%.
Gold in 2008Gold is often a good hedge during recessions and related bear markets. While there are individual gold stocks, there are also gold ETFs. For example, the gold ETF, IAU for iShares COMEX Gold Trust, had a return of 5.42% in 2008.
Global Bonds in 2008 and 2002As long as we’re looking at ETFs and stocks that went up in 2008, I’d be remiss if I didn’t at least mention what global bonds did in the past 2 bear markets. Interestingly, in both 2008 and 2002, global bond indexes went up brilliantly in addition to Treasury bonds. ETFs exist to represent global bond indexes, too. In comparison to stocks, in 2002, the Russell 1000 large cap growth stock index had a return of -27.88%. JPMorgan Global Government Bond unhedged index returned 19.37% that same year. Then in 2008, the Russell 1000 large cap growth stock index had a return of -38.44% while the JPMorgan Global Government Bond Index (unhedged) returned 12.00% that same year. Having shared this, and while not claiming to be an expert on global bond markets, I’ll say that global bonds seem to be in a different situation that they were in 2002 and 2008. As always, research carefully before making any investments, as nothing here is meant to be personal financial advice. Read my related post How Will a Stock market Crash Affect You?
Summary for Stocks That Rose in 2008The stocks that went up in 2008 fit three major categories:
- Consumer staples or mandatory products and services
- Companies that strategically increased shareholder value
The information on this website is for education only and is not to be construed as personal financial advice.