2 Stocks to Beat a Recession

With the Dow just above the 12,000 mark again, but the threat of a double-dip recession still palpable, it would do investors well to consider the impact a renewed downturn might have on our portfolios. It might be tempting to move to an all-cash position, but before you make such a hasty move, take the time to look at stocks that have the ability to hold up in tough times.

I used the Motley Fool CAPS supercomputer to look for companies that have proved to be less volatile than the market, but which have been reporting strong revenue and earnings growth over the past few years. With a beta of 1 or less, these companies ought to react less violently to any market swoon.

By adding in a measure of cheapness -- these stocks also carry a P/E ratio that's less than average -- we build in a margin of safety. However, with the CAPS community according them high ratings, we're getting companies that are expected to outperform.

Following are a handful of stocks that look like they could do well in any extended downturn.

Stock	CAPS Rating (out of 5)	3-Year Average Beta	3-Year Average Revenue Growth	3-Year Average EPS Growth	PE Ratio
Tim Hortons (NYSE: THI  )	****	0.6	16%	45%	12.1
Yamana Gold (NYSE: AUY  )	****	0.4	23%	15%	18.2

Source: Motley Fool CAPS screener.

The long-term view
Hot and cold. Fire and ice. There's something about pairing coffee and ice cream that seems to blend nicely. Dunkin' Brands (Nasdaq: DNKN  ) has done it for years, pairing its Dunkin' Donuts coffee shops with Baskin-Robbins ice cream parlors. Not only are there individual storefronts catering to each brand, but there's joint counter space, too. Dunkin' doesn't say how many co-branded stores it has, but there are 9,900 Dunkin' Donuts shops and more than 6,600 Baskin-Robbins stores with a combined 16,500 distribution points worldwide. More than a few overlap.

Canadian coffee shop Tim Hortons doesn't have the breadth of coverage that Dunkin' Brands does, but it sees the benefit of linking hot and cold together. It has 215 coffee houses that are co-branded with Cold Stone Creamery, a division of tiny Kahala, which also owns Blimpie subs and quick-serve Ranch 1 chicken stores. It's a concept it's still looking to grow, and as it expands its namesake footprint in the U.S. -- same-store growth here ran north of 6% -- we're likely to see more of these pairings.

Considering that's one area Starbucks (Nasdaq: SBUX  ) has yet to exploit, Hortons may use that as a differentiator to its competition.

With 94% of the more than 100 CAPS All-Stars rating the coffee shop to outperform the broad market indexes, it's apparent they see the stock running hot more often than cold. Add Tim Hortons to your watchlist, and tell us on the Tim Hortons CAPS page whether you think it can continue heating up a portfolio with two simple pleasures.

A conga line higher
It almost goes without saying that in a recession you should have some gold in your portfolio. While the Fool's precious-metal guru Chris Barker finds Primero Mining (NYSE: PPP  ) to be the single greatest gold stock in the world right now, principally because the market has discounted it so much because of its tax issues with Mexico, he also counts Yamana Gold as a hugely undervalued company that could easily double in price, driven higher on the strength of its copper reserves. For example, its Chapada project's by-product cash cost incredibly came in at a negative $2,045 per ounce.

With gold at $1,616 an ounce, there remains plenty of takeoff room on the runway to $2,000 an ounce that Barker sees as the reasonable next stage of valuation. CAPS member 1oldfatguy would be hard-pressed to disagree with his assessment of Yamana's prospects.

One of the best run mining companies in terms of cost of GEO produced. Gold continues to remain 3x higher than cost and Yamana adding output and output capacity. Dividend will surely rise as CEO has indicated it should. Will make more attractive to new buyers and drive price of stock up as demand remains solid in uncertain economy for next year or so.

Yamana recently reported third quarter revenues of $555 million, up 22% from the year-ago period, with cash costs of $468 per gold equivalent ounce. It hardly matters what price gold trades for -- Yamana will profit immensely.

Follow along to see whether the gold miner can dig up additional opportunities to drive down its costs by adding Yamana Gold to�your watchlist.

Take a recess
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