Building a Recession-Proof Business Strategy

As an investor, I love boring businesses. I'm talking about unglamorous but essential companies providing stable products and services that are always in demand - utilities, consumer staples, healthcare providers. They may not make headlines, but they steadily generate reliable profits year after year.

Why am I so attracted to these boring businesses? Because they tend to be incredibly resilient and resistant to economic ups and downs that can crush trendier companies. Their products and services remain necessary purchases regardless of whether we're in a booming or recessionary environment. When inflation flares up, their pricing power allows them to pass along rising costs to customers. And in bear markets, these steady earners keep compounding returns via dividends and buybacks while risky growth plays crumble.

I'm not saying ditch all growth companies - they certainly have a place in a balanced portfolio. But I anchor my holdings first with these steady cash cows. They provide stability and lower overall volatility, while growth names offer some upside potential.

On reducing volatility, I know many wonder how new disruptive technologies like AI will fare during high inflation periods or severe downturns. The truth is we lack much historical precedent to judge from yet. In theory, as a powerful general-purpose technology, AI adoption could keep rising even in tough times as companies look to boost productivity. But we could also see more speculative AI initiatives delayed or axed if conditions deteriorate dramatically.

My take is leading AI companies with diversified revenue streams and solid fundamentals should weather short-term macro storms reasonably well, similar to how big tech has navigated previous cycles. But investors overly reliant on pure AI moonshots may be disappointed. As always, prudent portfolio management centered on cash flows and balance sheets will be critical.

While AI and other innovations will undoubtedly transform industries, the investment case for high-quality but boring businesses isn't obsolete. A mix of cutting-edge and battle-tested companies remains a winning formula. Load up first on those steady earners, and let the sizzling AI plays be the side dish enhancing your solid core portfolio.