In this article, we will discuss the 11 Best Consumer Cyclical Stocks to Buy According to Hedge Funds.
Joe Quinlan, Head of Market Strategy in the Chief Investment Office for Merrill and Bank of America Private Bank, remains constructive on the broader US economy and earnings. The consumers are resilient, and capex, which continues to rise, is expected to benefit from the fiscal stimulus in the federal “One Big Beautiful Bill.”
Food Prices to Rise in 2025
As per the US Department of Agriculture (USDA)’s Economic Research Service, in 2025, overall food prices are projected to rise at about the historical average growth rate. In 2025, prices for all food are expected to rise 2.9%, with a prediction interval of 2.3% – 3.4%. The US economic growth slowed decisively in H1 of the year, according to Charles Schwab. Inflation-adjusted GDP grew at an average of 1.25%, consumer spending increased 0.95% (average), and private business investment increased at an average of 1.55%, the firm highlighted.
Amidst such trends, we will now have a look at the 11 Best Consumer Cyclical Stocks to Buy According to Hedge Funds.
Our Methodology
To list the 11 Best Consumer Cyclical Stocks to Buy According to Hedge Funds, we used a screener to shortlist the stocks catering to the broader consumer cyclical sector. Next, we chose the ones popular among hedge funds. Finally, the stocks are arranged in ascending order of their hedge fund sentiments, as of Q2 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11 Best Consumer Cyclical Stocks to Buy According to Hedge Funds
11. Dillard’s, Inc. (NYSE:DDS)
Number of Hedge Fund Holders: 22
Dillard’s, Inc. (NYSE:DDS) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 15, Telsey Advisory lifted the price objective on the company’s stock to $550 from $450, while keeping a “Market Perform” rating, as reported by The Fly. As per the analyst, the company seems to have regained the momentum after 4 consecutive quarters of healthy results. Furthermore, as per the firm, while Dillard’s, Inc. (NYSE:DDS)’s Q2 2025 results demonstrate its ability to execute well amidst the shifting macro-economic conditions, there are structural pressures in the department store landscape.
In Q2 2025, Dillard’s, Inc. (NYSE:DDS)’s total retail sales rose 1% YoY, with net income coming at $72.8 million as compared to $74.5 million. Total retail sales (which excludes CDI) for the 13 weeks ended August 2, 2025 and August 3, 2024 came in at $1.447 billion and $1.426 billion, respectively. The retail gross margin for the 13 weeks ended August 2, 2025 stood at 38.1% of sales as compared to 39.1% of sales for the 13 weeks ended August 3, 2024. As compared to Q2 2024, the retail gross margin rose moderately in shoes and in ladies’ accessories and lingerie. However, the retail gross margin declined slightly in men’s apparel and accessories and fell significantly in ladies’ apparel.
10. Gambling.com Group Limited (NASDAQ:GAMB)
Number of Hedge Fund Holders: 23
Gambling.com Group Limited (NASDAQ:GAMB) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 14, the company released its financial results for the second quarter ended June 30, 2025.
Gambling.com Group Limited (NASDAQ:GAMB)’s Q2 2025 performance was characterised by 2 factors, which demonstrate important broader trends in the business. First is the diversification away from the traditional search channel to a more omnichannel approach, mainly with the marketing business. Second is an accelerating diversification into the revenue models beyond marketing, which includes sports data services.
In Q2 2025, Gambling.com Group Limited (NASDAQ:GAMB) saw revenue of $39.6 million and adjusted EBITDA of $13.7 million, implying YoY growth of 30% and 22%, respectively, further highlighting the attractive growth platform. Furthermore, the acquisition of Spotlight.Vegas has added a complimentary new business that helps consumers access experiences and further diversifies Gambling.com Group Limited (NASDAQ:GAMB)’s sources of revenue and cash flow.
Gambling.com Group Limited (NASDAQ:GAMB) remains well-placed for continued growth as reflected in its 2025 full-year guidance, which contemplates significant YoY revenue and adjusted EBITDA growth. The company expects its full-year revenue to be between $171 million – $175 million and an adjusted EBITDA of $62 million – $64 million.
9. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 29
Restaurant Brands International Inc. (NYSE:QSR) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 7, Barclays analyst Jeffrey Bernstein reduced the price objective on the company’s stock to $78 from $80, while keeping an “Overweight” rating. The firm’s analyst highlighted that while the company reported a Q2 2025 earnings miss, its guidance remains intact. Restaurant Brands International Inc. (NYSE:QSR) made progress in its Q2 2025, advancing its strategic priorities, with improved sales trends and strong execution led by its 2 largest businesses, Tim Hortons and International.
With favourable momentum heading into the back half of the year, Restaurant Brands International Inc. (NYSE:QSR) remains confident in its ability to deliver 8%+ organic adjusted operating income growth in 2025. Restaurant Brands International Inc. (NYSE:QSR) expects long-term consolidated performance (on average), from 2024 to 2028, of 3%+ comparable sales and 8%+ organic adjusted operating income growth. Furthermore, it anticipates reaching 5%+ net restaurant growth towards the end of the algorithm period.
8. Victoria’s Secret & Co. (NYSE:VSCO)
Number of Hedge Fund Holders: 44
Victoria’s Secret & Co. (NYSE:VSCO) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 29, Barclays lifted the company’s price objective to $27 from $23, while maintaining an “Overweight” rating, as reported by The Fly. Victoria’s Secret & Co. (NYSE:VSCO) posted a fiscal Q2 2025 beat, which didn’t reflect in the reiterated fiscal 2025 earnings outlook, opines the analyst. However, the firm stated that Victoria’s Secret & Co. (NYSE:VSCO)’s brand initiatives are starting to show progress.
Victoria’s Secret & Co. (NYSE:VSCO) posted comparable sales growth in Victoria’s Secret and PINK, in North America and throughout the globe, and in its stores and online channels. The business remained robust throughout Q2 2025 and ramped up in July and into August. Victoria’s Secret & Co. (NYSE:VSCO) posted net sales of $1.459 billion for Q2 2025, demonstrating a rise of 3% compared to net sales of $1.417 billion for Q2 2024.
Victoria’s Secret & Co. (NYSE:VSCO) raised its full-year outlook for net sales, and expects it to be between $6.330 billion – $6.410 billion compared to the previous guidance of $6.2 billion – $6.3 billion.
7. Ulta Beauty, Inc. (NASDAQ:ULTA)
Number of Hedge Fund Holders: 56
Ulta Beauty, Inc. (NASDAQ:ULTA) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 29, Telsey Advisory lifted the price target on the company’s stock to $610 from $590, while keeping an “Outperform” rating, as reported by The Fly. As per the analyst, it delivered a nice operational beat, thanks to the healthy performance in the first half of the year. The firm believes that Ulta Beauty, Inc. (NASDAQ:ULTA)’s store portfolio, brand partnerships, loyalty program, and infrastructure capabilities are its competitive advantages.
Ulta Beauty, Inc. (NASDAQ:ULTA) delivered robust results in Q2 2025, which include 6.7% comparable sales growth. Notably, strong top-line performance, helped by the growth throughout major categories, fueled market share growth and better-than-anticipated profitability. In Q2 2025, its net sales rose 9.3% to $2.8 billion compared to $2.6 billion. This growth stemmed mainly from higher comparable sales, the acquisition of Space NK, and new store contribution. For FY 2025, Ulta Beauty, Inc. (NASDAQ:ULTA) expects net sales of between $12.0 billion – $12.1 billion.
Diamond Hill Capital, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Our bottom individual Q1 contributors were all from our long book, including lululemon athletica and Ulta Beauty, Inc. (NASDAQ:ULTA). Specialty beauty retailer Ulta Beauty is delivering solid results, with earnings ahead of expectations and guidance for this year consistent. Shares seem to have declined in Q1 largely in sympathy with weaker sentiment surrounding the broad consumer discretionary sector. However, we maintain our conviction in Ulta’s long-term opportunity to take share given its compelling portfolio of beauty brands across a range of price points, including its own private-label brand.”
6. PDD Holdings Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 65
PDD Holdings Inc. (NASDAQ:PDD) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 26, CMB International Securities analyst Saiyi He maintained a “Buy” rating on the company’s stock and set a price objective of $146.30. The analyst’s rating is backed by a combination of factors, mainly due to PDD Holdings Inc. (NASDAQ:PDD)’s better-than-expected financial performance. Its revenue growth, although modest, remained in line with projections, while cost savings in sales and marketing expenses resulted in a stronger operating profit than expected.
Despite the challenges resulting from the changes in the US policy and a competitive market, PDD Holdings Inc. (NASDAQ:PDD) demonstrated resilience via strategic investments targeted at enhancing the platform ecosystem and supply quality. In Q2 2025, PDD Holdings Inc. (NASDAQ:PDD) saw total revenues of RMB103,984.8 million (US$14,515.7 million), reflecting 7% growth YoY. This stemmed mainly from higher revenues from online marketing services and transaction services.
GreenWood Investors, an investment management company, released its Q4 2025 investor letter. Here is what the fund said:
“Aside from transitory foreign exchange translation losses (as opposed to trading losses), the two other notable detractors from our portfolio were MEI Pharma and PDD Holdings Inc. (NASDAQ:PDD) in 2024.
PDD Holdings founder Colin Huang is who inspired us to “run 3x faster,” as the relentless corporate culture of PDD has built an e-commerce company with roughly the same GMV (gross merchandise value) of Amazon in one-third the time it took Amazon to build itself. Shares reacted negatively when the company decided to reinvest its record margins into even faster growth and creating a healthier supplier ecosystem. As it looks set to create a second Amazon with its international site Temu, we are highly attracted to the opportunity. Sales are growing 4x faster than Amazon’s, yet shares are priced at less than a quarter of the Amazon earnings multiple.
PDD is a perfect example of why we want to look outside of the “Big Ten” companies that are nearly a third of global market indices. We would not want to compete with the demanding corporate culture of PDD and Temu. Its operating model is relentless at identifying efficiency throughout the manufacturing and selling supply chain. Not only is it a mor formidable competitor than Amazon, and growing much faster, but the valuation is 4x more attractive than Amazon’s…” (Click here to read the full text)
5. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 78
McDonald’s Corporation (NYSE:MCD) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 22, Stifel analyst Chris O’Cull lifted the price target on the company’s stock to $315 from $300, while keeping a “Hold” rating. As per the analyst, assessing the impact of McDonald’s Corporation (NYSE:MCD) reportedly agreeing with franchisees to reduce the prices on several combo meals remains complex as a result of regional price differences as well as varying consumer perceptions. That being said, the company needs to drive awareness with its promising second-half promotional lineup, added the firm’s analyst.
McDonald’s Corporation (NYSE:MCD)’s 6% global systemwide sales growth in Q2 2025 highlights the power of compelling value, healthy marketing, as well as menu innovation. The global comparable sales rose 3.8%, with broad-based growth throughout segments. McDonald’s Corporation (NYSE:MCD)’s systemwide sales to loyalty members across 60 loyalty markets came in at ~$33 billion for the trailing twelve-month period and ~$9 billion for Q2 2025.
4. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 81
NIKE, Inc. (NYSE:NKE) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 27, Williams Trading lifted the price target on the company’s stock to $100 from $73, while keeping a “Buy” rating, as reported by The Fly. As per the firm analyst, NIKE, Inc. (NYSE:NKE)’s US marketplace is expected to be largely cleaned up by September end. Also, the full price Air Force 1 sales continue to turn positive on a YoY basis, while US retailers are pleased with the Jordan Retro, the firm added.
NIKE, Inc. (NYSE:NKE) expects the business to improve due to the progress it is making via its Win Now strategy actions. While the company’s Q4 2025 reflected the largest financial impact from its Win Now strategy actions, it expects the headwinds to moderate. Revenues for NIKE, Inc. (NYSE:NKE) came in at $11.1 billion, reflecting a fall of 12% on a reported basis and down 11% on a currency-neutral basis. Notably, NIKE Direct revenues stood at $4.4 billion, down by 14% on a reported and currency-neutral basis, because of a 26% fall in NIKE Brand Digital, partially mitigated by the 2% rise in NIKE-owned stores.
Oakmark Funds, advised by Harris Associates, released its Q2 2025 investor letter. Here is what the fund said:
“NIKE, Inc. (NYSE:NKE) Cl B is a global leader in athletic footwear, apparel, and equipment. The company has built a leading global brand through decades of successful product innovation, marketing and partnerships with premier athletes. Since peaking in 2021, Nike’s stock price has declined to roughly a third of its previous high, largely due to challenges in its direct-to consumer initiative and concerns over tariffs. In our view, Nike’s new CEO is implementing a credible plan to improve fundamental performance by bolstering wholesaler relations and diversifying distribution while further increasing product innovation. We believe these actions will help to improve the health of the business over the medium-term, resulting in better growth and enhanced margins. These concerns provided us with the opportunity to purchase shares at a meaningful discount to our estimate of intrinsic value.”
3. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 93
The Home Depot, Inc. (NYSE:HD) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 29, the company announced that it received clearance from the Canadian Competition Bureau, in the form of a no action letter, related to The Home Depot, Inc. (NYSE:HD)’s previously announced tender offer to purchase, via its wholly-owned subsidiary Gold Acquisition Sub, Inc., and subject to certain conditions, all of the outstanding shares of GMS. Notably, the no action letter satisfies the remaining antitrust law-related condition required for the consummation of the tender offer as well as the transactions under the merger agreement.
Elsewhere, The Home Depot, Inc. (NYSE:HD)’s Q2 2025 results were in line with its expectations, with the momentum beginning in the back half of last year continuing throughout the first half. The company saw sales of $45.3 billion for Q2 2025, implying an increase of $2.1 billion, or 4.9% YoY. The Home Depot, Inc. (NYSE:HD) reaffirmed its guidance for FY 2025, with total sales growth of ~2.8% and gross margin of ~33.4%.
2. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 101
Alibaba Group Holding Limited (NYSE:BABA) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 29, Jefferies analyst Thomas Chong lifted the price objective on the company’s stock to $165 from $150, while maintaining a “Buy” rating, as reported by The Fly. As per the analyst, Alibaba Group Holding Limited (NYSE:BABA) posted a healthy set of June quarter results. Also, the firm anticipates the company to reach a new milestone and tap the next phase of growth ahead.
In the June quarter, Alibaba Group Holding Limited (NYSE:BABA)’s strategic emphasis on consumption and AI + Cloud posted healthy growth. The company generated significant synergies through combining the resources of its consumer platforms, which resulted in new highs in monthly active consumers as well as daily order volume. Alibaba Group Holding Limited (NYSE:BABA) rolled out the “Taobao Instant Commerce” service on the Taobao app at April end to cater to the consumer needs for on-demand delivery throughout a wide range of product categories, such as food, groceries, electronics, and apparel. As a result, the Taobao app’s leadership strengthened in China’s e-commerce industry.
Alluvium Asset Management, an asset management company, released its Q2 2025 investor letter. Here is what the fund said:
“Alibaba Group Holding Limited (NYSE:BABA) was down 12.8%. Bear in mind, this comes off a stunning 55.3% March quarter return. Alibaba reported full year results, and by all accounts they were pretty good. Market chatter suggests some were disappointed by the Cloud revenue, but with 18% growth over the last year, we are not complaining. We liked the continuation of share buybacks, noting that for the year ended 31 March 2025, it bought back over 5% of its shares. Our Alibaba holding accounts for 3.3% of the Fund. We wrote last quarter that we were closely monitoring the position (hinting toward selling). We chose not to act, largely because we see it as one of the cheaper and most direct ways for the Fund to benefit from AI initiatives and Cloud infrastructure growth, and at the same time it provides geographic and economic diversity.”
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 335
Amazon.com, Inc. (NASDAQ:AMZN) is one of the Best Consumer Cyclical Stocks to Buy According to Hedge Funds. On August 28, Reuters reported that Comcast-owned NBCUniversal and Amazon.com, Inc. (NASDAQ:AMZN) reached a deal to bring the ad-free version of Peacock to Prime Video Channels. This will be the first time that the streaming service is being provided as part of the retailer’s package of digital channels. Reuters also highlighted that Peacock possesses a total of 41 million subscribers, making it smaller compared to its peers.
For media partners such as NBCUniversal, Prime Video Channels provides a broad new platform in order to promote its $16.99 a month Peacock Premium Plus service to potential subscribers, reported Reuters. If successful, the deal can act as a template for deals with several other third-party streaming distributors, reported Reuters, while quoting a person familiar with NBCUniversal’s strategy. In Prime Video live sports, Amazon.com, Inc. (NASDAQ:AMZN) stated that the first season of NASCAR brought ~2 million viewers per race and the youngest audience among NASCAR broadcasters in over a decade in Q2 2025.
Oakmark Funds, advised by Harris Associates, released its Q2 2025 investor letter. Here is what the fund said:
“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest online retailer and provider of cloud services. The company is a dominant player in massive end markets with secular growth tailwinds. Amazon benefits from a wide competitive moat supported by scale, customer loyalty, and network effects. We think it is a well-managed business that will use AI to improve operational efficiency, enhance customer experience, and fuel long-term demand growth at Amazon Web Services (AWS). Despite this favorable outlook, Amazon’s stock price fell recently due to a combination of tariffs and short-term macroeconomic concerns. We were pleased to purchase shares in what we believe is one of the world’s best companies at a discount to our estimate of intrinsic value.”
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