There are some notable themes from these lists.
Companies that may be viewed as provisioners of inferior goods - those goods whose demand rises as income falls - like WalMart (WMT), McDonald's (MCD), Family Dollar Stores (FDO), DollarTree (DLTR), TJX Companies (TJX), Ross Stores (ROST) and Spam-maker Hormel (HRL) all were well represented during the Financial Crisis. Similarly, do-it-yourself automotive chains like O'Reilly Automotive (ORLY), AutoZone (AZO), and Advanced Auto Parts (AAP) were high on the list of performers. While WalMart is currently outperforming (see accompanying piece published today on the outperformance of company's with high credit ratings), the broader retail sector could see unique pressure during this downturn given potential temporary store closings related to expanding quarantines. Financials are notably under-represented in both the 2007-2009 episode and the current environment. Given the stress on the banking sector and financial system more broadly during that previous period, only one financial made the list - current Dividend Aristocrat, People's United Financial (PBCT), a Connecticut-based bank serving the Northeast that successfully expanded during the crisis. In the current downturn, the banking sector is entering the downturn with a much more robust balance sheet and improved liquidity. Banks are still geared towards the broader economic climate. While they will outperform their disastrous 2007-2009 performance, they may still lag the broad market. Health Care (XLV), was the most frequently represented sector on the Financial Crisis-era lists and is well-represented on the current list. One could expect that health care companies that deliver solutions within the current public health crisis could be rewarded with outperformance once again. Two of the best performers - Regeneron Pharmaceuticals (REGN) and Gilead Sciences (GILD) - are working on coronavirus vaccines. Utilities (XLU) and consumer staples (XLP) were naturally well-represented on both lists given their defensive business models. These two sectors comprise 44% of the best performers in the current environment. Clorox (CLX) is the top performing consumer staple during the current market sell-off. Energy (XLE) was surprisingly well-represented on the Financial Crisis-era lists as well. Oil surged into mid-2008, hitting $145 barrel that summer before collapsing. Companies at the forefront of the shale revolution were listed frequently on these lists of top performers. That industry may have been too successful, increasing domestic supply as demand was secularly challenged by efforts to curtail fossil fuel emissions. In the current stress, petrostates are competing for market share, imperiling the financial health of some of the smaller private players. Names like Southwestern Energy (SWN), Hess Corp (HES), Range Resources (RRC), and star-crossed Occidental Petroleum (OXY) are much closer to the bottom of current performance tables. The drawdown in Energy in the current market episode is certainly a crisis within a crisis. There is naturally some level of consolidation during a downturn as companies with balance sheet capacity look to acquire competitors or adjacent businesses that have gotten cheaper. Getting these M&A calls right during the last downturn would have certainly boosted performance. Unique uncertainty, and the reduction in face-to-face meetings, may limit mergers and acquisitions in the short-run in the current crisis episode, but eventually stronger companies may turn to acquire underperforming smaller peers as this downturn extends.
This is another piece where my curiosity simply led to the creation of an article. I wanted to see these lists of top performers as a reality check on the sectors and themes that outperform in down markets, and am sharing them with the Seeking Alpha community. Every crisis is different, and the outperformers in the current environment reflect some of the unique conditions with this episode. I hope this article proves valuable to Seeking Alpha readers as they look to navigate the current stressed environment.
Disclaimer: My articles may contain statements and projections that are forward-looking in nature, and therefore inherently subject to numerous risks, uncertainties and assumptions. While my articles focus on generating long-term risk-adjusted returns, investment decisions necessarily involve the risk of loss of principal. Individual investor circumstances vary significantly, and information gleaned from my articles should be applied to your own unique investment situation, objectives, risk tolerance and investment horizon.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
Disclosure: I am/we are long SPY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.