In a downturn, would you invest in tech stocks? Although it seems risky, several tech firms have historically made excellent recession investments. When the COVID-19 epidemic struck North America in March 2020 and resulted in extensive lockdowns, tech stocks were among the first to suffer losses. In contrast to other stocks whose fundamentals were impacted by shop closures, they later rebounded quicker and better. Additionally, during the 2000–2002 dot com boom, tech stocks experienced the most losses of any market sector. However, they eventually experienced a tremendous recovery, generating an 810% return in under two decades.
In this article, I will explore two tech stocks that could be good buys in today’s tech-led bear market and possible recession.
Constellation Software Tech Stock
Mark Leonard created the Canadian technology business Constellation Software (TSX:CSU). Being the “best buyer of tech companies in the world” is Leonard’s ambition. He has so far shown himself to be a respectable contender for that position. CSU has bought hundreds of medium-sized businesses since becoming public in 2006, and its stock price has increased by 11,543%. It’s been a fantastic run.
What makes Constellation Software such a good recession buy specifically?
It comes down to the business strategy of CSU. or, more precisely, the unique business strategies employed by the companies in its portfolio. Many internet companies sell advertising space to businesses or “pleasure products” (also known as “discretionary commodities”) to consumers. During recessions, sales of both of these categories of services frequently decline. The situation is the exact reverse with Constellation’s businesses.
Constellation purchases large corporations that supply essential software to commercial and governmental organizations. The portfolio enterprises of CSU are essential to local businesses, government agencies, and law enforcement. These are vital businesses and institutions that won’t fold just because of a downturn. Therefore, it should not be surprising that CSU’s most recent financial report, which showed a 33% increase in revenue and a 28% increase in profitability, exceeded expectations.
Apple Tech Stock
Now let’s turn to the US and look at Apple (NASDAQ:AAPL). Apple is a remarkably tough business that has successfully survived numerous recessions throughout the years. When the American financial system was on the verge of collapsing in 2008, Apple’s sales and profits both surged by high double digits. In 2020, when the COVID-19 epidemic brought on a recession, it was comparable. People just seem to enjoy purchasing Apple things, regardless of the state of the economy.
Apple had a particularly excellent quarter last quarter, with 8% revenue growth and a little increase in earnings. In the same time frame, the majority of other tech companies experienced sluggish revenue growth and negative earnings growth. The release of Apple’s iPhone 14 was a huge success, spurring a flood of purchases that increased Apple’s revenue significantly. Due to its resilience, Apple is a tech stock that should be purchased even during severe recessions.
Recessions are frequently regarded as terrifying, and they are terrifying if you own low-quality assets. Recessions can lead to the bankruptcy of unprofitable businesses. With excellent stocks, it’s exactly the contrary. They benefit from the turmoil that drives others to break because they are tough, powerful, and profitable.