Amazon (AMZN -0.68%) may be one of the world’s largest and most diversified companies, but shareholders have taken a beating in the current bear market, which has sent its shares sliding over 30% so far this year. And with inflation and fears of a recession clearly in view as strong headwinds to many consumer-oriented businesses, investors seeking shelter from the storm may need to rotate their portfolios into safer stocks if they haven’t already.
In that vein, below is a trio of companies whose business models are likely to make them more resilient against the toxic cocktail of economic forces at play. What’s more, all three have outperformed the market — and Amazon — over the past 12 months, so let’s take a closer look.
Steris (STE 1.06%) makes and distributes the disinfection equipment and sterilization goods that hospitals worldwide use to protect patients from contagion, and it’s a safer stock than Amazon as a result. Unlike the random knickknacks you can get delivered to your door via Amazon Prime, Steris’ customers simply can’t function without its products. Imagine a hospital trying to provide care without a vast supply of sterile wipes and recently disinfected instruments.
As a result of these must-have products, the company’s revenue is highly recurring with 70% of its $2.8 billion in sales to healthcare customers coming from consumables or services in its fiscal 2022. And it also sells to customers in the life sciences and biopharma industries since researchers and pharmaceutical manufacturers have significant needs for sterilization technology as well.
There’s no end yet in sight for Steris’ growth as more and more medical procedures are occurring each year. Looking out ahead, management expects double-digit earnings per share (EPS) growth and mid-to-high single-digit revenue growth. Of course, that’s slower than what Amazon will probably swing, but at least investors can appreciate that the business’ base of revenue isn’t subject to potential erosion by poor consumer sentiment.
2. Abbott Laboratories
You may have heard of Abbott Laboratories (ABT -0.21%) thanks to its recent troubles with safely manufacturing enough baby formula to meet demand, but its product offerings are far more diverse than nutrition solutions alone. It develops and sells everything from BinaxNOW rapid antigen tests to generic medicines and even medical devices for diabetes and chronic pain management.
Importantly, its mix of products includes those for which there will always be demand, including baby formula as well as innovation-driven products like glucose monitors, where it can capture more growth. And with trailing 12-month revenue of more than $44.5 billion, the company operates at a global scale that few other healthcare enterprises can match.
In comparison to Amazon — which pays no dividend — Abbott maintains a longstanding and ever-increasing one that is enabled by its persistently growing free cash flow (FCF). And while Abbott’s annual FCF rose by 158.5% over the past five years, Amazon’s fell by more than 422%. In the same period, Abbott grew its dividend by 158%. Therefore, even when its share price is falling, investors still get the benefit of a small payout, and Abbott has continually been hiking that payout for the last 50 years.
All of this points to Abott Laboratories’ longstanding viability as a solid investment.
3. Costco Wholesale
Costco Wholesale (COST 1.33%) and Amazon both target some of the same segments, like consumer goods. But while Amazon relies extensively on its delivery trucks and distribution infrastructure, Costco relies on its warehouses, which require people to pay for a membership to access.
Costco’s pitch is that customers will get a much better deal on groceries its warehouses than anywhere else, even including membership fees, which totaled around $4.1 billion over the last 12 months. Plus, it offers products that Amazon can’t get to people in a timely or affordable fashion, like gasoline, cars, vacation packages, pharmacy goods, and even insurance, all of which are big-ticket items for cash-strapped consumers.
Cheaply selling key physical goods means that Costco is a favorite when times are tough economically and also that its profit margin doesn’t budge much. Amidst high inflation in the U.S., it reported that its sales for the month of May rose by an incredible 16.9% compared to the prior year, raking in more than $18.2 billion.
Given that inflation could be persistently high for the next few years, the conditions look as ripe as ever for Costco to flourish.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alex Carchidi has positions in Abbott Laboratories and Costco Wholesale. The Motley Fool has positions in and recommends Amazon and Costco Wholesale. The Motley Fool has a disclosure policy.