With fears of an impending recession selling off the market, individual stock analysts have begun to buy their top stock picks in an economic downturn. Several reports this week to clients of Wall Street banks focused on stocks that have resilient revenue and business models. Stocks fell deep into bear market territory on Thursday as investors feared a recession would result from the Federal Reserve’s aggressive action against inflation. On Wednesday, the central bank announced its biggest rate hike since 1994. The Dow Jones Industrial Average fell below the key 30,000 level on Thursday. On Wall Street, however, many of the stocks named this week — including Dollar General and Republic Services among others — were approved by analysts for their defensive characteristics amid a tough economic backdrop. Here are Wall Street’s favorite recession beneficiary: Republic Services Waste disposal company Republic Services can act as a hedge against inflation and a safe haven during economic downturns, according to Deutsche Bank. Analyst Kyle White upgraded Republic Services from hold to buy, saying in a note Thursday that the company has strong pricing power and defensive characteristics against an increasingly challenging economic backdrop. “We are upgrading Republic Services (RSG) to buy rating because it is (i) an inflation hedge in today’s environment, (ii) a safe haven in market downturns and (iii) a particularly risk-adjusted basis. Provides attractive earnings growth at Rs. Deutsche Bank kept its $147 price target on the company unchanged. That’s up about 20% from where the shares closed on Wednesday. According to Dollar General Morgan Stanley, the discount retailer is a defensive stock with “many ways” to outperform during recessions. Analyst Simeon Gutman upgraded Dollar General’s shares to overweight, saying in a note Thursday that the “only scenario” where the company could underperform is if the economy recovers rapidly. “In a prolonged downturn, DG should continue to outperform with growth in physical earnings and valuations. Even if the economy does not enter a recession, business is an income compounder,” the note said. “DG’s margin trajectory is more sustainable as we enter the year, and we expect wallet share shifts for retail to be more difficult over the next 6-12 months.” Morgan Stanley raised its price target from $225 to $250. The new price target is up 7% from Wednesday’s closing price. According to Wells Fargo, Adient margins for the automotive seating company could actually improve during a downturn. Analyst Colin M. Langan, reiterating the overweight rating on the stock, said in a note Thursday that the company should meet its long-term target for margins due to declining consumer demand after a meeting with the company’s management. Langen wrote, “Interestingly, management sees the potential for margin improvement in a recessionary scenario as U.S. volumes still rise, driven by increased demand, inventory rebuilding, volatility in the overall production schedule and input/ There may be a marginal increase in labor cost.” Wells Fargo has a $43 price target on the company. This means around 33 per cent above Wednesday’s closing price for the company. According to Morgan Stanley, Biopharma Biopharma stock could be part of the investor playbook for the second half of 2022. Analyst Matthew Harrison said the sector outlook for the small- and mid-cap biotech is improving as the price of shares recovers from a hike in interest rates, and worries about a slowdown in the latter part of this year are rising. “Importantly, we also believe we are near SMIDcap bottom. We highlight three key reasons for our outlook (1) SMID-cap draw down is now at ~50%, compared to traditional market draw down~ Above 36% bearish (Performance 2); (2) The sector, which has historically underperformed 15% as rates rise, has already paid the price in a rising rate environment (Exhibit 3); and (3) SMID Biotech really begins to outperform the market in a bearish environment,” the note read. Morgan Stanley said it focused on growth stories with defensive properties, and called it Argenx, Legend Biotech, Seagen, BioMarin Pharmaceutical, Eli Lilly, AbbVie and Royalty Pharma. Energy Energy is no exception to the stock sell-off in recent days, but Citi said some businesses in the sector are likely to outperform during the economic downturn. Analyst Scott Gruber, in a note Tuesday reviewing the bearish playbook for energy, said the firm prefers oilfield equipment and services (OFS) companies. “The historical playbook within energy was to move toward majors during economic contraction,” read the note. “However, with supranormal commodity prices and refining margins, the defensive playbook may shift towards global OFS players.” Citi prioritizes Schlumberger NV, Baker Hughes, Oceaneering International and ChampionX among global OFS names.