Best Depression Stocks

The post Best Depression Stocks by Sarah Horvath appeared first on Benzinga. Visit Benzinga to get more great content like this.

Investing during a period of economic depression or recession can be daunting. However, choosing the right depression stocks can help you weather a period of uncertainty and protect your financial interests. Today, we’ll be taking a look at a few stocks you may want to consider investing in if you believe that the market will take another downturn. 

Quick Look at the Best Depression Stocks:

• VAALCO Energy, Inc.
• Synopsys
• Netflix
• Campbell Soup
• IBM

Overview: Depression Stocks

A depression is a period of extreme economic downturn that often lasts for several years. During a depression, prices and world trade fall, unemployment rates rise and the economy sees a consistent negative gross domestic product (GDP) growth. Many economists define depression as a drop in real GDP that exceeds 10%. A depression is a more severe form of a “recession,” which is usually defined as 2 consecutive quarters of decline in quarterly real GDP. A recession may lead to a depression if the recession goes on for at least 2 years.

Though the U.S. has experienced several recessions, there has only been 1 major depression. Often referred to as “the Great Depression,” the stock market crash of October 29, 1929, caused the GDP of both the United States and foreign countries to decline sharply. GDP fell by an estimated 15%, crop prices plummeted over 60% and unemployment rates rose to 25.6% during the peak. 

While the depression caused many companies to go out of business as layoffs were made and consumers tightened their belts, some stocks survived — and a few even increased in value. Many of the stocks that rose during the Great Depression were defense stocks like Electric Boat, now a defense subsidiary of General Dynamics (NASDAQ: GD). This was because the U.S. was gearing up to enter World War II and drastically increased its defense budget. 

We can learn from the innovation and commitment to versatility that these companies showed to predict which stocks will best survive through future economic downturns. 

Best Online Brokers for Depression Stocks

No matter if you’re searching for long-standing stocks to protect your investment during the next depression or you’re only interested in stocks under $5 to day trade, the most important tool at your disposal is a reputable brokerage account. If you aren’t sure where to open an account, consider a few of our top choices below. 

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Best For

Active and Global Traders

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get started securely through Interactive Brokers’s website

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Active and Global Traders

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Interactive Brokers is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. You can buy assets from all around the world from the comfort of your home or office with access to over 150 global markets. Options, futures, forex and fund trading are also available, and most traders won’t pay a commission on any purchase or sale.  

IBKR is geared primarily toward experienced traders and investors but now with the availability of free trades with IBKR Lite, casual traders can also acclimate to IBKR’s offerings.

Best For

• Access to international markets
• Active traders
• Detailed mobile app that makes trading simple
• Wide range of available account types and tradeable assets

Pros

• IB SmartRouting provides significant price improvement vs. industry
• Fractional trading allows investing regardless of share price
• Industry’s lowest margin rates
• Earn more by lending your fuly-paid shares

Cons

• Beginner investors might prefer a broker that offers a bit more hand-holding and educational resources

Best For

Leveraged Trading

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get started securely through Plus500’s website

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Disclosure: 82% of retail accounts lose money

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Leveraged Trading

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82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Plus500 is an online CFD broker focusing on contracts for difference (CFDs). CFDs are similar to binary options in the U.S. where traders take all-or-nothing speculation on the prices of certain securities like indices, commodities or currencies. While not legal to trade in the U.S., CFDs are legal in many jurisdictions across the globe and Plus500 offers a wide array of tradable markets using these instruments. 

Plus500 doesn’t charge commission and only profits off the spread, which is the difference between the buy and sell price of a specific security. But Plus500 is not a broker for beginners — the education materials are sparse and CFDs are risky derivatives capable of sapping out all of an investor’s capital. Only trade these instruments if you understand how they operate and the risks involved with buying them.

Best For

• Traders looking for a smooth mobile experience

Pros

• Great mobile app
• Low spreads and commissions
• Unlimited demo account

Cons

• Only derivatives are available
• Not open to U.S. residents

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Trading Ideas

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get started securely through public.com’s website

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Trading Ideas

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Public is the only investing platform that lets you trade stocks, ETFs, crypto, bonds, options and alternative assets—like fine art and collectibles—all in one place. Public also provides access to custom company metrics, live shows about the markets, and insights from a community of millions of investors, creators, and analysts.

Today, Public provides more ways to create a diversified portfolio than nearly any other online broker. Members can engage in sophisticated investing strategies and access a wealth of investing insights—from company-specific analysis to live audio shows and town hall-style Q&As. In addition, Public offers a premium membership tier with unique company KPIs, detailed performance metrics, and institutional-grade research. 

 

Best For

• Stock and ETF investors
• Crypto investors
• Investors looking to diversify with alternative assets or bonds and options

Pros

• Commission-free stock and ETF trading
• Fractional share investing
• Advanced data, tools, and insights with Public Premium

Cons

• You can’t transfer crypto to another wallet
• No mutual funds or precious metals
• At this time, only offers individual brokerage accounts and not IRAs

Best For

Commission-Free Mobile Trading

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get started securely through Robinhood’s website

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Commission-Free Mobile Trading

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Robinhood is a popular trading platform known for its commission-free trades and user-friendly mobile app. Ideal for novice investors, Robinhood makes it easy to buy and sell stocks, ETFs and cryptocurrencies. The platform offers a straightforward, no-frills experience, making it accessible for users new to investing. With features like fractional shares and a sleek interface, Robinhood lowers the barriers to entry for investing, allowing users to start with just a few dollars. It lacks the advanced tools and research options that more experienced investors might seek. Overall, Robinhood is a great choice for beginners seeking a simple way to invest.

Best For

• Beginners looking for simplicity
• Mobile-first investors
• Commission-free trades

Pros

• User-friendly mobile app
• Instant double
• Cash management
• Access to cryptocurrencies

Cons

• Limited research tools
• No mutual funds available
• Basic customer support options

Best For

Active Short Sellers

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get started securely through TradeZero’s website

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Active Short Sellers

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TradeZero is an online broker and free stock trading platform that provides everything you need to successfully share and trade, including round-the-clock customer support. TradeZero provides four different trading state-of-the-art software programs with its services, a locator for sourcing shares for shorting, commission-free trades, and real-time streaming, to name a few of the features promoted on their website. The software is a unique and (potentially) affordable option for anyone interested in stock trading.

Best For

• Traders seeking high transparency and mobility in a stock trading program
• Those attracted to commission-free trades
• Those seeking a free version of a high-quality trading program

Pros

• 24/7 live customer support
• Uses ZeroWeb technology, a powerful level 2 online platform with direct market access
• Mobile app allows users to access stocks and trade in real-time while on the go

Cons

• Enforces Pattern Day Trading restrictions (accounts need to maintain a daily equity balance of at least $25k)
• Mobile app could offer more features

Features to Look for in Depression Stocks

Not every stock is equally as equipped to handle a depression or recession. By examining the aftermath of the stock market crash of 1929, we can identify a few key characteristics of companies that survive periods of economic uncertainty. If you’re looking for investments for the next depression, you might want to consider stocks that exhibit these fundamental qualities.

• A long history that spans multiple markets: You won’t find many stocks under $20 on our list of the best stocks to survive a recession. Companies with long histories that have withstood both bull and bear markets are more adequately equipped to handle a new period of depression when compared with new companies and those with a negative earnings per share value.    
• Innovation and quality: During the depression that began in 1929, companies like Electric Boat and Bulova Watch were able to stay afloat in part due to their reputation for creating quality products and devoting a large percentage of their budgets to cutting-edge innovations. Search for companies with large research and development budgets and that make efforts to keep up with the changing tastes of the modern consumer. These companies are more likely to have the tenacity needed to make it through a depression.
• Wholesale and discount retailers: Another sector that tends to do well during recessions and depressions is the discount and wholesale industry. During an economic downturn, unemployment rates and consumer confidence both have a tendency to plummet. This means that discount retailers are at a unique advantage as families cut back and save as much money as possible. 

Preparing for Economic Uncertainty 

Though many companies lose value during economic depressions, downturn can also present a great opportunity to pick up stocks below their fair value. Some of the world’s most successful investors (including Warren Buffet and John Templeton) used periods of economic downturn to enhance their portfolios and bring their investments to new heights. The key to successfully investing through a depression is to choose stocks with rock-solid company fundamentals. From providing a unique value to customers to continuous innovation, the companies that survive depressions know how to adapt to a changing market. 

Frequently Asked Questions

The post Best Depression Stocks by Sarah Horvath appeared first on Benzinga. Visit Benzinga to get more great content like this.