Which ASX All Ords shares could perform well in a recession?

I think there are a few different industries that could keep generating solid earnings during tough times.

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Key points

  • Food, healthcare, and funerals could be industries that are resilient in a recession
  • There’s also research that shows people are more likely to buy lottery tickets during a downturn
  • Telecommunications is another sector that could have defensive earnings

There has been widespread volatility with All Ordinaries Index (ASX: XAO), or All Ords, shares since the beginning of 2022 amid concerns about inflation and higher interest rates. Indeed, there are fears that ongoing negative economic effects could lead to a recession.

Perhaps it was inevitable that some retailers weren't going to keep posting record profits. And maybe demand for buying cars will reduce.

But, while share prices are hard to predict, is it possible to find businesses that could see their profits barely affected by a recession – perhaps even grow?

I think there are a few places we can look to.

Food

We all need to eat. I believe that businesses that sell food to consumers could continue to see decent results. Certainly, I think the demand will still be there.

In my opinion, food is one of those areas where people will keep spending, even if they have to change to cheaper alternatives. Supermarkets are an obvious suggestion here, such as Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

But, I also think that KFC and Taco Bell operator Collins Foods Ltd (ASX: CKF) could be another defensive idea.

Farmland real estate investment trust (REIT) Rural Funds Group (ASX: RFF) could be another defensive All Ords ASX share idea, thanks to its long-term rental contracts and the ongoing tenancy by leading farming businesses.

Energy

There doesn't seem to be an end in sight to the Ukraine conflict and energy prices remain high. The world needs energy, even if demand were to drop a little. I think that Woodside Energy Group Ltd (ASX: WDS) could keep generating good earnings, particularly with the All Ord ASX share's LNG division as Europe looks for alternative sources of energy away from Russia.

APA Group (ASX: APA), the owner of various energy assets including a large gas pipeline network, could also keep generating good cash flow as it transports half of Australia's natural gas.

Telecommunications

People's phones and home internet are very important bills to pay. Indeed, my work depends on it. Communication is vitally important. And so on. Nearly every business needs the internet for some reason.

I think Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPG), and Aussie Broadband Ltd (ASX: ABB) all could offer defensive earnings, particularly with the NBN transition now over.

Telstra is expecting to grow its earnings per share (EPS) over the next few years.

Healthcare

People don't choose when to get sick, but I do think people (and the government) would keep paying to access healthcare services. All Ords ASX share names like CSL Limited (ASX: CSL) and Sonic Healthcare Ltd (ASX: SHL) (excluding COVID-19 testing) are two names that I think won't see much change in demand.

Gambling

There is research that shows that "when people are experiencing financial difficulties during economic recessions, the possibility to improve their financial situation by winning large jackpots with low initial stakes becomes more enticing".

The Lottery Corporation Ltd (ASX: TLC) is the business that operates Australia's lotteries through The Lott.

Funerals

There are only two things certain in life – death and taxes, as the saying goes.

While it's a bit morbid to think about owning All Ords ASX shares that are funeral operators, they could provide defensive earnings. Demand is based on deaths rather than economic factors.

Within this sector are names like InvoCare Limited (ASX: IVC) and Propel Funeral Partners Ltd (ASX: PFP).

Auto parts

Finally, Bapcor Ltd (ASX: BAP) is an interesting one in my opinion. It's the biggest auto parts business in Australia and New Zealand with a number of brands like Burson and Autobarn.

I think that people are more likely to delay a new car purchase in leaner times. This means trying to make their current car last longer, which could mean buying replacement parts when needed. This, in turn, could be good for Bapcor's earnings.

Motley Fool contributor Tristan Harrison has positions in RURALFUNDS STAPLED. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband Limited, CSL Ltd., and Collins Foods Limited. The Motley Fool Australia has positions in and has recommended APA Group, COLESGROUP DEF SET, RURALFUNDS STAPLED, and Telstra Corporation Limited. The Motley Fool Australia has recommended Aussie Broadband Limited, Bapcor, Collins Foods Limited, Propel Funeral Partners Ltd, Sonic Healthcare Limited, and TPG Telecom Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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