3 Recession Proof Stocks To Buy in September

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Market volatility has been ratcheting up, with U.S. stocks recently seeing their worst day since early Augus t. The S&P 500 dropped 2.1% in a single day and erased all the gains seen during a previous three-week rally. These moves which are increasing in voracity to the downside certainly indicate that many in the market are looking to hedge their positions, as recessionary concerns continue to pick up.

Just how steep of an interest rate cut we'll see during the upcoming FOMC meeting next week remains to be seen. On the one hand, the Federal Reserve will have to walk a tightrope - they may feel behind the curve, and cutting by 50 basis points may indeed be the best move. However, if they do a 50 bps cut, that could indicate to many in the market that a recession is indeed around the corner.

Such a large cut may, in turn, spook investors and create panic selling, creating the conditions for a self-fulfilling doom loop where we do see a recession. That's why, at least for now, I'm in the 25 basis point cut. Of course, plenty of investors disagree, with the odds of a 25 or 50 basis point cut around 50/50 at the time of writing.

That said, if we do get a recession in the next year or so, investors who position their portfolios much more defensively may outperform. Here are three such stocks I think are worth owning ahead of any additional turbulence.

Key Points About This Article:

• Recessionary bets are picking up, as the Federal Reserve's upcoming interest rate decision looms large over the market.
• With fears rising that the Fed may not be able to avoid a hard landing, here are three stocks to buy for those looking to remain fully invested.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.

Berkshire Hathaway (BRK-B)

Warren Buffett speaking at an annual meeting

Warren Buffett's success is well-known. The Berkshire Hathaway ( BRK-B ) CEO has just recently joined the ranks of a handful of individuals that have managed a $1 trillion company . That's largely due do Berkshire's core business, which is essentially providing a holding company for a range of subsidiaries in diverse sectors, though Berkshire also holds entire businesses in core economically-sensitive sectors with clear competitive advantages and strong leadership teams. Indeed, Buffett's ability to hold companies or individual stocks for a very long period of time has allowed Berkshire to produce market-beating returns over the long-haul.

Most of the companies in Berkshire's portfolio aren't the kinds of "sexy" growth businesses investors are after. However, these companies are ones that many long-term investors have benefited from owning during a number of market cycles. Companies in industries like rail, insurance and utilities are certainly among the more stable places to invest capital for a multi-decade long time frame. In Buffett's case, those are exactly the kinds of companies he wants to own over the very long-term, often deploying capital at the right times.

With Berkshire selling stakes in many of the company's largest positions, it's clear the Oracle of Omaha believes there could be more downside ahead in this market. But if we do get a recession, Berkshire's massive cash pile which is closing in on $300 billion could come in handy for some very big strategic acquisitions.

McDonald's (MCD)

A McDonald's location sign, showing a $1 coffee deal

McDonald's ( NYSE:MCD ) is among the most stable companies in the stocks market. The fast food giant's incredibly stable dividend history and decent yield appeals to income investors. However, this is isn't an exceptional fast-growing dividend paying stock many income investors are after for this reason alone. Rather, it's McDonald's long-term growth profile, and ability to grow in market environments that are less-than-conducive to growth in the minds of many investors.

The company's core strength really lies in its stance as a leading consumer defensive stock. With global diversification, McDonald's cash flow growth profile has remained relatively stable over the long-term. This has allowed the company to pay out a dividend yield of around 2.3% (around 100 basis points above that of the S&P 500) while retaining a payout ratio below 60%. If McDonald's chooses to continue its 47 year streak of annual dividend increases (which seems all but assured), there's room to do so.

For investors looking to add a stock with a consensus buy rating and some real upside in times of economic turmoil (MCD stock actually increased during the GFC), McDonald's is a company worth considering for its ability to capture trade-down share in down markets.

Barrick Gold (GOLD)

Gold nuggets on top of black sand

Founded in 1983, Barrick Gold Corporation ( NYSE:GOLD ) has become a leading global gold miner with a $34.1 billion market cap. The company is a major player in gold production, as its name suggests. However, the gold miner also has interests in copper, silver, and other energy materials. Notably, GOLD stock is up 20.5% over the past year and 21.5% over the last six months, but recently dipped 8.8% from its 52-week high of $20.89 reached on August 20.

With gold prices continuing to climb as a result of heightened recession fears, Barrick Gold is certainly a top pick many investors may want to consider right now. Those bullish on the future trajectory of precious metals prices may want to consider Barrick Gold's Q2 report on August 12. Following this report, which showed a 68% year-over-year jump in EPS despite a 6% drop in gold output, it's clear that Barrick's fundamentals are rock-solid in this period of higher gold prices. Free cash flow surged to $340 million, and the company upgraded its production guidance forecast for the year. Indeed, there's a lot to like about this company's defensive position in the face of what could be an incoming recession.

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