Rattled by the Stock Market Sell-Off? These 3 Stocks Outperformed the S&P 500 During the Great Recession

The economy has been on shaky ground for a while, and President Trump's tariffs and trade wars could finally send it into a recession. That's a big concern for the market these days as consumers have been keeping discretionary spending to a minimum as high costs have created many affordability issues. If costs get even higher, that may only make things worse.

If you're wondering which stocks might do well even if the U.S. economy slumps, you may want to look back to see which ones thrived during the last prolonged recession -- the Great Recession, which took place between December 2007 and June 2009. The S&P 500 fell by 36% during that period. By contrast, Netflix (NASDAQ: NFLX), Ross Stores (NASDAQ: ROST), and Vertex Pharmaceuticals (NASDAQ: VRTX) did well during that stretch.

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Netflix: Up 77%

Netflix was a much smaller business during the Great Recession, but it was experiencing rapid growth and it was a promising business to invest in -- gaining 77% during the Great Recession. This was in the early stages of offering streaming video, and mailing DVDs out to customers was still the core part of its business. Excitement about the new streaming service was likely a key reason for Netflix's impressive stock performance during this turbulent period.

If another recession hits in 2025, Netflix may still make for a good investment. While consumers may be unhappy with its price increases, its streaming service offers excellent value. With ads, the service costs $7.99 a month and without them, the lowest-priced tier is $17.99 a month. Considering the variety and volume of programming it offers, Netflix is still an attractive option and a way for consumers to keep their entertainment costs down, especially if the alternative might be a cable TV subscription or going to the movies.

The only price for Netflix that I don't like is its price-to-earnings multiple of 48. That's a fairly high ratio that could leave the stock vulnerable to an adjustment if investor sentiment sours on the market as a whole. However, it could still be among the safer stocks to be holding during a recession.

Ross Stores: Up 51%

Another business that may be a go-to place for consumers looking to save amid challenging economic conditions is Ross Stores, which rose 51% during the Great Recession. The off-price retailer benefits by acquiring goods that other retailers are having difficulty selling and are looking to offload. Because of that strategy, consumers can find brand-name products in Ross stores at bargain prices; it's not uncommon to find people posting videos of the deals they find on social media.

Ross proved to be a great stock to own during the Great Recession and may also do well should the economy struggle in the near future. The company has set a conservative forecast for its fiscal 2025 (which ends Jan. 31, 2026), projecting that same-store sales will land in the range of down 1% to up 2%, as management notes that macroeconomic conditions are weighing on its in-store traffic.

While that may not be a terribly rosy outlook, Ross' focus on low-cost merchandise could position it better to handle a downturn than many other retailers. And with the stock trading at less than 20 times trailing earnings, its valuation is appealing; the average stock in the S&P 500 trades at 23 times earnings.

Vertex Pharmaceuticals: Up 18%

Pharma stock Vertex Pharmaceuticals was also a much different business during the Great Recession, when it still gained 18%. It wasn't profitable, and its lead drug candidate at the time was telaprevir, which has since been discontinued. Today, Vertex generates billions of dollars in annual revenues from its cystic fibrosis business, which centers around the triple-drug treatment Trikafta/Kaftrio. In 2024, the company generated more than $11 billion in sales. Back in 2007, its top line totaled just $199 million.

Vertex has been a phenomenal growth stock, and with the FDA approval of its non-opioid pain medication Journavx in January, more growth could be on the way. The company's highly profitable operations could make it a fairly safe growth stock to own. Last year, it reported an operating profit of $4.4 billion, giving it an impressive margin of 40%. If it can maintain that level of profitability while also growing at a fast rate, the stock could have a lot more room to rise.

Currently, it's trading at nearly 30 times next year's estimated earnings. With a promising R&D pipeline that includes candidate treatments for type 1 diabetes, IgA nephropathy, and APOL1-mediated kidney disease, Vertex could make for a great long-term stock to buy and hold, regardless of what happens to the U.S. economy in the short term.

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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.