Two Steady Hands in a Shaky Economy: Why These Stocks Will Thrive Through a Recession

As the specter of a potential 2025 recession looms, investors are turning to companies that can withstand economic headwinds. While no stock is immune to market volatility, certain sectors and businesses—utilities, healthcare, and consumer staples—have historically proven their resilience. Among these, American Water Works (AWK) and Pfizer (PFE) stand out as exemplars of defensive strength. Both offer stable cash flows, wide economic moats, and valuation discounts that position them to outperform during a downturn.

American Water Works (AWK): The Indispensable Utility

Water is a necessity, and American Water Works, the largest U.S. publicly traded water and wastewater utility, leverages this fact to deliver rock-solid performance. During the Great Recession, its stock fell just 12.7%—a fraction of the S&P 500’s 35.6% decline—while its long-term returns since its 2008 IPO rival those of tech giants. As of April 2025, AWK has delivered a 953% total return compared to Alphabet’s 1,090%, proving that essential services need not sacrifice growth for stability.

Why It’s recession-proof:
- Regulated pricing: Most of its revenue comes from rate-regulated contracts, shielding it from economic swings.
- Inelastic demand: Water consumption remains steady even as households cut discretionary spending.
- Low cost of capital: Its investment-grade credit rating allows it to fund infrastructure projects at favorable rates, ensuring long-term growth.

*The chart will show AWK’s steady ascent, outpacing the S&P 徘徊.

Pfizer (PFE): A Pharma Giant Anchored in Innovation

Pfizer’s portfolio of patent-protected drugs—spanning vaccines, cancer therapies, and cardiovascular treatments—provides a shield against economic uncertainty. Despite its undervaluation at a 38% discount to its $42.00 fair value estimate, Pfizer offers a 6.56% dividend yield and a robust pipeline of therapies. During the 2008–2009 recession, its stock dipped only 15.7%, faring better than the broader market.

Why It’s recession-proof:
- Diversified pipeline: Reliance on a mix of chronic-care drugs (e.g., Prevnar pneumonia vaccine) and oncology therapies reduces dependency on any single product.
- Scale and R&D power: Its $10 billion annual R&D budget fuels breakthroughs, such as its recent advancements in mRNA technology.
- Post-pandemic transition: While pandemic-related revenues have waned, Pfizer is now focusing on core therapies, which offer steadier, predictable cash flows.

*The visual will highlight its dividend growth and relative stability during recessions.

The Defensive Playbook: Beyond These Two Stocks

While AWK and PFE exemplify defensive excellence, investors should diversify further. For instance, Brown-Forman (BF.B) (spirits) and NextEra Energy (NEE) (renewables) also rank highly for their inelastic demand and regulated growth. However, the duo chosen here offers distinct advantages:
- AWK’s water infrastructure is a literal lifeline, and its regulated model provides predictability.
- PFE’s pharmaceuticals address universal health needs, insulated from consumer spending cycles.

Conclusion: Weathering the Storm with Data-Driven Confidence

History shows that defensive stocks like these outperform during recessions. During the Great Recession, AWK and Pfizer underperformed the market’s downturn by wide margins, while their post-recession recoveries were swift. As of Q1 2025, their valuations—38% and 26% below fair value, respectively—suggest further upside.

Investors should also note their dividend yields: AWK’s 2.6% and Pfizer’s 6.56% provide income stability while compounding growth. Even if a recession doesn’t materialize, their fundamentals—steady cash flows, wide moats, and undervalued shares—make them compelling buys for any portfolio.

In an uncertain market, these two stocks are more than recession-resistant; they’re recession-ready.

Data sources: Morningstar, S&P Global, company filings.