In this article, we discuss the 10 best recession stocks to buy according to Jim Cramer.
Economic pessimism is growing in the United States amid high energy prices, soaring inflation, slowing economic growth, and a slump at the stock market. According to a recent survey by management consulting firm Gallup, nearly 46% of Americans consider present economic conditions to be “poor” while nearly 39% rate them as “only fair”. Market experts predict that the economy could go into a recession by 2023 or 2024 as the central bank raises rates to bring inflation down, although many see the rate hikes as “too little, too late”.
In this overall environment, the stock market is getting battered. Jim Cramer, the former hedge fund manager and present host of Mad Money on CNBC, thinks that the prices are going higher on the pump and there was not much anyone could do to stop the tide, not even the president. However, the journalist investor has advised his viewers to go ahead and pick up the shares of “valuable companies” that report bad news but have a historical ability to weather the oncoming storm because Wall Street was “overlooking imperfections”.
Some of the stocks that Cramer is monitoring include Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and AT&T Inc. (NYSE:T). Cramer claims that “stocks have been so crushed in anticipation of multiple rate hikes, you can be bold enough to buy a discounted product without much hesitation”. Cramer also noted that so much money had been lost in new firms, pointing to the record IPO year in 2021 and the loss of appetite for these IPOs in 2022 as an example, to argue that it was time to invest in tried and tested old names.
Our Methodology
These were picked keeping in mind the latest calls that Cramer made on these equities on his Mad Money show aired by news platform CNBC. An extensive database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the popularity of each stock among hedge funds.
Best Recession Stocks to Buy According to Jim Cramer
10. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 41
Constellation Brands, Inc. (NYSE:STZ) is a New York-based firm which markets several alcoholic products such as beer, wine, and spirits. Cramer has been bullish on the company over the past several weeks. In a recent post for news platform CNBC, the investor identified the beermaker as one of the firms that did well in both good and bad times for the economy. Per the veteran investor, beer sales actually go up during periods of recession, and could benefit the stock in the coming months as the economy slows.
On April 8, Credit Suisse analyst Kaumil Gajrawala maintained an Outperform rating on Constellation Brands, Inc. (NYSE:STZ) stock and raised the price target to $295 from $278, noting that the quarterly results of the firm were strong and guidance was comfortably healthy.
At the end of the first quarter of 2022, 41 hedge funds in the database of Insider Monkey held stakes worth $982 million in Constellation Brands, Inc. (NYSE:STZ), compared to 48 in the previous quarter worth $1.3 billion.
Just like Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and AT&T Inc. (NYSE:T), Constellation Brands, Inc. (NYSE:STZ) is one of the stocks on the radar of elite investors.
9. American Tower Corporation (NYSE:AMT)
Number of Hedge Fund Holders: 50
American Tower Corporation (NYSE:AMT) is a Boston-based real estate investment trust that primarily operates communications infrastructure. Cramer gave the stock a Buy recommendation during the Discussed Stock segment of his show on June 1. The investor claimed that the company was a “pure play” in the data center and cell towers sector and a “better investment” than peers like DigitalBridge because of a less complicated corporate structure. The firm has paid a growing dividend to shareholders for the past ten years.
On June 5, Bank of America analyst David Barden resumed coverage of American Tower Corporation (NYSE:AMT) stock with a Buy rating and a price target of $315, noting that the firm had removed overhangs for investors with a private capital announcement recently.
At the end of the first quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $4.1 billion in American Tower Corporation (NYSE:AMT), compared to 53 in the previous quarter worth $4.7 billion.
In its Q3 2021 investor letter, Qualivian Investment Partners, an asset management firm, highlighted a few stocks and American Tower Corporation (NYSE:AMT) was one of them. Here is what the fund said:
“What Attracts Us
Superior Business:
- High barriers to entry resulting from low bargaining power of suppliers (land owners) and customers (wireless companies). Neither can find reasonable substitutes for existing cell towers. Combined with low possibility of disruption, this results in a business oligopoly and pricing power.
- Stable business with consistent high returns on equity, low maintenance capital required, and strong cash generation.
− Ten-year, non-cancelable contracts with built in pricing escalators and high renewal rates
− 1%-2% churn
Superior Reinvestment Opportunities:
- Strong growth for the foreseeable future due to increasing demand for wireless data usage, resulting in wireless carriers Capex equipment spend on existing and new towers.
- Low maintenance capital expenditure requirements; most of capital expenditure is for growth
Superior Management / Capital Allocation:
- Capital reinvested back in business has had returns well above cost of capital
- Company has purchased stock opportunistically…” (Click here to see the full text)
8. 3M Company (NYSE:MMM)
Number of Hedge Fund Holders: 51
3M Company (NYSE:MMM) is a diversified technology company. The journalist investor gave the firm a Buy recommendation during the Discussed Stock segment of his show on May 2. He has previously put the company in a basket of “great American” firms that tend to weather market swings better than others. He also claimed that these firms are profitable and have tangible products, making them suitable to own during periods of recession. He has also appreciated the recent quarterly earnings of the firm.
On April 27, Credit Suisse analyst John Walsh maintained a Neutral rating on 3M Company (NYSE:MMM) stock and lowered the price target to $161 from $173, noting that the firm was facing some supply chain issues.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in 3M Company (NYSE:MMM), with 6 million shares worth more than $898 million.
7. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE: DG) operates as a discount retailer. Jim Cramer was bullish on the stock during the Discussed Stock segment of his show on April 11. He has previously outlined that consumer spending patterns are strong and Dollar General is poised to outperform at the low-end of the retail sector due to this boom. During periods of recession, as pricing power declines, consumers could shift towards discount retailers even more, putting the firm in place to benefit from an economic downturn.
On May 27, investment advisory Deutsche Bank maintained a Buy rating on Dollar General Corporation (NYSE:DG) stock and raised the price target to $264 from $234. Analyst Krisztina Katai issued the ratings update.
At the end of the first quarter of 2022, 53 hedge funds in the database of Insider Monkey held stakes worth $2.25 billion in Dollar General Corporation (NYSE:DG), compared to 44 in the preceding quarter worth $2.20 billion.
In its Q3 2021 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Dollar General Corporation (NYSE:DG) was one of them. Here is what the fund said:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General Corporation (NYSE:DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General Corporation (NYSE:DG) is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General Corporation (NYSE:DG) was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.” (Click here to see full text)
6. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
The Coca-Cola Company (NYSE:KO) is a beverage company based in Georgia. Cramer has identified the firm as an “endurable, investable” one that delivers “clinical” earnings. Recently, the investor also highlighted it as one of the firms that had historically done well during a recession, pointing to the sales numbers and noting that they increased during an economic slowdown. Coca-Cola has a dividend history stretching back six decades, with 59 consecutive years of growing payouts to shareholders.
On April 26, Guggenheim analyst Laurent Grandet maintained a Buy rating on The Coca-Cola Company (NYSE:KO) stock and raised the price target to $71 from $68, noting the firm was “best placed company in the food and beverage space to navigate high inflation”.
Among the hedge funds being tracked by Insider Monkey, Nebraska-based firm Berkshire Hathaway is a leading shareholder in The Coca-Cola Company (NYSE:KO), with 400 million shares worth more than $24.7 billion.
In addition to Apple Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and AT&T Inc. (NYSE:T), The Coca-Cola Company (NYSE:KO) is one of the stocks that hedge funds are keeping their eye on.
5. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 67
Zoetis Inc. (NYSE:ZTS) is a drug company. Cramer had previously said that he is bullish on the “humanization of pets” business and forecasts lots of growth in the area. The journalist investor claims Zoetis is a “well-run” company and one of the best positioned to benefit from drug trends in the pet space. In recent advice for young investors on how to invest during a recession, Cramer highlighted that companies that had historical ability to weather storms, like in the drug sector – Zoetis is a spinoff of drug giant Pfizer – could be a solid bet.
On March 9, investment advisory Citi maintained a Neutral rating on Zoetis Inc. (NYSE:ZTS) stock and lowered the price target to $208 from $232. Navann Ty, an analyst at the firm, issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in Zoetis Inc. (NYSE:ZTS), with 3.3 million shares worth more than $627 million.
In its Q3 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and Zoetis Inc. (NYSE:ZTS) was one of them. Here is what the fund said:
“Finally, exiting our position in Zoetis Inc. (NYSE:ZTS) was purely a function of valuation. With the business trading for up to 45x forward earnings, we felt we had more attractive alternatives. We maintain high conviction in the company and their competitive advantages and hope to be owners again, at a more attractive valuation. In short, we sold what we believe to be very a high-quality business at relatively high valuations to fund the purchase of equally high-quality businesses trading at lower valuations and even better long-term earnings growth prospects. While we are certainly not tactical in approach, we do aim to make prudent adjustments over time.”
4. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 67
NIKE, Inc. (NYSE:NKE) makes and sells athletic products. Cramer has said that there has been “too much fear” around names like Tesla, Apple, and Nike in light of their dependence on China in recent weeks. As China lifts virus lockdowns, these stocks, which delivered solid earnings even during the pandemic, could lift even higher. Cramer has advised investors to stick with firms that have “pricing power” during a recession, identifying Nike as one which caters to the high-end retail segment in this category.
On June 6, Stifel analyst Jim Duffy maintained a Buy rating on NIKE, Inc. (NYSE:NKE) stock and lowered the price target to $150 from $160, backing the firm to meet multi-year growth targets despite COVID and China restrictions.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in NIKE, Inc. (NYSE:NKE), with 6.7 million shares worth more than $905 million.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NIKE, Inc. (NYSE:NKE) was one of them. Here is what the fund said:
“NIKE, Inc. (NYSE:NKE) is another play on e-commerce as well as the anticipated growth in consumer spending as we learn to live with COVID-19. After selling out of the stock in 2016 due to competitive concerns, we were motivated to repurchase shares because of optimism around a new management team’s focus on accelerating Nike’s shift toward e-commerce and direct-to-consumer (DTC) distribution. Near-term supply chain issues in Vietnam and retail weakness in China that we see as ephemeral provided a good buying opportunity. We do not believe the market is giving proper credit to Nike’s potential to deliver attractive, high-single-digit revenue growth while delivering operating margin expansion as more merchandise is sold direct. NIKE, Inc. (NYSE:NKE) is also still under indexed to the women’s category, which we see as a significant ongoing catalyst.”
3. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
The Procter & Gamble Company (NYSE:PG) markets consumer packaged goods. Cramer is bullish on the stock and has advised investors to stick to consumer staples during a recession. Cramer recently said that consumer staples tend to do well during a recession as people will keep buying staples regardless of the overall economic outlook. He has also highlighted the dividend history of the company, which goes back nearly six decades, as another reason to own the stock during an economic slowdown.
On June 1, Deutsche Bank analyst Steve Powers maintained a Buy rating on The Procter & Gamble Company (NYSE:PG) stock and lowered the price target to $171 from $177, noting that the firm had outperformed against an increasingly difficult cost, consumer, and supply backdrop.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in The Procter & Gamble Company (NYSE:PG), with 9.9 million shares worth more than $1.5 billion.
2. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 83
Danaher Corporation (NYSE:DHR) is a Washington-based conglomerate with interests in professional, medical, industrial, and commercial products and services. Cramer gave the stock a Buy recommendation during the Lightning Round segment of his show on June 1. The Investing Club of CNBC, which Cramer heads, has identified the firm as the “right kind of stock” for the present market given its reliable earnings history.
On June 1, RBC Capital analyst Deane Dray upgraded Danaher Corporation (NYSE:DHR) stock to Outperform from Sector Perform and raised the price target to $310 from $299, noting that the “high quality, defensive portfolio looks incrementally more attractive given the higher Wall of Worry/macro fear”.
At the end of the first quarter of 2022, 83 hedge funds in the database of Insider Monkey held stakes worth $6.1 billion in Danaher Corporation (NYSE:DHR), compared to 87 in the preceding quarter worth $7.3 billion.
In its Q1 2022 investor letter, Cooper Investors, an asset management firm, highlighted a few stocks and Danaher Corporation (NYSE:DHR) was one of them. Here is what the fund said:
“This combination of attributes was not in favour during a quarter where the market rotated into larger, more traditional index heavyweights that, while growing more slowly and generating lower returns on capital, typically trade on lower headline multiples. In Healthcare for example, we saw portfolio holdings Danaher Corporation (NYSE:DHR) fall 10-15% in the quarter. Given the relative business quality and growth prospects for a life sciences capital allocator champion like Danaher Corporation (NYSE:DHR) versus a large diversified pharma company, we think this period of underperformance is likely more a blip than a trend.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) makes and sells healthcare products. Cramer gave the stock a Buy recommendation during the Discussed Stock segment of his show on May 2. The journalist investor had previously noted that the firm was one of the great American firms and that investors will not have time to buy the shares at such great prices if inflation were to fall.
On May 23, SVB Leerink analyst David Risinger assumed coverage of Johnson & Johnson (NYSE:JNJ) stock with an Outperform rating and a price target of $200, backing the firm to deliver consistent earnings growth to investors.
At the end of the first quarter of 2022, 83 hedge funds in the database of Insider Monkey held stakes worth $7.4 billion in Johnson & Johnson (NYSE:JNJ), the same as in the previous quarter worth $7.3 billion.
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Disclosure. None. 10 Best Recession Stocks to Buy According to Jim Cramer is originally published on Insider Monkey.
