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Motley Fool Issues Rare “All In” Buy Alert

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This has been one of the most-challenging years on record for Wall Street and investors. The widely followed S&P 500 turned in its worst first-half to a year in over a half-century, and the growth-driven Nasdaq Composite shed close to a third of its value since the year began. Both the S&P 500 and Nasdaq find themselves firmly entrenched in a bear market.

To make matters worse, there's the real likelihood that the U.S. is near, or has already entered, a recession. First-quarter gross domestic product (GDP) came in at a final reading of negative-1.6%, while the Atlanta Federal Reserve's GDPNow estimate for the second quarter has deteriorated to negative-1.5%. If the Atlanta Fed's GDP estimate proves accurate, two consecutive quarters of negative GDP growth would indicate a U.S. recession is already in place.

Although recessions can lead to unpredictability and heightened volatility in the stock market, they aren't a reason to run for the hills. Rather, they're almost always the perfect opportunity to buy innovative businesses at a discount.

If the U.S. does dip into a recession, the following four stocks would make for no-brainer buys.

One of the safest sectors to consider putting your money to work during a recession is the healthcare sector. Since we can't control when we get sick or what ailment(s) we develop, there's always demand for prescription medicine, medical devices, and healthcare services. That's what makes robotic-assisted surgical system developer Intuitive Surgical (ISRG -5.74% ) such a no-brainer buy.

At the end of March, Intuitive Surgical had placed more than 6,900 of its da Vinci surgical systems in hospitals and surgical centers around the world. While not a jaw-dropping figure, it's substantially more surgical-assistive robotic systems installed than its competitors. Because these systems are pricey and the training for them is time-consuming, buyers tends to remain loyal customers for a long time.

Another reason Intuitive Surgical is such a smart investment is its razor-and-blades operating model. The idea behind the razor-and-blades model is to get consumers to purchase the low-margin "razor," then continue to sell them higher-margin "blades" for replacement on a regular basis.

In Intuitive Surgical's case, most of the company's early revenue derived from selling its lower margin, but pricey, da Vinci systems (the "razor"). Over time, as the installed base of da Vinci systems has grown, the percentage of total sales has shifted to instruments sold with each procedure and system servicing (the "blades"). These segments generate considerably higher margins than da Vinci system sales and should allow Intuitive Surgical's operating margins to expand.

Another no-brainer buy if the U.S. dips into a recession is payment-processing behemoth Mastercard (MA -0.88% ) .

Superficially, financial stocks might sound like an odd place to consider putting your money to work if a recession strikes. After all, financial stocks are cyclical, and cyclical businesses tend to take it on the chin when economic activity falters. During a recession, it's not uncommon for Mastercard's revenue and profits to fall as consumer and enterprise spending dips.

However, there are two sides to every coin. Even though recessions are inevitable, they last substantially shorter than periods of economic expansion. Over long periods, Mastercard spends a disproportionate amount of time benefiting from higher spending than it does navigating its way through economic pullbacks.

To add to this point, Mastercard's outperformance is a function of its avoidance of lending. Although Mastercard would likely have no issue becoming a lender and generating interest income, doing so would expose it to inevitable loan delinquencies during recessions. Because Mastercard strictly sticks to payment processing, the company doesn't have set aside capital to cover loan losses. This makes a big difference when it comes to bouncing back from an economic downturn.

Since most global transactions are still being conducted in cash, Mastercard offers a sustainably long growth runway in virtually any economic environment.

A third no-brainer buy if the U.S. dips into a recession is oil and natural gas services company NOV (NOV -0.67% ) . If the name doesn't ring a bell, it could be that NOV was known as National Oilwell Varco until changing its name last year.

Similar to Mastercard, there might be a little head-scratching as to why a cyclical oilfield services company would make for a smart buy during a recession. It's normal for crude oil and natural gas prices to decline during a recession, which would be expected to adversely affect oilfield service demand, at least in the short term.

But these are unique times, and NOV appears perfectly positioned in a number of ways to take advantage of growing demand for oil and natural gas.

For example, global energy supply chain disruptions are likely to lead to elevated oil and natural gas prices for years. These disruptions are the result of reduced capital investments during the pandemic, as well as Russia's invasion of Ukraine. In short, a minor recession is unlikely to dissuade drillers from eventually boosting their production and taking advantage of elevated oil and gas prices.

Additionally, NOV is one of a very select few companies that provides the technical expertise to get drilling rigs and fracking operations under way. With few options for upstream companies to choose from, NOV finds itself ideally positioned to benefit from increased oil and gas demand over time.

A fourth and final no-brainer stock to buy if the U.S. dips into a recession is U.S. marijuana stock Cresco Labs (CRLBF 1.81% ) .

There's arguably been no industry more universally despised by Wall Street over the past year than cannabis. The expectation had been that a Democrat-led Congress and Joe Biden in the Oval Office would usher in a wave of reform at the federal level. But between the ongoing pandemic and other pressing issues, cannabis reform has gone nowhere. Ultimately, pot stocks have paid the price for this federal inaction.

But the important thing to understand about U.S. marijuana stocks is that federal legalization isn't a necessity for them to thrive. While legalization would eliminate some operating redundancies, there have been more than enough state-level legalizations to drive ample growth potential for multi-state operators.

Cresco Labs ended March with 50 operating dispensaries, but is in the midst of completing a groundbreaking acquisition that'll make it one of the nation's biggest retail cannabis companies. Last week, Columbia Care shareholders voted in favor of an all-share merger with Cresco. Assuming the deal completes toward the end of 2022, the combined company will have more than 130 operating retail stores and have a presence in 18 states. 

Furthermore, Cresco Labs will be able to differentiate itself thanks to its industry-leading wholesale operations. Even though wholesale cannabis has less impressive margins than retail cannabis, Cresco's ability to place its proprietary products into more than 575 dispensaries in California, the largest weed market in the country, allows the company to make up in volume what it might be losing in operating margin.

Sean Williams has positions in Columbia Care, Intuitive Surgical, and Mastercard. The Motley Fool has positions in and recommends Cresco Labs, Intuitive Surgical, and Mastercard. The Motley Fool has a disclosure policy.

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