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My Favorite Recession-Proof Stocks

These companies actually benefit from tough times.

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I look at hundreds of stocks every week for possible inclusion in Morningstar’s two stock model portfolios, the Tortoise and Hare Portfolios. Monitoring that many stocks can be overwhelming at times, so I’ve found it useful to create various watchlists organized by type of stock. I have one watchlist for financial stocks, one for drug stocks, one for retail stocks, etc. In fact, I have 32 lists in all.

What’s my favorite watchlist? That’s easy: The Bellwether 50.

The Bellwether 50 is a list of companies we track in Morningstar’s monthly newsletter, Morningstar StockInvestor. It includes 50 companies with large competitive advantages, or what Warren Buffett likes to call "economic moats." There are four types of economic moats: low-cost provider, high customer switching costs, intangible assets, and the network effect. Companies possessing one or more of these types of economic moats generate high returns on capital and returns on equity.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.