A stock that shrugged off the last recession …

Back in the fall of 2008, investors were running from the stock market like crazy because recessionary conditions had clearly set in. And with “double-dip” headlines all over the place and the Dow back around that all-important 10,000 level, we could be in for a similar exodus exactly two years later.

There’s no telling whether this fall will hold another drubbing for U.S. shares. But either way, I want you to know that you don’t have to abandon stocks altogether even in the worst of times.

In fact, once you know what to look for, you can not only sleep well at night while holding U.S. companies through thick and thin but also spot terrific bargains if prices do decline further.

Case in point …

McDonald’s: It Thrived During the Last Recession And
Rewarded Investors with Dividends and Capital Gains

In November of 2008, while everyone else was heading for the exits, I wrote an article right here in Money and Markets about the world’s largest fast food chain, McDonald’s.

As I pointed out:

#1. It had a good history of hiking dividends.

My specific proof back then:

“In 2007, it decided to boost its annual payment by a whopping 50 percent. Then, just last month, it decided to increase its dividend another 33 percent!”

#2. Investors were failing to understand just how recession-resistant its business was.

Here’s exactly what I said:

“While it’s technically a consumer discretionary company, MCD is really a consumer staple food stock these days.

“After all, where else can financially squeezed people find complete meals for a few bucks? In many cases, eating at McDonald’s is far cheaper than buying similar ingredients and making a home-cooked meal.”

“In the kind of recessionary environment we have now, that argues for stronger sales. People will flock to the lowest-cost sources of food, especially when they save time in the process.”

#3. Its big international reach would help the company further.

My original words:

“The company’s huge — and expanding — overseas presence will further insulate it from weakness in one region and provide plenty of future growth.

“In the last two months, I’ve spent time on four different continents. And you know what I saw every place I visited? Lots and lots of Ronald McDonald’s!”

As I also noted in that column, I had already recommended McDonald’s to my Dividend Superstars subscribers a year earlier … and in July of 2009, I told them to double their stake in the company.

Here’s a chart that shows my two “buy” recommendations and how the stock has performed since then …

Obviously both of those recommendations should have produced solid profits for anyone who acted on them.

In fact, I just told subscribers to take their profits off the table because the shares hit a new 52-week high and I consider them more than fairly valued. I’m tracking capital gains of 29 percent and 30.9 percent, respectively.

Meanwhile, the S&P 500 has LOST 28 percent since my first recommendation of McDonald’s, and has risen only 8 percent since the day I told subscribers to add more shares of MCD.    

Perhaps the most important thing to note is how little McDonald’s stock dipped throughout that entire tumultuous period in the broad stock market: They were never underwater more than 8.4 percent even when the S&P 500 was down a whopping 54 percent!

My point is simple …

Don’t Run Scared from All Stocks,
Just Choose the Ones You Buy Wisely

Clearly, I am no longer saying McDonald’s is a stock to buy right now. The shares would have to come down in price before I would re-recommend them to anyone.

However, the very same characteristics I once used to support my argument for buying MCD can certainly help you find new opportunities in the stock market … even now, with the prospect of a double-dip recession staring us in the face.

There’s no reason to view things in black and white. There are always undervalued companies out there that rise even when the broad market falls. There are plenty of businesses that thrive even as the economy tanks. And many companies continue to mail out fat dividend checks even when other income sources have run dry.

Best wishes,

Nilus

P.S. In the latest issue of Dividend Superstars, which just went to press on Friday, I actually recommended a new company that reminds me a lot of MCD two years ago. It also has a well-recognized name … has been boosting dividends like crazy … and its recession-resistant business is being completely misjudged by investors right now.

If you want to get all the details on that new “buy” sent to you right away, just click here to sign up for a risk-free subscription to my newsletter.