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

142 points by themoops36 ↗ HN
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

183 comments

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rpx78
Platforms like airBnb/Uber. The house always wins.
boringg
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).

princevegeta89
Except there is no house during a recession. People don't travel nor look for vacation rentals to stay in.
egberts1
or people look to airBnB as a cheaper alternative to hotels.
blululu
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).

scarface74
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.

theandrewbailey
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.

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

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

_3u10
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?

joezydeco
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.

beebmam
Probably most, if not nearly all; tech is eating everything.
wutbrodo
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.
amateurdev
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
bombcar
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.

bee_rider
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!)

amateurdev
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.
bluesquared
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.

no_wizard
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
greymalik
Big companies have layoffs.
no_wizard
Some also insulate really well especially with shorter recessions. Like Apple, or Shopify, or Microsoft. They are very insular in many ways
gunfighthacksaw
I’d argue that a startup which just got a major cash infusion is the best to ride out an imminent recession.
toomuchtodo
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.
nobodyandproud
By unemployment insurance, do you mean state run unemployment?

Or are there reputable private insurers?

UncleOxidant
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).

senectus1
>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.

tbihl
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.
cj
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.

mistrial9
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.
giantg2
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.
enjoyitasus
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)

kodah
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.

spenvo
> 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

kodah
You have a valid point, I was thinking luxury retail.
bdamm
Why would luxury retail be a good harbor in a recession? Usually luxury spending goes down.
vilius
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.
kodah
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.
achillesheels
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?

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neverartful
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).
stickfigure
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.
bluetomcat
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".

stickfigure
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?

neverartful
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.
throwaway4good
No energy will do badly; go back to 2008 and see what happened to energy companies after oil had its 150 USD price spike.
lghh
> Anything energy related.

The oil and gas industry would say otherwise.

giantg2
Don't utilities tend to do well (energy related)?
aaronrobinson
Look for companies and industries that can pass rising costs onto customers more easily. So typically staples over discretionary. Fuel, food, medicine.
laverix
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.
whiplash451
This is a very different setup than 2020. Governments are done dumping trillions of dollars on the problem.
asdff
As long as there are cronies there will never not be bailouts
bombcar
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.

sofixa
In the (potentially) incoming recession? Anything related to the basics, food and military, and those serving them, are sure. Everything else - it depends.
thenerdhead
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.
vmception
Organizations with lots of cash on hand and very little debt/leverage.
wintermutestwin
That sounds right, but look at CSCO for a counter example. Plenty of cash, minimal debt and traded down through every recession.
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vmception
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.
nomilk
Related question: which tech products are 'inferior goods' - goods whose demand rises when incomes fall https://en.wikipedia.org/wiki/Inferior_good
erdos4d
Torrent clients and generally any open source alternative to paid software would be my guess.
jihadjihad
One might be software substitutes for physical software engineers. Automated QA software instead of QA Engineers, for example.
jallen_dot_dev
Pay-as-you-go phone plans. Early model phones. Phone/pc repair.
blamazon
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.

ThunderSizzle
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.
blamazon
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.
maerF0x0
how about things like intuit mint or nerd wallet where people will turn to try and reduce expenses?
big_gulp
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.
tr_user
They're already losing billions each year. You want them to lose more?
Sparyjerry
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.
scarface74
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.

ushakov
> 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

DelaneyM
"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.

dharmatech
> 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.

DelaneyM
> 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/)?

ardit33
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.

VirusNewbie
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.

spaetzleesser
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.
josh_carterPDX
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.
throwaway24124
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.