The chief investment strategist at a $42 billion firm shares 9 stocks that can weather a recession while boosting income

  • In the face of a potential recession, Thornburg’s Brian McMahon is targeting robust companies.
  • To build a steady flow of income, he’s focusing on firms with high dividends and cash generation.
  • McMahon shared 9 stocks that are both recession-resistant and can boost income streams.

In the latest move in the ongoing and high-stakes fight against inflation, the Federal Reserve raised interest rates by another 75 basis points at Wednesday’s FOMC meeting. While some investors have responded to Fed Chair Powell’s hawkish sentiments with pessimism, others have welcomed the rate hikes as a necessary — and long-overdue — remedy for inflation raging at decades-high levels.

“It’s going to be a tough, tough battle to get inflation down below 3%,” said Brian McMahon, chief investment strategist at Thornburg Investment Management, which manages $42 billion in assets. “The Fed did too little, too long.”

At upcoming meetings, McMahon predicts the central bank will continue to hike rates, and agrees with the general Wall Street consensus that rate cuts are unlikely to appear until at least late 2023 or early 2024. “So far it looks like a safe landing shaping up, but it just looks kind of bumpy,” he told Insider in a recent interview.

Invest in resilient companies with high dividends

McMahon has overseen the Thornburg Investment Income Builder Fund (TIBIX) — which currently holds around $11 billion in assets — since its inception two decades ago. Because this fund aims to deliver a consistent stream of income to its investors, McMahon particularly emphasizes investing in high-quality fixed income assets and dividend-paying equities. In a macroeconomic environment like this, he’s targeting robust firms that are able to withstand a potential downturn.

“On the stock side, we’re pretty focused on companies that we think have some resilience, some pricing power, and balance sheets that are strong enough to withstand a storm,” he explained.

McMahon is also focused on investing in firms that not only are able to pay a dividend, but have previously demonstrated a willingness to raise those dividends. “Hopefully a dividend that will grow over time, so you need to have a good cash-generative business,” he said.

According to McMahon, companies with strong fundamentals that generally operate with enough steady cash flow to pay out attractive dividends often fall into the large telecommunications, pharmaceuticals, and technology sectors.

McMahon shared nine stocks for investors to consider that are both recession-resistant and can boost income streams. Those stocks are listed below, along with each company’s ticker, market capitalization, and McMahon’s commentary.

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