In this article, we discuss 10 stocks that rebound after recessions.
The United States economy is in the midst of recession fears as rising prices and interest rates spook investors. In the middle of this turmoil, the US Department of Labor released the job numbers from April, reporting solid growth in the sector and marking the 16th consecutive month of gains. The US economy added 428,000 jobs in April despite inflation and the unemployment rate in the period remained steady at 3.6%. The numbers are all the more remarkable considering the US economy lost nearly 22 million jobs during the pandemic.
Federal Reserve chairman Jerome Powell, who has faced criticism for his tackling of the situation from several quarters on Wall Street, has pointed to the labor market to justify his actions, saying recently that the tight labor market in which openings outnumber available workers by nearly two to one was a sign there was room to reduce demand without inducing a sharp downturn. He also added that wages were rising far more quickly than would be consistent with the 2% target for inflation set by the central bank.
Restaurants, bars, and manufacturers are all looking for more workers, pointing to the internal resilience of the economy in the US despite recession headwinds globally, an argument that has also been highlighted by US President Biden to boost investor confidence recently. Investors who want to take advantage of the present situation can pick up the shares of companies like The Walt Disney Company (NYSE:DIS), Walmart Inc. (NYSE:WMT), and Marriott International, Inc. (NASDAQ:MAR) at discounted prices and reap the benefits of the recovery later.
Our Methodology
The stocks that tend to rise and fall with the fortunes of the economy were selected for the list. The business fundamentals and analyst ratings of these firms are also discussed to provide further context. Hedge fund sentiment was included as a classifier as well. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to quantify the hedge fund sentiment around each stock.
Source:Pixabay
Stocks that Rebound After Recessions
10. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 23
Restaurant Brands International Inc. (NYSE:QSR) owns and runs quick service restaurants. Some of the famous brands it runs include Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs. The company has been building a dividend history in the past few years, increasing the payout consistently for the last six years. On May 3, the firm declared a quarterly dividend of $0.54 per share, in line with previous. The forward yield was 3.79%. The dividend is payable to shareholders by early July.
On May 5, Credit Suisse analyst Lauren Silberman maintained an Outperform rating on Restaurant Brands International Inc. (NYSE:QSR) stock and lowered the price target to $68 from $73, underlining that the long-term growth plans of the firm would encourage investors to get more constructive on the stock in the coming months despite mixed first quarter results.
At the end of the first quarter of 2022, 23 hedge funds in the database of Insider Monkey held stakes worth $1.75 billion in Restaurant Brands International Inc. (NYSE:QSR), compared to 24 in the preceding quarter worth $1.78 billion.
Just like The Walt Disney Company (NYSE:DIS), Walmart Inc. (NYSE:WMT), and Marriott International, Inc. (NASDAQ:MAR), Restaurant Brands International Inc. (NYSE:QSR) is one of the stocks on the radar of elite investors.
In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Restaurant Brands International Inc. (NYSE:QSR) was one of them. Here is what the fund said:
“Restaurant Brands International Inc. (NYSE:QSR) is a high-quality business with significant long-term growth potential trading at a highly discounted valuation.
Comparable sales have recovered or are well on their way to recovery.
Tim Hortons Canada improved to a mid-single-digit decline during Q3 relative to 2019.
Burger King U.S. under new leadership and poised to make a recovery.
Burger King International and the Popeyes brand continue to grow well with strong same-store sales growth relative to 2019 levels. As underlying sales trends recover, QSR’s share price should more accurately reflect our view of its business fundamentals.
Management continuing to make investments for future growth.” (Click here to read full text)
9. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Holders: 38
AutoZone, Inc. (NYSE:AZO) markets automotive replacement parts and accessories. The company posted earnings for the third fiscal quarter on May 24, reporting earnings per share of $29.03, beating market estimates by $3.16. The revenue over the period was $3.8 billion, up 6% compared to the revenue over the same period last year and beating analysts’ expectations by $160 million. In the first three months of 2022, the domestic same store sales increased 2.6% for the company compared to the previous quarter.
On May 13, Citi analyst Steven Zaccone maintained a Buy rating on AutoZone, Inc. (NYSE:AZO) stock and raised the price target to $2,250 from $2,210, noting that there were growing recession risks at retail firms.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in AutoZone, Inc. (NYSE:AZO), with 148,531 shares worth more than $303 million.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and AutoZone, Inc. (NYSE:AZO) was one of them. Here is what the fund said:
“The Fund’s investments in auto-related businesses were consistent top performers in 2021. Shortages of new vehicles have driven buyers into the used car market. AutoZone, Inc. (NYSE:AZO) has won new customers who need to maintain vehicles they now plan to own longer (and federal stimulus checks have given car owners some extra cash to spend on car maintenance).”
8. Tapestry, Inc. (NYSE:TPR)
Number of Hedge Fund Holders: 39
Tapestry, Inc. (NYSE:TPR) markets luxury accessories and branded lifestyle products. Despite a high inflation environment, the firm has a growing top line forecast as it brings in new customers through digital advertising spend. It has also increased share buyback targets recently and boasts a high forward yield and improving efficiency. These are likely to help the firm make cash flow more sustainable in the future. The stock has dropped by about 30% in the past few months but is well-positioned to gain as the markets recover from recession fears.
On May 16, Barclays analyst Adrienne Yih maintained an Overweight rating on Tapestry, Inc. (NYSE:TPR) stock and lowered the price target to $39 from $53, highlighting that “transitory headwinds in China were largely expected and should subside into fiscal 2023”.
At the end of the first quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $605 million in Tapestry, Inc. (NYSE:TPR), compared to 48 in the preceding quarter worth $827 million.
In its Q3 2021 investor letter, Ariel Investments highlighted a few stocks and Tapestry, Inc. (NYSE:TPR) was one of them. Here is what the fund said:
“Luxury accessory and lifestyle brand, Tapestry, Inc. (NYSE:TPR) was the top contributor to performance over the trailing one-year period. Revenue improvement across all three brands with a notable increase in consumer demand, particularly for the Coach business, triple-digit growth in e-commerce, and better than expected pricing, drove margins higher. Looking ahead, we expect Tapestry’s supply chain and SKU rationalization initiatives to continue to deliver margin expansion. Together, with early signs of improved receptivity for the Kate Spade brand, we believe a significant value creation opportunity lies ahead.”
7. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 45
Southwest Airlines Co. (NYSE:LUV) is a passenger airline firm. On May 11, the company announced that it would be spending $2 billion in the coming years to improve the passenger traveling experience. The improvements include faster internet service, power outlets at every seat on new planes, larger overhead bins for carry-on bags, as well as more entertainment and refreshment options. A new fare category is also being introduced that will slot in between the cheapest and mid-tier fare categories.
On May 2, Citi analyst Stephen Trent maintained a Neutral rating on Southwest Airlines Co. (NYSE:LUV) stock and raised the price target to $53 from $48, noting that the firm was well-positioned for “sustained profitability over the rest of the year”.
At the end of the first quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Southwest Airlines Co. (NYSE:LUV), compared to 38 in the previous quarter worth $682 million.
6. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is a Michigan-based automobile manufacturer. On May 9, the company announced that it will begin the production of the E-Transit Custom vehicle at a plant in Turkey by 2023. The carmaker claims that the new electric vehicle will help businesses make the switch to electrified vehicles. The company also hopes to set new benchmarks with the one-ton van segment in Europe through the vehicle. The firm plans to reach zero emissions for all Ford vehicle sales in Europe by 2035.
On May 20, Tigress Financial analyst Ivan Feinseth maintained a Buy rating on Ford Motor Company (NYSE:F) stock and raised the price target to $22 from $20, noting that strong demand for combustion engines and SUVs would drive near-term revenue for the firm.
At the end of the first quarter of 2022, 46 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Ford Motor Company (NYSE:F), compared to 53 in the preceding quarter worth $1.7 billion.
Along with The Walt Disney Company (NYSE:DIS), Walmart Inc. (NYSE:WMT), and Marriott International, Inc. (NASDAQ:MAR), Ford Motor Company (NYSE:F) is one of the stocks that elite hedge funds are monitoring.
5. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 49
EOG Resources, Inc. (NYSE:EOG) is a Texas-based oil and gas firm. Energy stocks have gained rapidly in the past few months as supply challenges as well as rising tensions in Europe push prices to new highs. In early May, crude oil topped $110 per barrel, sending the shares of oil firms like EOG soaring. On May 5, the company declared a quarterly dividend of $0.75 per share, in line with previous. The forward yield was 2.43%. The board of directors of the company also declared a special dividend of $1.80 per share on the common stock. Since industrial demand rises after recession, energy stocks are set to achieve even higher momentum.
On May 10, Raymond James analyst John Freeman maintained a Strong Buy rating on EOG Resources, Inc. (NYSE:EOG) stock with a price target of $170, noting that the “yield potential, net cash position, and recent stock underperformance underpins the upgrade”.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Harris Associates is a leading shareholder in EOG Resources, Inc. (NYSE:EOG), with 8.6 million shares worth more than $1 billion.
In its Q1 2022 investor letter, Oakmark Funds highlighted a few stocks and EOG Resources, Inc. (NYSE:EOG) was one of them. Here is what the fund said:
“EOG Resources, Inc. (NYSE:EOG) (+36%), was among our top contributors in the quarter as oil prices rallied due to tight supplies, which were then exacerbated by the Russian invasion of Ukraine. Although their share prices have increased considerably, both companies still look quite undervalued even using longer term oil prices in the $65-70 dollar range. Meanwhile, if times are good over the next couple of years, we expect these companies to return significant percentages of their market caps to shareholders.”
4. Marriott International, Inc. (NASDAQ:MAR)
Number of Hedge Fund Holders: 52
Marriott International, Inc. (NASDAQ:MAR) owns and runs hotels and resorts. On May 4, the company posted earnings for the first quarter of 2022, reporting earnings per share of $1.25, beating estimates by $0.33. Revenue over the period was $4.2 billion, up close to 81% compared to the revenue over the same period last year. During the first three months of 2022, the firm added 11,800 rooms globally. These included 5,300 rooms in international markets and more than 2,500 conversion rooms. The development pipeline totals almost 2,900 properties.
On May 4, Stifel analyst Simon Yarmak maintained a Hold rating on Marriott International, Inc. (NASDAQ:MAR) stock and raised the price target to $180 from $175, noting that the firm had a better line of sight into North American markets and recently reinstated dividends as well.
At the end of the first quarter of 2022, 52 hedge funds in the database of Insider Monkey held stakes worth $3.5 billion in Marriott International, Inc. (NASDAQ:MAR), up from 43 in the previous quarter worth $2.8 billion.
In its Q1 2022 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Marriott International, Inc. (NASDAQ:MAR) was one of them. Here is what the fund said:
“Marriott International, Inc. (NASDAQ:MAR) is the world’s largest hotel company followed closely by Hilton (HLT) and Intercontinental Hotels Group plc (IHG). The company owns a portfolio of brands from the low end (Courtyard, SpringHill Suites, Aloft), through the mid-tier (Marriott, Sheraton, Westin, Renaissance Hotels), to the luxury high end (JW Marriott, Ritz-Carlton, St. Regis). In total the company had 7,642 properties with over 1.4 million rooms as of the end of Q1 2021. The majority (85%) of Marriott’s revenue comes from hotels in the United States, with the rest almost evenly split between Asia Pacific and Europe. Like it’s smaller peer, Hilton, the company today is almost exclusively a manager and franchisor of hotels, not a hotel owner. Marriott International, Inc. (NASDAQ:MAR) owns 66 hotels, manages 2,083 and franchises 5,493. Like all franchise-based businesses Marriott requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Marriott currently faces a difficult operating environment due to the Covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure (the company acquired Starwood Properties in late 2016) – if pent-up demand for travel materializes post-Covid, as we expect it will, Marriott International, Inc. (NASDAQ:MAR) will quickly go from losing money to raking in profits.”
3. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 54
Caterpillar Inc. (NYSE:CAT) markets construction and mining equipment. On May 17, the stock climbed by more than 2% after the company approved a new share buyback program worth $15 billion that will be effective from August. Based on the prices as of May 17, the buyback program could total over 72 million shares, or 13.6% of the outstanding shares on March 31. The company expects an increase in demand for mining machines in the coming years to extract raw materials used in the manufacture of electric vehicles.
On May 20, Tigress Financial analyst Ivan Feinseth maintained a Buy rating on Caterpillar Inc. (NYSE:CAT) stock and raised the price target to $282 from $278, noting that the firm was seeing “strong end-market demand and is well-positioned to benefit from ongoing capital equipment spending”.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Fisher Asset Management is a leading shareholder in Caterpillar Inc. (NYSE:CAT), with 7.2 million shares worth more than $1.6 billion.
In its Q2 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Caterpillar Inc. (NYSE:CAT) was one of them. Here is what the fund said:
“Having followed the company closely for north of a decade, Caterpillar Inc. (NYSE:CAT) is a name we know well. For much of its history, the operating efficiency of the company left much to be desired, but its underlying competitive position was rarely in doubt. A series of actions over the past decade (e.g., LEAN implementation, improved service mix, optimized manufacturing footprint) helped to narrow the gap between Caterpillar’s potential and its realized results, driving material margin expansion and strong share price performance. In our view, the company remains among the highest quality industrials in the market, but its underlying business is cyclical, which can translate to large swings in both performance and investor sentiment over short time periods. Our ability to focus on the long-term, sustainable earnings power of a business (rather than getting distracted by near-term fluctuations) is our most significant edge when investing in cyclical businesses. Due to the inherent volatility in Caterpillar’s end markets and operating performance, we suspect we’ll have a future opportunity to own this high-quality business at a more attractive price once the cycle turns and today’s enthusiasm wears off.”
2. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 60
Walmart Inc. (NYSE:WMT) operates as a retail firm. On May 24, the firm announced that it would be expanding an agreement with supply chain tech company Symbotic to advance a set of tech-related initiatives at the regional warehouses of the company. The new plans include drone delivery setups and artificial-intelligence powered warehouses, in addition to other robotics and software automation in general. The deal is part of a larger plan by the company to modernize the supply chain network.
On May 18, BMO Capital analyst Kelly Bania kept an Outperform rating on Walmart Inc. (NYSE:WMT) stock and lowered the price target to $165 from $170, noting the stock was impacted by “omicron-related staffing and supply chain/fuel challenges”.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm GQG Partners is a leading shareholder in Walmart Inc. (NYSE:WMT), with 15.4 million shares worth more than $2.2 billion.
1. The Walt Disney Company (NYSE:DIS)
Number of Hedge Fund Holders: 113
The Walt Disney Company (NYSE:DIS) operates as an entertainment company. The company recently forecast that most subscribers to the digital Disney+ service are likely to choose the subscription plan that comes with advertisements as opposed to paying extra for no ads. The firm expects around two-thirds of Disney+ subscribers to be on the discounted ad-supported plan in time. The company claims that the advertisement load on the ad plan will be four minutes of ads per an hour of content.
On May 12, RBC Capital analyst Kutgun Maral kept an Outperform rating on The Walt Disney Company (NYSE:DIS) stock and lowered the price target to $176 from $210, noting that “ongoing macro pressures and recessionary fears will likely continue to weigh on sentiment” despite strong momentum in the parks business.
At the end of the first quarter of 2022, 113 hedge funds in the database of Insider Monkey held stakes worth $5.1 billion in The Walt Disney Company (NYSE:DIS), up from 111 the preceding quarter worth $6.9 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Walt Disney Company (NYSE:DIS) was one of them. Here is what the fund said:
“The communication services sector was a weak spot in both the benchmark and the portfolio in the fourth quarter. The Walt Disney Company (NYSE:DIS) announced lower than expected streaming subscriber growth to the company’s Disney+ offering, attributable primarily to the content release schedule. The Walt Disney Company (NYSE:DIS) has been ramping up content spending given strong global response to Disney+, although production capability was temporarily impacted by COVID-19. We still believe Disney is on track to reach the subscriber outlook outlined at its December 2020 analyst day, driven by a very robust slate of content releases, particularly in the 2022–2024 time period.”
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Disclosure. None. 10 Stocks that Rebound After Recessions is originally published on Insider Monkey.
