In a market downturn, or a recession, all shares would be affected. However, it's very likely that some shares would be more affected than others due to the nature of their businesses.
For example, healthcare stocks like Primary Health Care Limited (ASX: PRY) would be less affected whilst economy-related stocks like Commonwealth Bank of Australia (ASX: CBA) would probably do worse.
The best time to buy cyclical stocks is as close to the bottom of the cycle as you can, not at the top.
With that in mind, here are three shares I'd buy in a recession:
Seek Limited (ASX: SEK)
It's very common for the number of jobs advertised to be reduced during a recession. Therefore, it's logical to say that Seek would be hurt more than some other ASX stocks.
The company has an impressive array of growth plans such as expanding in overseas markets and offering more services. However, at the moment most of its money is generated through job listings.
It's currently trading at around 35x FY18's estimate earnings, which is too expensive for me.
Macquarie Group Ltd (ASX: MQG)
Macquarie is an investment bank, but it has changed significantly since the GFC, with most of its earnings recurring instead of capital market-facing. But, that doesn't mean it still wouldn't be affected more than a lot of other ASX shares.
It's my pick of the big banks due to its overseas earnings and the focus on infrastructure, however I'll be waiting until the next recession to buy some shares.
Macquarie is currently trading at 15x FY19's estimated earnings.
Challenger is an annuity provider and investment manager. It has a large amount of funds under management on its balance sheet that it earns fees from.
If a market crash were to happen that Challenger's balance sheet would be hit hard, which is sometimes why it drops more in a market dip than other shares. Although I already own Challenger shares, I'd like to own more in the event of a market crash, particularly with its long-term tailwind of the ageing population.
It's currently trading at 17x FY19's estimated earnings.
Foolish takeaway
I'd be happy to have held any of these shares over the past year or two, but I'm waiting for a really good opportunity to buy shares of them. If I had to pick one to buy today it would be Challenger because of how much growth it could generate over the next two to three years with the recent government budget changes.
