Related question: which tech products are 'inferior goods' - goods whose demand rises when incomes fall https://en.wikipedia.org/wiki/Inferior_good
Pay-as-you-go phone plans. Early model phones. Phone/pc repair.
Ask HN: What tech companies/industries will do well in a recession?
61–70 of 184 posts
Re: Ask HN: What tech companies/industries will do well in a recession?
#62If you're wondering what to invest in, I would stick to VTI/ITOT/etc. Some people will definitely be lucky but nobody knows nothing!
Re: Ask HN: What tech companies/industries will do well in a recession?
#63Companies that cater mostly to luxury clients Anything energy related. Geography also plays an important role. Places like the valley saw very little impact while the place I was living at in the South basically had it's software ecosystem gutted. It did bounce back within a year though, so just make sure you have enough funds to ride a recession out in the worst case.
No energy will do badly; go back to 2008 and see what happened to energy companies after oil had its 150 USD price spike.
Re: Ask HN: What tech companies/industries will do well in a recession?
#64In every recession we have seen a big uptick in startups being created. If you look at the last big one in 2008 a number of notable startups got their start including Twilio. So I would imagine the same will happen if we dip into a big recession. We are starting to see some of that happen now. I read a report that in 2021 VCs invested in double the SaaS companies than they did in 2020. However, 2020 was a bad year fo…
Startup creation / funding is closely correlated with near-zero interest rates. When money is cheap, venture capital is more lucrative. This correlates closely with the early 2000s bubble, the 2008 crash that dropped interest rates and allowed for extreme amounts of venture capital, and the 2020-2021 surge in startup investment. Venture capital in theory becomes a far less lucrative choice in a high-inflation, rising interest rate market. While we’ve definitely seen a bit of a pullback in VC funding over the last 6 months, it remains to be seen whether that was another temporary dip like in Feb/March 2020 or a larger shift in the market.
Personally, I think the entire economy has shifted to focus on SaaS revenue growth above all else, and it will be impossible to “pull back” from venture capital because of that inertia, but in theory based on historical trends there should be a pull-back.
Re: Ask HN: What tech companies/industries will do well in a recession?
#65There is no exact answer to this question, just a set of factors that contribute towards doing better than someone else.
First, do you directly make money for a company, or directly reduce costs? The closer you are to core activities that generate income, or increase efficiency, then the more protected you will be from being laid off. This applies to companies too in a way.
Companies need core services like email or ERP. Chat like Slack is now core compared to the situation in 2008. This core software is going to be the last thing that companies want to change. What they will focus on eliminating is all of the nice-to-have software that has been deployed in their organization. SaaS costs add up at the department and company levels and companies will look to eliminate low hanging fruit.
If something has low usage numbers, that'll go. When some product has a nice UX, but there is an alternative within some other product, then the nice UX won't win out (e.g. use Jira instead of Asana.)
These are examples of software, but the same patterns play out across other categories. What's worth considering, is how can these things come out of a recession? At the start of the recession, contingent staff or contractors were often let go before employees. As the economy recovered, hiring contractors was a safer bet during the uncertain window when it wasn't clear that we had turned a corner. SaaS started to become a viable option because you could get started cheaply and didn't have to stump up funds for implementation. We take SaaS for granted now, but a lot of the growth came out of the last recession when you could make arguments for it.
Re: Ask HN: What tech companies/industries will do well in a recession?
#66"Recession" is a bit ambiguous. To identify winners and losers in any economic climate you need to consider the specific factors at play, and the winners of previous "recessions" may or may not be winners in the next. In this case _my_ assessment is that we're facing a prolonged period of high inflation partially fueled by factors which can't be mitigated by Fed actions (COVID lockdowns in China, global transportatio…
> In that economic environment, consumer staples which do their own production and have the ability to quickly respond to inflation are favoured. I'm in a sector ETF for this.
What are some example ETFs in that space?
Commodities oriented ETFs?
---------- UPDATE ----------
OK, nevermind. :-) Googled "consumer staples etf" and a bunch of examples came up.
https://www.investopedia.com/top-performing-consumer-staples...
---------- UPDATE ----------
Top 10 holdings of IYK
Procter & Gamble PG 16.91%
Coca-Cola KO 11.10%
PepsiCo PEP 10.40%
Philip Morris PM 6.95%
CVS CVS 4.04%
Altria MO 3.60%
Mondelez MDLZ 3.40%
Colgate CL 3.00%
Archer Daniels Midland ADM 2.44%
Kimberly-Clark KMB 2.34%
----------
Consumer staples -> consumer poisons. This leads to upward pressure in healthcare.
Re: Ask HN: What tech companies/industries will do well in a recession?
#67Companies that cater mostly to luxury clients Anything energy related. Geography also plays an important role. Places like the valley saw very little impact while the place I was living at in the South basically had it's software ecosystem gutted. It did bounce back within a year though, so just make sure you have enough funds to ride a recession out in the worst case.
> Anything energy related.
The oil and gas industry would say otherwise.
Re: Ask HN: What tech companies/industries will do well in a recession?
#68Anything that assumes low interest rates might be negatively affected. Capital intensive things based on renting/leasing (e-scooters?) are in the cross-hairs.
Credit/pay-later services will have greater credit losses, higher risks and higher rates.
Viewing hours on ad-based tech might not be negatively affected, but that doesn't translate linearly to revenue.
Re: Ask HN: What tech companies/industries will do well in a recession?
#69Earlier quoted context omitted.
You have a valid point, I was thinking luxury retail.
Why would luxury retail be a good harbor in a recession? Usually luxury spending goes down.
There is a significant population on Planet Earth that are "permahedged" from any material anxieties. Clearly, we are talking about annual consumption trends of $500K per individual, and not in the luxury yacht race. (They likely already have access to one if needed).
This is the market to cater to. The question is: with what truly novel good?
Re: Ask HN: What tech companies/industries will do well in a recession?
#70"Recession" is a bit ambiguous. To identify winners and losers in any economic climate you need to consider the specific factors at play, and the winners of previous "recessions" may or may not be winners in the next. In this case _my_ assessment is that we're facing a prolonged period of high inflation partially fueled by factors which can't be mitigated by Fed actions (COVID lockdowns in China, global transportatio…
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