The 2008 recession was the worst economic downturn since the Great Depression of the 1930s. Millions of jobs were lost, unemployment spiked, homes were foreclosed upon, and the stock market tanked. Some dubbed it the Great Recession because of the devastating effects it had on the US economy.
The recession occurred because banks and financial institutions were doling out too much credit to under-qualified borrowers. When so many of those borrowers defaulted on their mortgages, it led to a housing market collapse of historic proportions. And there was no governmental regulation in place to stop it.
But it wasn’t just the housing market, many corporations were highly overleveraged as well. Investment firms were making questionable moves. The highly-publicized bankruptcy of Lehman Brothers, the country’s fourth-largest investment bank, was just the first of many to come.
While all of that may seem to be behind us, the recent failures of Silicon Valley Bank and First Republic Bank have caused fears that history could repeat itself. In that light, it’s important to evaluate the companies that thrived during the 2008 downturn so we can be fully prepared should a recession occur again.
So what companies grew during the 2008 recession?
Companies That Grew Despite the Recession
Consumers looking to cut costs in tough times turn to discount retailers, and the 2008 recession was no exception. Walmart and Amazon were mainstays because they offered discounted products that were easy to obtain. Dollar Tree and Dollar General also flourished as well.
Healthcare companies are another go-to when the going gets tough. Even though some consumers may delay major medical procedures during a downturn, there are some healthcare costs that are unavoidable. That’s why companies like Johnson & Johnson, Walgreens, and CVS were good picks during the recession.
Utility and infrastructure stocks will continue to be essential regardless of the economy, and that was true during the 2008 recession as well. Energy, water, natural gas, and even waste removal companies still thrived in the downturn.
Many consumers sacrificed eating out for eating in, and that’s why grocers like Kroger profited during the recession. Also, companies like General Mills and Tyson Foods were able to expand their brands as customers shifted their eating habits.
The Top 10 Companies That Grew the Most During the Recession
Netflix (NFLX): It might seem like streaming subscriptions would be the first thing consumers cut, but Netflix experienced growth during the Great Recession.
Lego (Privately Owned): People will always want toys for their children. But one of the great features of Lego sets is reusability: the same set can be used to construct various designs.
Groupon (GRPN): Groupon isn’t a discount retailer, but it provided an important new way for customers to get a price break on their favorite brands.
Pinterest (PINS): Hobbyists looking to share their similar interests flocked to the app, growing the company into one of the biggest social media companies in the world.
Uber (UBER): Launched during the height of the recession, Uber’s ride-sharing model was revolutionary. Not only did it allow users to cut transportation costs, but it was also a major player in creating today’s gig economy.
Mailchimp (INTU): Mailchimp is a marketing tool that changed how companies reached home-based customers.
Slack (CRM): Slack became an integral tool for collaboration among global teams. As more people shifted to work-from-home, Slack provided a platform to keep workers productive.
Airbnb (ABNB): Airbnb did for travel what Uber did for transportation. Homeowners could access a whole new income stream and consumers could find low-cost alternatives to pricey hotels.
Square (SQ): Square technically began in 2009 at the tail end of the Great Recession, and quickly grew to be a major provider of Point-of-Sale services, connecting companies with their customers in a more effective way.
What Factors Contributed to the Growth of These Companies?
There are several overarching elements these companies share. The main factor is that all of these companies offer low-cost ways to solve their customers’ problems. Even though consumers will cut luxury items, travel, dining, and entertainment costs, they’ll still want all of these things. They will just be more creative in how they spend.
Instead of paying for movie or concert tickets, they will pay for a Netflix subscription. They will buy toys like Lego that can be used over and over again. They will still travel, but they will search for an affordable Airbnb as opposed to a luxury hotel.
But there’s another major factor that many of these companies share. They provide a platform for home-based consumers to connect. Slack, WhatsApp, and Pinterest are great examples of services that help people maintain those personal connections while stuck at home.
Lessons Learned from the Recession
Legislation was passed to try to keep the issues that caused the 2008 recession from happening again. Institutional investors and banks have gotten much more cautious as to how they are spending their money. But recent banking failures are an indicator that it still can happen.
Diversification is not a new concept, but it’s still one of the main reasons why investors fail. Silicon Valley Bank had a high concentration on struggling tech investments, and when there was a run on the bank the bank failed.
It’s also important to invest, for the most part, for the long term. After the Great Recession, many investors likely assumed that was going to be one of the worst crises of their lifetime. Fast forward a few years and lockdowns in 2020-21 presented a totally unprecedented challenge that our economy is still recovering from.
No one knows the future. But we can evaluate companies that have navigated catastrophes to understand why those businesses thrived. Investing in stable, established companies with recession-proof products is a winning strategy.
Best Companies To Buy In a Recession
Recessions are inevitable. But recent downturns should be a learning opportunity for savvy investors looking to secure their portfolio. That way, if another recession happens there’s a plan in place. Look for companies that cater to home-based lifestyles. Whether it’s retail or entertainment stocks, it’s clear that customers will alter their spending habits in a recession.
Also, look for companies that allow customers to make better connections while still maintaining a home-centered lifestyle. Understand that customers won’t give up every entertainment and travel and dining experience, they will just look for cheaper ways to have a similar experience.
No one wants another recession to happen, but if it does, having a diversified portfolio full of strong stocks will help you weather the storm.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.