3 recession-resistant tech stocks to buy now

A slowdown in economic growth is almost certain, and maybe, just maybe, even a recession is on the way. Why? Inflation is skyrocketing and the US Federal Reserve is raising interest rates to combat it. As a result, the interest rates on the two-year and ten-year Treasury Bills are about the same. If the two-year yield rises, a phenomenon known as “yield curve inversion” sometimes (though certainly not always) predicts a recession.

Do not panic. Instead, take stock of what’s in your portfolio and make sure the companies you own are high quality with the wherewithal to survive some hardships. (It’s a good practice at any time, but especially if a slowdown in economic growth is looming.) Right now, three contributors to Fool.com think T-Mobile USA (TMUS 1.88% ), intuitive surgical ( ISRG 1.28% )and Fiverr International (FVRR 1.16% ) fits that description. This is why.

Someone using an outdoor digital information kiosk.

Data source: Getty Images.

This telecom action may end stagflation and maybe even benefit from it.

Billy Duberstein (T-Mobile US): Inflation is high and shows no signs of slowing materially, which could force the Federal Reserve to raise rates. Both factors could greatly affect the American consumer. If that pressure leads to a recession, what stocks would investors want to be in?

Well, there are consumer staples, which consumers buy through thick and thin, but rising input costs could crimp those companies’ margins unless prices rise. Then there are also the walmartsand costco wholesales of the world, offering low-priced items in bulk, along with cheap private label brands. However, these stocks trade at very high multiples, so rising interest rates may affect their valuations.

I would argue telecommunications giant T-Mobile may be the best bet on the market to weather a recession and even profit from it. That’s because T-Mobile offers low-cost mobile plans, and for most people, mobile internet is the last thing they’ll cut out of their budgets.

Not only is T-Mobile traditionally priced lower than competitors, it has a two-year head start on the competition in 5G coverage, following its 2020 merger with Sprint. As more and more people get 5G phones, it looks like T-Mobile’s coverage and costs could stand to gain it big as consumers look for low-cost 5G options.

T-Mobile is also trying to facilitate new 5G “breakthrough apps” as it just introduced T-Mobile DevEdge, a new platform for developers aimed at making development on its 5G network quick and easy. At its 5G event on March 23, T-Mobile also announced partnerships with Red Bull and waltdisney to create immersive 5G experiences.

And 5G may not just be a mobile experience. In many areas, 5G could also be a viable new broadband technology. In fact, T-Mobile just rolled out 5G fixed broadband plans in the US, priced at just $50 a month (with autopay). That’s well below the price of traditional cable broadband.

If customers are looking to save pennies on their monthly recurring expenses, more people may be willing to try T-Mobile’s 5G broadband at a lower cost. And if the product does well, this could be a great new market for the company.

As for valuation concerns: While T-Mobile may seem expensive at 53x bottoming earnings, those earnings are misleading, as the company is still shouldering the one-time merger costs of integrating Sprint. However, those should be behind the company in the second half of this year. management sees Free cash flow going from $5.6 billion last year to between $7.1 billion and $7.6 billion this year, on track for $13 billion to $14 billion in 2023. Assuming T-Mobile meets those projections, the stock is only trading about 12 times 2023 free cash flow. So T-Mobile doesn’t have the valuation concerns that many other higher-priced consumer staples stocks do.

Overall, T-Mobile looks like an odd tech stock that should also hold up well in a recession, so it’s a buyable today.

Healthcare robots don’t mind the recession

Nicholas Rossolillo (Intuitive Surgical): Intuitive Surgical is a leader in robotic-assisted surgery. Its da Vinci surgical robot gained approval from the US Food and Drug Administration in 2000. More than two decades later, growth remains strong, both here in the US and abroad .

I’ve been getting more and more drawn to healthtech stocks lately. This is because health care in general is fairly resilient to recessions (apart from those caused by a pandemic, the complete shutdown of the economy, and the temporary closure of elective surgeries).

In addition, Intuitive has key advantages with its da Vinci surgery platform. Once a system is installed in a hospital or surgical center, it is incredibly “sticky” due to the high price of the da Vinci machine. Once a surgical team is trained to use a da Vinci robot, switching to a rival system becomes even less likely, given the time investment required to get it up and running. And after the sale, Intuitive earns recurring revenue from disposable instruments and support services.

So, recession or no recession, I think Intuitive will continue to move forward at a mid-teen percentage rate of revenue growth for quite some time. It is also incredibly profitable. The company generated free cash flow of $1.74 billion last year on revenue of $5.71 billion, a free cash flow profit margin of 30%. Steady growth and profitability is a powerful combination in times of uncertainty, and I think it will serve this stock well for the foreseeable future.

Management expects the number of procedures performed with a da Vinci robot to grow 11% to 15% this year. Add the sale of new da Vinci systems and we’re looking at another year of double-digit percentage growth. Intuitive also has an impeccably clean balance sheet, with $8.62 billion in cash and equivalents and no debt. If what you are looking for is stability, few health technologists They are more stable than this.

A winner for all seasons, but especially for market downturns

Anders Bylund (Fiver): You don’t have to be in favor of a market crash when you invest in stocks that should do well in any type of market. That’s what I see from independent marketplace operator Fiverr International.

First of all, Fiverr business is on a roll. Annual sales have quadrupled in the past three years. Every year since the company began publishing financial data, both the number of active buyers on the Fiverr platform and the average annual spend per buyer have increased by double-digit percentages. And the opportunity to continue this rocket journey is huge. The company posted $298 million in blue-chip sales last year, and its target market is estimated to be worth more than $100 billion in annual revenue from independent services, in the United States alone.

In addition to that fundamental strength, I expect Fiverr to benefit from future downturns in the national and global economic systems. The call gig economy it’s already disrupting the traditional labor market, and that revolution should only accelerate when workers find themselves with thin pockets and extra time on their hands.

And Wall Street market makers have concluded that Fiverr is absolutely reliant on a weak economy: share prices have fallen 64% over the last year. The bearish mood remains strong as nearly 16% of Fiverr stock is loaned out to short sellers. However, the company has a habit of crushing analyst estimates and sticking with bullish guidance targets.

The mismatch between Fiverr’s high performance and Street’s low expectations looks to me like a wide-open buying window, and the invitation is even more obvious if you expect an economic slowdown in the near future.

This article represents the opinion of the author, who may not agree with the “official” recommendation position of a premium Motley Fool advisory service. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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