Ask HN: What tech companies/industries will do well in a recession? | Hacker News Reader

Ask HN: What tech companies/industries will do well in a recession?

142 pointsthemoops36177 comments

It's been a while since the last recession. If there was another one, which companies would do well? "Do well" could mean succeed or grow meaningfully, or "do well" as in not be hurt as badly

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Don't invest for the winners in the recession.

Invest near the depths of the recession for the winners of the recovery where everything looks like its on a firesale.

The problem is of course timing the bottom. And resisting the emotional urge to think nothing could ever recover.

The 2020 extraordinarily V-shaped recovery surprised me a lot.

Given that nothing financial is really popping that hard and a lot of the headwinds we're facing now are just high commodities prices, bullwhip effects from the pandemic, and China is shutting down again, all of those factors are likely to be temporary so any near-term recession is likely to be V-shaped as well.

I suspect this is just a correction and we're close to maximum pessimism and investors should start looking for what to buy in the near term. And if you didn't already sell then you're probably too late and would be looking at locking in any losses that you had and missing the rebound.

But this is a description of conditions as they are today, not a crystal ball of the future. If something detonates tomorrow everything could change (and literally if Russia launches some nukes at Kiev tomorrow everything may change in an instant -- but I'm more considering a financial detonation).

> The 2020 extraordinarily V-shaped recovery surprised me a lot.

Printing and living on monopoly money really helped. Instead of running faster we simply made the ruler shorter.

I took the question differently, but I may be wrong. I took the question as which tech industries will do well in the coming recession so as to work for them and have solid dependable employment during the recession, not how to invest to take advantage of it. I suppose I took it that way because that's my place in the world (a worker not an investor).

So if you're sure that it's going to go into a recession, you invest in medium-to-long-term bonds, because recessions cause interest rates to fall, and bond prices go up as interest rates fall. Then, approximately when the recession hits bottom, sell the bonds and buy stocks.

Note that this requires that you approximately time the market twice, which can be difficult. Also hazardous.

Note well: I am not a financial advisor. Follow this advice at your own risk.

While I agree with much of your first couple sentences and resisting the emotional urge to think recovery is impossible, you're walking a hazardous line between believing recession timing is effectively impossible and trying to ballpark near term recession risk.

I preach this: nobody can reliably predict recessions but everyone should know recessions will happen. It would be damn near impossible to predict recessions if you had a single large country only trading with itself. Throw in the billions of people in the global economy, each a market participant, and the task becomes intractable. The macroeconomists and policy wonks sound much like you do: identifying real risks and evaluating sentiment in an attempt to convince others, and themselves, that they have special insight. I try not to be a cynic - there's enough negativity on HN - but I really think recession prediction is an exercise in futility.

Still, it's critical to expect recessions. Buying stock in a company that's selling for 100x revenue and would go bankrupt in the event of a recession is gambling. Likewise, leaving the market and putting your money in gold, Bitcoin, your mattress, etc because you think recession is around the corner is likely to burn you. Yes, Michael Burry and The Big Shorters made a ton of money betting on what would coincide with a recession... but some of them would've gone broke had the timing stretched on even longer.

In short, your best bet if you're scared of recessions is the same as your best bet if you're in a boom or in the middle of a recession: buy undervalued assets and hang on to them long enough for everyone else to recognize their value. And, since recessions happen regularly at an irregular interval, your job will be made much easier if those assets can simply survive a recession.

Speaking of a recession, I hope the recession isn't another massive redistribution of wealth into the hands of an older generation.

Housing has continued shooting up, as those in the 30s find themselves with fewer assets to buy it with. The low interest rates amortize the costs allowing affordability, but the older generation still gets a massive payout. Then when the economy start recovering back up, the older generations find themselves with all of this liquidity to exploit, while the younger generation is stuck paying off mortgages.

Housing is controlled politically, and holds safety, convenience and schooling hostage. It doesn't play the supply-n-demand game. Thus, it gets to stay unaffected by recession as long as default rate stay low. I am not sure what the mechanism for it is, but I do selfishly wish that housing prices and interest rates will back down to normal sometime soon.

"Speaking of a recession, I hope the recession isn't another massive redistribution of wealth into the hands of an older generation."

It will be. They're the demographic that has the most in their 401ks and the most capital/assets in general.

> The low interest rates amortize the costs allowing affordability

Negative real interest rates devalues income from work and up-values ownership of assets. Inflation is not in the interest of workers.

> housing prices and interest rates will back down to normal sometime soon.

Mortgage rates needs to rise until the real interest rate is positive - ie interest rate is greater or equal than housing appreciation.

Oh yes, I misspoke.

> back down to normal

I agree. By down, I meant going back to being 2-3% higher than inflation and not being literally 'free money' by being behind inflation.

> Inflation is not in the interest of workers.

Agreed. I think my next sentence clarified that, but yes. In isolation, it does look like I am supporting inflation. My bad.

It's anything but a redistribution to favor older generations.

Older generations are living on savings. They don't have upwardly-adjusted salaries. They don't have time to ride equities downward-then-strongly-upward again, they have to spend from the pile they already had.

The strong inflation definitely favors younger generations, who will salary-adjust with it.

The average recession lasts 15months. So if you're planning to die before Christmas 2023 you won't have time as you say. But 95% of boomers will be just fine.

Also, inflation proof incomes (like pensions and social security) and investments with inflation proofing are a much better bet than "my boss has to give me X% to match inflation".

Then there is the housing market, most people's biggest asset. Anyone without a house will get fucked by rising prices. Anyone with a mortgage will struggle as interest rates rise, but only in cashflow terms, they're still making our overall. And old people who own outright will get all the upsides and none of the downsides...

Pensions? Not likely, in the US.

As for Social Security, it was designed to cover (at best) 40% of costs. That leaves your (shrinking) investments to cover the majority. And Social Security is quickly running out of money. (This should be fixed immediately. Before forgiving student debt, or many other things. Social Security is vital!)

Younger workers will get inflation adjusted raises. The older will lose purchasing power. Inflation is absolutely harmful to those on fixed incomes, less so to those on elastic incomes.

But if you're arguing that a $15 minimum wage was harmful in general, I won't disagree. Inflation hurts everyone.

Related question: which tech products are 'inferior goods' - goods whose demand rises when incomes fall https://en.wikipedia.org/wiki/Inferior_good

Torrent clients and generally any open source alternative to paid software would be my guess.

One might be software substitutes for physical software engineers. Automated QA software instead of QA Engineers, for example.

Pay-as-you-go phone plans. Early model phones. Phone/pc repair.

Non-car modes of powered transit - small petro scooters, e-bikes, etc.

People always need to get around in a non sweaty way but a car is both a lead weight financially and a potential windfall when car prices are artificially high.

I don't see these being true unless you live in an area where getting around on a bike is actually realistic. Basically not USA, even the metro areas, except for maybe a handful.

I lived in a van with an e-bike for a year and traveled the United States extensively in both modes. I can assure you that getting around on an e-bike is realistic pretty much everywhere in USA. Even over long distances or hilly terrain or in the hot or in the cold. I agree that the comfort of the car makes people 'soft' and so entrepreneurs looking to sell alternative modes of transport need to work hard at allaying the concerns that you imply with your worldview if they want to get customers out of cars.

how about things like intuit mint or nerd wallet where people will turn to try and reduce expenses?

If uber/lyft were cheaper (especially during peak) this would be the future of "inferior goods". Honestly, they should be taking pennies on the dollar for each ride instead of their current rate in order to secure their place in transportation.

They're already losing billions each year. You want them to lose more?

I think Uber is in a great position already with the dramatic increase in cost of new and used vehicles and people's ability to work from home multiple days a week or permanently. It may already be more cost effective to Uber over having a car. Obviously bussing is an option but Uber matches the flexibility of a car much better. I'm going to generalize here but you might spend $700/month on a car. A monthly payment of $400 for the car (or equivalent purchase price/useful life), $100/mo for insurance, and $200/mo on gas. In a given month there might be 20 to 25 business days. For $700/month you could instead spend $28 per business day on Uber and break even, and if you work from home Uber comes out cheaper. This is without including parking costs in metropolitan area's, repairs, license fees, tows, and of course the insurance deductibles as well when an accident eventually does happen. Plus you get the comfort of not driving and ability to get things done on the trips. If we are drinking we end up Ubering anyways as well so we don't have to drive home.

If my 11 year old Ford gives up the ghost, I’m definitely living the Uber lifestyle. I did it for a year during Covid when I gave my car to my older son who doesn’t live with us. I work remotely and didn’t miss it.

The only reason I have a car now is because we bought a car for my wife and the Ford was hers before.

When I travel for business, I love taking Uber everywhere.

I would rent a car once every two or three months to see my parents who live about 200 miles away.

I suppose we could also frame the question as which tech companies and industries will NOT do well during the recession.

I think that streaming services will not do well. People will return to torrenting and piracy. Same with crypto trading platforms. Basically any place where Joe Average can't afford to spend more than he has on hand. Tesla will see a big drop too, as people will cash out to buy their groceries.

As for what will: free for the end user services that get by on ad revenue and data mining. Alphabet, Facebook, stuff like that.

Torrenting and piracy will do well in part because streaming on Netflix now sucks compared to what it was 10 years ago.

Whether Tesla does well depends on partly why the recession occurs. Persistent high energy costs can cause recessions, but high gasoline costs benefit Tesla.

If Tesla wasn't a luxury car brand, maybe.

Most people will go for cheaper electric cars, which aren't plentiful but do exist.

The three cars OEMs are capable of producing have already been accounted for.

> ad revenue and data mining

Ad spend will go down when companies have less to sell.

> I think that streaming services will not do well.

Entertainment does well in time of recession. People want to take their minds off their problems.

Most people do not know how to pirate films. Piracy won't be a huge deal.

Netflix is losing out to Disney and HBO. Traditional media caught up and pulled the plug, and great content has never been a core part of Netflix's DNA. They're more algorithmic than taste makers, and unfortunately they've got a low dimensional projection of what people really want.

I would disagree - when average Joe loses his job due to a recession they are going to need some form of entertainment to fill their now wide-open schedule. People here might find torrenting and piracy pretty trivial but the average Joe is going to find it a much bigger hurdle than simply logging into Netflix and pressing go.

But how does average Joe pay for the account, if the prices for groceries, electricity, heating and transportation explode? If things go really south, average joe will be happy if he can afford food and heat his rented flat at least a little bit in winter.

We already know that governments are likely to just start throwing loads money in every direction if they believe that things are going to go ‘really south’.

He probably will keep paying for a single service he really likes and share it with a bunch of people/family and split the costs. But yeah of course if it is between beans and rice and Netflix the person is gonna choose food. But that would be extreme poverty

I think this assumes they can't get food through other programs (unemployment, snap, food bank, etc). They could have their food and Netflix too.

Average Joe will use the cheaper, ad-based plan that Netflix is working on.

He'll finance it with credit card debt.

I agree with you. The rational HNer thinks of course streaming services should be the first to go when money gets tight. But people don't behave rationally.

The cord-cutting trend didn't really kick off during the depths of the Great Recession, but in the years after when better online alternatives came around.

I agree most people won’t turn to privacy. I still think streaming services like Netflix will take a massive hit though, not because people are turning to privacy but because the market is saturated and people have lots of different streaming subscriptions. If a recession hits, I think it’s unlikely every user cancels all their subscriptions, but many will likely reduce the number to just one or two. For some people, they might axe Disney+ and keep Netflix. Others may opt for Hulu and get rid of Netflix. I think virtually all of them will see a sizable loss of subscribers.

AI/ML is a bit of a wildcard for me.

On the one hand, I’m certain many companies will be eager cut costs through automation. On the other, investors will likely grow cold if the results just can’t live up to the hype fast enough.

And the hype won’t deliver fast enough. What has not been automated today will not be automated (robustly) in two years time.

There is hype and then there is practical ML which is integrated and working in lots and lots of companies today

The results are living up. ML is integrated into the core of so many companies at this point it’s not like it was 10 years ago. ML is here to stay and it will be almost the entire economy in the not to distant future

I think the results are mixed. I don’t think anyone is claiming ML will die off. But in my own experience, for every company with a healthy ML environment, there are dozens that are kind of just throwing money and data around without much success, or without even the type of problems ML can solve. And at many companies that do have a solid ML use case, you often have teams of data scientists looking to find new projects that justify their existence because the maintenance of existing ML products doesn’t take up capacity.

ML will always be around, but it’s also definitely in a bubble right now in my opinion and there will likely be a contraction before the profession matures and gets to a healthy place.

Thats fair, everything is in a bit of a free money bubble right now. And yeah I've seen team looking for ML solutions that didn't really have any.

I’m in ML and looking to pivot to web dev due to this. My personal view is that ML is in the midst of its own dot-com bubble. There are plenty of valid use cases for ML currently, but on the whole it’s a solution in search of a problem, and a bit of a figurehead at most companies who are at the very least wanting to use ML/AI/data driven in marketing materials. If a serious recession hits, I think a lot of these companies will make the realization these initiatives aren’t worth much to them and cut their losses.

Eventually the field will stabilize in a much healthier place, but only after some dark days.

My guess is you haven't worked anywhere where ML is a part of the core product. think e.g. search and recommendations.

I have. But at that job we got the ML system to a very solid state where it simply became a matter of maintenance. That didn’t require a whole lot of time, which meant people started looking for other ways to use ML, unsuccessfully, to justify keeping themselves around.

Torrenting is really inconvenient compared to streaming. Yes I had a Plex server set up that I could use from anywhere. It isn’t worth the hassle.

Someone from Wells Fargo was on CNBC earlier this week. I liked his viewpoint:

They're bullish on a subset of tech that's specifically focussed on efficiency and process automation.

I think the same category would do well in a recession. If money is tight, you'll trim down your workforce and you'll cut out "nice to have" goods and services from your budget, but you probably won't cut services/tools that help you get things done faster with fewer people.

business schools have a name for this ... high beta or something like that .. it literally is the sector of business that does well with massive unemployment and similar.. shopping clubs with lower prices for members are one example.

Beta is just variablity compared to market variability. High beta means the stock move more than the market as a whole. Low beta means it moves less than the market as whole. Investipedia probably has a better definition.

Any company who’s customer is the government. There’s only one entity that spends money in a recession, and that’s the government. Safest job you could have is one working for the federal government. Everything else is speculative and subjective to whatever is influencing the economy at any given point.

I would add that industries that contract with or supply tools for the government work would be good. Things related to infrastructure would likely be good. However, they already had an infrastructure bill and companies like CAT might be over bought.

> There’s only one entity that spends money in a recession

in a recession consumers still spend, but they often shift from high price to lower price.

iirc it's a depression where things get really vicious cycle w/o gov't

Look for companies and industries that can pass rising costs onto customers more easily. So typically staples over discretionary. Fuel, food, medicine.

Just have a look which companies did good during corona, or which businesses were not affected by the lock down. Those are the real essential ones, which will be safe in a recession.

This is a very different setup than 2020. Governments are done dumping trillions of dollars on the problem.

As long as there are cronies there will never not be bailouts

Walmart barely had even a hiccup.

https://finance.yahoo.com/quote/WMT/

Look at the 5y chart and see if you can even tell when the 35% drop to the rest of the stock market was.

We're arguably in a recession right now: https://en.wikipedia.org/wiki/COVID-19_recession

Companies offering free services or cheap ownership of things should do well I think, but any company that relies on subscriptions or upgrades would be hit hard.

Usually it's defined as two quarters of negative GDP growth which we haven't seen since the beginning of the pandemic.

That's the technical definition - though with our robust demand for labor participation right now we will blow though any technical recession back to growth unless global macroeonomic situation deteriorates heavily

>any company that relies on subscriptions or upgrades would be hit hard.

Fingers crossed that this would reduce the obnoxious trend of pay a sub for locally run SW. I recently looked in to apps that would help my workflow out on MacOS and all the ones that might have helped were leachware.

Why arguably? I thought a recession just had to meet a certain criteria.

> I thought a recession just had to meet a certain criteria.

(1) the actual criterion is “NBER names it a recession, which usually happens significantly retrospectively, and start and end dates are often adjusted after initial determination.”

(2) the casual rule of thumb criteria, which is more objective at the starting end (“a period starting with two consecutive quarters of negative economic growth and ending...sometime later”) can also only be applied significantly retrospectively with regard to the starting point.

So, yes, under either standard, whether or not we are currently in a recession is generally an assessment made on the basis of trying to predict the future.

Companies that cater mostly to luxury clients

Anything energy related.

Geography also plays an important role. Places like the valley saw very little impact while the place I was living at in the South basically had it's software ecosystem gutted. It did bounce back within a year though, so just make sure you have enough funds to ride a recession out in the worst case.

> Companies that cater mostly to luxury clients

Nah - look at what happened to the Boating industry in 2009. The values of jetskis, sailboats, etc took a major hit as demand dried up. Boats are considered luxury items

You have a valid point, I was thinking luxury retail.

Why would luxury retail be a good harbor in a recession? Usually luxury spending goes down.

Depends on the luxury level. At the very top the customer base consists of the most recession-proof people in the World. I assume they just carry on with their habits recession or not.

I don't think that's true. I worked for a luxury retailer right after 08/09 and I looked at their revenues. They were about even, if not moderately higher. I went to work for another shortly after that, and it was a similar story. Now, net sales may go down, but luxury retailers have a pretty wide latitude in what they sell their products for because they're often artificially controlling inventory (similar to the way Nintendo does). I think that's what really affects the bottom line.

There is a significant population on Planet Earth that are "permahedged" from any material anxieties. Clearly, we are talking about annual consumption trends of $500K per individual, and not in the luxury yacht race. (They likely already have access to one if needed).

This is the market to cater to. The question is: with what truly novel good?

I would think the important distinction would be luxury products that cater to the extremely wealthy (as opposed to luxury products bought by people that can barely afford it).

What kind of luxury products cater to only (or even primarily) the extremely wealthy? Superyachts, airplanes, maybe some exclusive villas/hotels, what else? Even supercars are bought by the merely "very" wealthy, who may be affected.

For a watch analogy, consider Tissot vs Omega. The former is considered an "entry-level luxury" brand with many offerings around the $1000 mark, while the latter is a true luxury brand with most offerings in the range of tens of thousands of dollars. Pretty much any broke person can get a Tissot to appear well-off, if they want it hard enough.

For a car analogy, consider BMW vs Aston Martin. Many people in an unfavourable financial sitation can get a well-specced 3-series and appear well-off, while a $200k DB11 is well out of reach for most "pretenders".

Hmmmm... I'm not terribly familiar with watches, but a $200k car is well within the reach of most people with 7 or low-8 figure net worth. Those people aren't so wealthy that their spending habits are recession-proof.

What percentage of Aston Martin buyers are 7-figure buyers as opposed to 9-figure buyers? I'm wildly guessing it's a big percentage, since there just aren't as many 9-figure buyers? Do we have any way to know?

I don't entirely know because I'm very far from being in that demographic. Despite that, I'm sure that there are some super expensive luxury home furnishings.

No energy will do badly; go back to 2008 and see what happened to energy companies after oil had its 150 USD price spike.

> Anything energy related.

The oil and gas industry would say otherwise.

Don't utilities tend to do well (energy related)?

People downscale their food choices during recessions.

They drop Five Guys and go back to McDonald's. Panera vs Subway, Chipotle vs Taco Bell, etc.

"Recession" is a bit ambiguous. To identify winners and losers in any economic climate you need to consider the specific factors at play, and the winners of previous "recessions" may or may not be winners in the next.

In this case _my_ assessment is that we're facing a prolonged period of high inflation partially fueled by factors which can't be mitigated by Fed actions (COVID lockdowns in China, global transportation backlogs, European conflict, food shortages) and perpetuated by high household savings levels. I don't think we're going to face significant slowdown of consumer spending this year.

In that economic environment, consumer staples which do their own production and have the ability to quickly respond to inflation are favoured. I'm in a sector ETF for this.

I also believe profitable tech which is ad-funded is at an advantage - anything where prices are set by auction and ROI is demonstrable/visible is golden, as are industries like cloud computing which have natural deflationary economics. This implies Meta/Goog/MSFT (and in this I'm betting on specific tactics and am choosing specific companies).

Those are my bets, you should form your own hypothesis and extrapolate appropriately.

Also note that these are systemic factors, but will always be dominated by idiosyncratic realities. Individual stocks are only loosely correlated with sector movement, if you think you have a winner or asymmetric knowledge about a specific company don't let larger trends dissuade you (or vice versa).

Finally, a corollary to the above: when you invest on macro/sector trends, do so through sector/strategy ETFs. If you're investing on asymmetric knowledge or insight, invest in specific equities. Combine the two strategies at your peril.

> In that economic environment, consumer staples which do their own production and have the ability to quickly respond to inflation are favoured. I'm in a sector ETF for this.

What are some example ETFs in that space?

Commodities oriented ETFs?

---------- UPDATE ----------

OK, nevermind. :-) Googled "consumer staples etf" and a bunch of examples came up.

https://www.investopedia.com/top-performing-consumer-staples...

---------- UPDATE ----------

Top 10 holdings of IYK

Procter & Gamble PG 16.91%

Coca-Cola KO 11.10%

PepsiCo PEP 10.40%

Philip Morris PM 6.95%

CVS CVS 4.04%

Altria MO 3.60%

Mondelez MDLZ 3.40%

Colgate CL 3.00%

Archer Daniels Midland ADM 2.44%

Kimberly-Clark KMB 2.34%

----------

Consumer staples -> consumer poisons. This leads to upward pressure in healthcare.

> Consumer staples -> consumer poisons.

When you're sampling the top-10 you get a biased set - "sin" stocks usually face increased consolidation pressure (certainly true for PM, MO, KO). If you expand your view to a full breakdown, a consumer staples ETF broadly represents "stuff people buy at supermarkets".

ETFs based on indices do not have opinions or intelligent design, they attempt to accurately represent a well-defined sector or thesis. A lot of people buy a lot of unhealthy stuff, so that shows up here.

If this is important to you, could I suggest screened indices (https://www.ishares.com/us/products/investment-goals#/funds?...) or a social impact fund (https://www.ishares.com/us/products/286007/)?

There is no exact answer to this question, just a set of factors that contribute towards doing better than someone else.

First, do you directly make money for a company, or directly reduce costs? The closer you are to core activities that generate income, or increase efficiency, then the more protected you will be from being laid off. This applies to companies too in a way.

Companies need core services like email or ERP. Chat like Slack is now core compared to the situation in 2008. This core software is going to be the last thing that companies want to change. What they will focus on eliminating is all of the nice-to-have software that has been deployed in their organization. SaaS costs add up at the department and company levels and companies will look to eliminate low hanging fruit.

If something has low usage numbers, that'll go. When some product has a nice UX, but there is an alternative within some other product, then the nice UX won't win out (e.g. use Jira instead of Asana.)

These are examples of software, but the same patterns play out across other categories. What's worth considering, is how can these things come out of a recession? At the start of the recession, contingent staff or contractors were often let go before employees. As the economy recovered, hiring contractors was a safer bet during the uncertain window when it wasn't clear that we had turned a corner. SaaS started to become a viable option because you could get started cheaply and didn't have to stump up funds for implementation. We take SaaS for granted now, but a lot of the growth came out of the last recession when you could make arguments for it.

+1 for being close to the money. Prefer the revenue side over efficiency if possible.

Cantillon Effect for IC's.

Because workers have more time to upskill in a recession, companies that offer services in this area (e.g. SIS systems, etc.) might also do well. From what I can recall, one of my former employers (https://moderncampus.com) has traditionally done well during an economic downturn.

Not hurt badly: Already free cash flow positive ones.

Success or Grow meaningfully: not sure. There's also other risks (geopolitical, supply chain). It also depends on what it means by growth. Growing revenue? Is success measured by external measures (stock price) or other intrinsic factors (profitability)

I work at a startup currently and am wondering if it’s time to start job hunting at the big companies because I worry about stability. There will be some flood of labor soon I can feel it in the air and I want to get in before that

Big companies have layoffs.

Some also insulate really well especially with shorter recessions. Like Apple, or Shopify, or Microsoft. They are very insular in many ways

It’s always the time to be job hunting. Stay hungry.

I’d argue that a startup which just got a major cash infusion is the best to ride out an imminent recession.

Keep a robust emergency fund on hand, always be networking, just be prepared for the separation call. Low burn rate + emergency fund + unemployment insurance = safety net during a recession. If you have any health issues you’ve been putting off having addressed, do it now while you have insurance.

By unemployment insurance, do you mean state run unemployment?

Or are there reputable private insurers?

Yes, state unemployment systems.

Build up your emergency fund to at least 6 months of living expenses.

> There will be some flood of labor soon I can feel it in the air and I want to get in before that

I'm currently still getting several recruiter emails per day. I realize this could change quickly, but so far we're still very much in the talent aquisition and retention phase (in tech, anyway).

>Build up your emergency fund to at least 6 months of living expenses.

If you're able to do this, you will not have a problem and shouldn't be concerned.

For most of us this is an absurdity. I can't imagine having enough emergency funds to survive on alone for 6 months.

Without discounting the other good advice, it's unlikely that you'll be the one unable to find a job in a recession; that unpleasant distinction goes to people with low skills or education.

Ed tech - when people lose their jobs they want to upskill themselves

Any company that is pre-revenue or is subsidizing growth by under charging for their services will be in a bad spot (unless they have a long run way).

Hmm.. how about instacart?

"Instacart slashes valuation by nearly 40% to $24 bln" https://ca.news.yahoo.com/instacart-slashes-valuation-nearly...

I'd be worried if I worked there...

Any company that has an unsexy middle of the line offering. Those companies usually sit on tons of cash anyway and will be fine through the duration.

Anything that assumes low interest rates might be negatively affected. Capital intensive things based on renting/leasing (e-scooters?) are in the cross-hairs.

Credit/pay-later services will have greater credit losses, higher risks and higher rates.

Viewing hours on ad-based tech might not be negatively affected, but that doesn't translate linearly to revenue.

Power Systems or certain companies in the healthcare space? I was working in a company making software for utilities and oil & gas companies (think competition to GE, Siemens etc). Don't think this will ever be slowed down or have to lay off people specifically due to a 2008-09 like recession

They can - but they can also be so loaded with debt that a slight downturn flips them over.

The company then goes bankrupt and continues as if nothing happened, but the shareholders are wiped out and the debtors own the company. Happens in airlines all the time.

So "essentials" companies that have a low debt load may be interesting, especially if boring.

Berkshire Hathaway may do decently well.

How was it? I've always vaguely wanted to work for the power company. Seems like it would be a pretty stable field, and in the end it is a product that really helps people.

For a while now I've had a vague suspicion that if we poured as much analysis into (broad strokes) smart grid stuff as we do advertising/the stock market, issues like renewables' intermittence would start looking like less of a big deal. (Although I'm aware there are already lots of smart people working on keeping the grid reliable!)

Culture-wise? Pretty boring TBH. I've worked in 2 startups and this company, hence the opinion. Work was very slow paced, lots of processes to follow and not experimental with technology (for obvious reasons). IMO ideal for someone who wants a great work life balance and decent pay. Never got the thrill of working for the 3 years I was there and decided it was time to move on.

I'm a EE/hardware engineer, so this may be a bit different than a pure SWE perspective.

I worked in computer hardware for oil & gas, there was a turndown around 2014-2015 that slowed the demand for a lot of our products. Not quite enough for layoffs or anything, but that industry can slow down quite a bit depending on market cycles.

Healthcare is also a tricky one, I'm in that now. You'd think it's safe because "everybody needs healthcare", but hospital capital equipment sales slowed a good deal due to lots of elective procedures being cancelled for months on end during different periods of the pandemic. New product launches delayed, incessant supply chain headaches on everything electronics (and other stuff too), it's a rough time for low/mixed volume manufacturers like you see in most healthcare.

I'm not totally sure, but I suspect quantitate finance/market makers, of which tech is a big part, would do well during recessions- profits there seem correlated to volatility and volume of stock trading, which I'd guess would be high during a downturn and recovery?

During the 2008-2009 episode, analytics companies did well. Apparently a lot of their customers were interested in trimming the fat and needed analytics software for it. I'd guess any tech company that directly helps cut the enterprise costs will be in a good position.

In every recession we have seen a big uptick in startups being created. If you look at the last big one in 2008 a number of notable startups got their start including Twilio. So I would imagine the same will happen if we dip into a big recession. We are starting to see some of that happen now. I read a report that in 2021 VCs invested in double the SaaS companies than they did in 2020. However, 2020 was a bad year for all VC funding, but it says something that the growth in VC backed SaaS companies grew so drastically while the market has struggled for the past two years.

Startup creation / funding is closely correlated with near-zero interest rates. When money is cheap, venture capital is more lucrative. This correlates closely with the early 2000s bubble, the 2008 crash that dropped interest rates and allowed for extreme amounts of venture capital, and the 2020-2021 surge in startup investment. Venture capital in theory becomes a far less lucrative choice in a high-inflation, rising interest rate market. While we’ve definitely seen a bit of a pullback in VC funding over the last 6 months, it remains to be seen whether that was another temporary dip like in Feb/March 2020 or a larger shift in the market.

Personally, I think the entire economy has shifted to focus on SaaS revenue growth above all else, and it will be impossible to “pull back” from venture capital because of that inertia, but in theory based on historical trends there should be a pull-back.

It varies depending on the context of each recession. For the likely upcoming recession, energy/industrial/agriculture/real estate. In other words, hard assets, manufacturing, and commodities.

How does real estate make sense when interest rates are rising?

If there is a softening in real estate prices, coupled with a slump in securities, those with cash may want to put their money in real estate in the hopes of seeing a good returns when the recession turns around.

Even with rising interest rates, if someone locks in a loan where they can break even with renters, they can sit on the property waiting for the market to recover.

This looks particularly attractive in the scenario where high interest rates combined with a recession creates difficulties for many people to purchase a home, in which case they will rent and be paying off someone else's loan/giving them a return on their invested cash.

Unlike companies, property doesn't go bankrupt. It can devalue, but there is often inherent value in the fact that it can be rented out, so there is decent stability. I guess, though, if there is a major regional shift where the property is located, like a manufacturing plant in the midwest shutting down, there could be a drop in housing prices and rental demand that would be very difficult to recover.

Any citations or rationale for this? Real Estate will have to deal with exorbitant valuations and actual interest rates for the first time in a decade. Agriculture makes sense (people need to eat just as much now as ever and there are some global supply issues which will help producers in certain countries). Industrial (this is too big to call a sector). Automotive will have a tough time as consumer spending drops and loans start to actually cost money. Semiconductor is a crap shoot (a lot of uncertainty). Aerospace is looking grim, but government support is typically forthcoming. Energy. The forecast is bright for energy right now, but we are currently in a moment of high inflation, low unemployment and a war involving a large petroleum exporter. If unemployment rises, then energy becomes less promising. Times are good now but not always.

On a historical note, I would add: Biotech: Development times are long. Products will come online that were developed during the peak. Also startups become more affordable when competing industries flag. Entertainment: the movie business has historically weathered most recessions pretty well. They can release things that were already made during the fatter years. Education: Historically this has done well during recessions (people who lose their jobs go back to school). Unclear if this will be as likely at this stage since the prices are not exactly favorable.

A recession will probably lead to even more consolidation. The big companies will get bigger and smaller companies will die or be bought. The whole economy is increasingly favorable toward bigger players.

Organizations with lots of cash on hand and very little debt/leverage.

That sounds right, but look at CSCO for a counter example. Plenty of cash, minimal debt and traded down through every recession.

I didn't interpret OP's question as a stock picking question. More about how to weather or avoid massive layoffs. But its not clear what they're asking.

From all the FAANGMULA companies, only Apple and Facebook haven't had layoffs during a recession.

Yes, even Microsoft had some layoffs back in 2008-2009, and Google had some 'stealth' closures. Also they did a hire freeze as well back then. Just right now they laid off the GCP customer support team. We know all the others (Uber, Airbnb, Lyft, etc, had all layoffs as well).

It really depends on the CEO's mentality. Some companies, even if their balance sheet is fine, they will use as an excuse to cut some fat.

So far only Apple and Meta are the exceptions.

I'm not sure that means anything. Large companies do layoffs all the time, as it avoids risk of lawsuits. They often solicit managers to voluntarily include some of their people to be included in the layoffs (folks who might be PiPed, etc.) rather than going through a longer process.

It's a really blunt instrument that I don't agree with, but at all of these companies there are going to be people coasting, and layoffs are one way to sort of make people re-interview for their own jobs.

Source: Happened to my division at bigco, lots of people were RIF'ed, but then allowed to transfer to other teams, I and other teammates got offers from other groups only after we 'interviewed' with them.

I knew of an online company that caters toward attorneys. They publish bankruptcy notices. They do very well in every economic downturn. But that's pretty niche isn't it.

I would say its more based on companies than industry. If the company is not profitable, has <6mo runway(startup) than it most likely will be one to avoid.

Big companies that make money, google, apple, etc will be fine. For medium sized companies if you involved in a unit that makes the company money or run core infrastructure you should also be fine. For smallish companies if they survive you better hope you are single point of failure and if you left things would be in a bad state.

Large companies have rounds of layoffs to trim the fat during the good times. This goes into overdrive during bad times.

In the (potentially) incoming recession? Anything related to the basics, food and military, and those serving them, are sure. Everything else - it depends.

Probably most, if not nearly all; tech is eating everything.

I agree with you at the industry level, but a characteristic of a burgeoning industry is that it's overextended on the margins. There are plenty of individual companies that are sustainable during flush times but not during a recession.

What do you mean by well? Like stock increases, profitability, etc?

I guess what I’m asking is are you looking for stocks to invest in or a job to ride out the storm kinda thing?

Depends on what you're looking for? Stability in employment? Hard to say, even successful companies can have rounds of layoffs during a recession.

As for investing, you're probably best off with the bog-standard 'invest in everything' index fund - during a recession is when you get to pick up shares at lower prices, but it's hard to time the bottom.

Even "big names" like Berkshire can be affected by a recession.

fintech SaaS companies. the banks have all the money, so those companies who provide services to them should thrive. regardless of the economy, people need bank accounts, credit cards, mortgages, etc. a recession just makes competition more fierce, and players in the vertical require technology to stay competitive

Anything with solid fundamentals based on a legitimate, defensible USP or captive audience within a sector having recession-proof demand.

Food, drugs and administration.

Add to that deep science and technology ventures that would do well anyway and don't care if it's a recession.

Faang companies are printing cash. Instead of making 50bil maybe they will only make 45.

FAANG companies have P/E ratios orders of magnitude higher than 'traditional' industries. They are expected to make a 'lot of money'. Making 'good money' will lead to stock crashes as we saw with Meta and Netflix.

faang like facebook or netflix? I think it’s time people stop using this acronym

Even in India people use FAANG where 3 of these are missing. It’s become an equivalent now of top payers who are also stable employers.

Ones that save you money: https://vantage.sh and https://mainstreet.com are ones I've used.

One I've yet to see mentioned here is Security.

It's an industry built on top of a cat and mouse game and so will always be required in some capacity, and things like breaches and fines are recession invariant.

Skimp on security at your own risk.

Home service businesses (contractors, electricians, plumbers, HVAC, roofers, etc). Even houses owned by banks/investment groups need repairs done. It's a huge industry that desperately needs employees.

These are among the first businesses to get hit by a recession. Sure, you may call the plumber to fix a leaky pipe but that bathroom remodel project is on hold. New construction, where a lot of contractors make the bulk of their money, also dries up.

The defense sector, but you'll eat lower payments until a recession

Sites targeting distressed or bankruptcy assets like: https://www.inforuptcy.com/

> What tech companies/industries will do well in a recession?

every company that’s not driven by hype (example: crypto, chatbots) and not focused on growth as primary objective

Just buy the index like everyone else will be doing. TINA

I work in Fintech. Our company has never done layoffs through the recession. It is not a FAANG company, but if you want stability, it has that.

If you're wondering what to invest in, I would stick to VTI/ITOT/etc. Some people will definitely be lucky but nobody knows nothing!

Recessions impact every industry there’s no good stocks. If you’re asking what will do well this cycle: Energy, materials, industrials.

If anyone could predict this with any reasonable accuracy, there would never be another recession. Ergo, there is no answer to this.

None. Tech is highly cyclical.

Maybe some are closer to government spending which maybe will rise in a recession but they will all be hurt.

During the 2007-2009 recession, I worked for a software development company that provided custom software development services to local and state governments. My understanding was that their sales rose during the recession because replacing government agency staff with our software was a cost saving measure.

Probably military-related will be the most insulated in the upcoming recession given the current events in Europe.

Why has it been a while since the last recession. Wasn't there a recession in 2020 due to the pandemic?

I kinda assumed that one hasn't really started yet, as it was postponed by artificial money.

Are you asking in the context of investment or job search? The answer may vary significantly based on this.

I think the answer is Berkshire Hathaway. But the problem is whether you can afford to buy one share.

You can buy the class B shares if you want.

M&M Mars. People buy M&MS instead of more expensive chocolate. Similar to the Kraft Index.

Avoid consumer cyclical companies.

Companies that make it easier/faster to onboard new customers.

Support the arms industries. War is peace.

Outsourcing firms like Upwork

Netflix

at $60/month? That’d be the first for me to drop, if pressed further.

Military.

Healthcare and insurance.

Telecom and Military

Video streaming

I think companies that focus on a specific use case or problem where there is a strong value proposition will be the ones that do well in a recession. For example, when you have less money, what are you going to invest in? Probably not something that does everything for you. So I'd expect to see some very niche products and tools take off.

Platforms like airBnb/Uber. The house always wins.

Both @ IPO prices. In a recession both of their main offerings drop as people don't use the service - to keep their share prices up they need to up their rev share combined with equity prices dropping as a hole. Strongly disagree with this opinion.

If the argument is for working at them - I think any large tech corp with a voluminous employee size is probably relatively safe (layoff risk always abound).

Except there is no house during a recession. People don't travel nor look for vacation rentals to stay in.

or people look to airBnB as a cheaper alternative to hotels.

Except that an AirBnB now typically costs more than a hotel for basic travel (a private bedroom & bathroom with wifi and maybe some basic kitchen supplies for coffee).

AirBnB also uses a bunch of dark patterns (service fees and taxes are not listed in the default nightly rate...) and you don't always get what you thought you were getting. I've been burned enough times with deceptive AirBnB listings to not trust the sticker price (hotels are typically less hassle).

I can attest to this. My wife and I are planning to rent our house out for a couple of years and become “digital nomads”. I was looking at AirBnbs in different cities. The decent ones weren’t any cheaper than a 3 star (middle of the road) Homewood Suites.

With Homewood Suites, we get a full kitchen, a gym, a pool, and a crazy amount of Hilton Points when we use their highest end credit card.

On top of that, we know what to expect.

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