In this piece, we will take a look at the 11 best stocks to buy in falling markets according to hedge funds.
Recessions are inevitable and the market has been forecasting a recession in the near future for quite some time. The reason is that since July last year, the yield curve has been inverted, which has often been a signal that recession may be on the horizon. When economic downturns hit, people always tend to invest in safe stocks which may offer them reasonable returns during higher uncertainties. Thus healthcare and consumer staple shares are mostly preferred in those situations when macroeconomic headwinds are high.
Companies in the consumer staples are the ones that mostly produce and sell consumer necessity goods. Those goods are bought easily even during recessions because when economic challenges skyrocket, people opt for necessities rather than luxuries. According to The Wall Street Journal, consumer staple stocks are a “bright spot in bleak market”.
“Consumer-staples companies are commonly regarded as a haven during volatile markets and recessionary periods,” the WSJ added.
Consumers cannot stop buying medicines, prescription drugs or basic household products even when recessions hit, Morningstar analyst Amy Arnott wrote.
According to Arnott, healthcare and consumer staple stocks are the most “resilient performers” during economic downturns.
Opportunities lie ahead for consumer staple companies as they will maintain their performance and have organic sales growth despite economic downturns this year and into 2024, analyst Amber Kanwar said in an interview on BNN Bloomberg.
In the near future, consumer staples will be an important part of stock portfolios as there will be a major focus on low-end consumers, Mona Mahajan, a senior investment strategist at Edward Jones said.
Considering recession is imminent and inevitable, according to many analysts, we decided to take a look at some of the best stocks to buy in falling markets which include General Mills, Inc. (NYSE:GIS), Philip Morris International Inc. (NYSE:PM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), PepsiCo, Inc. (NASDAQ:PEP), and others.
Our Methodology:
We chose stocks from the Consumer Staples Select Sector SPDR Fund because historically consumer staple companies have performed well in times of economic downturns. In this article, the Consumer Staples Select Sector SPDR Fund has been selected which holds 39 companies in the consumer services industry. The stocks held under this ETF are expected to offer earnings per share growth of 7.61% in the next three to five years. The price/book ratio for this ETF stands at 4.58 for the last year which demonstrates that stocks are trading at premium prices, while the price/earnings ratio for this ETF is at 18.94. The price/earnings ratio compares a company’s share price to its yearly net profits. Anything below 20 would be considered a good price-to-earnings ratio. The stocks were ranked from Insider Monkey’s database of 910 hedge funds traced at the end of Q2. The companies were ranked accordingly, and the top 11 recession-resilient stocks that hedge funds are piling into are listed below.
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Best Stocks to Buy in Falling Markets According to Hedge Funds
11. General Mills, Inc. (NYSE:GIS)
Number of Hedge Fund Holders: 48
General Mills, Inc. (NYSE:GIS) is the producer and marketer of consumer food products internationally. Headquartered in Minneapolis, Minnesota, General Mills, Inc. (NYSE:GIS) has been in the industry for more than a century. Since the firm lies in the consumer staples sector, it is a recession-resistant stock during economic downturns and is expected to do well in terms of best stocks to buy in falling markets.
At the end of Q2 2023, for the consumer foods manufacturer firm, 48 hedge fund investors had invested their capital in General Mills, Inc. (NYSE:GIS) according to the Insider Monkey database. The largest shareholder of General Mills, Inc. (NYSE:GIS) was Bridgewater Associates, which owned roughly 1.1 million shares with a value of about $81.6 million. Founded by Ray Dalio, the hedge fund has been in the business since 1973. General Mills, Inc. (NYSE:GIS) shares are currently trading at $64 while the average daily volume is about 4 million shares. General Mills, Inc. (NYSE:GIS) has an average rating of hold on its stock.
10. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 48
The producer, importer, and seller of beers and wines, Constellation Brands, Inc. (NYSE:STZ) distributes these products across Canada, Italy, Mexico, New Zealand, and the United States. The New York-based Constellation Brands, Inc. (NYSE:STZ) ranks in the top 10 on our list of best stocks to buy in falling markets.
As of June 30, 2023, 48 hedge funds had a stake in Constellation Brands, Inc. (NYSE:STZ). The largest shareholder was Holocene Advisors which owned 797,000 shares of Constellation Brands, Inc. (NYSE:STZ) for a total value of approximately $196.1 million. With a market capitalization of $46 billion, Constellation Brands, Inc. (NYSE:STZ) is anticipated to perform well during a recession.
General Mills, Inc. (NYSE:GIS), Philip Morris International Inc. (NYSE:PM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT), PepsiCo, Inc. (NASDAQ:PEP), and Constellation Brands, Inc. (NYSE:STZ) are some best stocks to buy in falling markets.
9. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 54
Philip Morris International Inc. (NYSE:PM) is one of the largest tobacco companies headquartered in Stamford, Connecticut. With regional offices globally, Philip Morris International Inc. (NYSE:PM) offers cigarettes and smoke-free products, including vapor, heat-not-burn and oral nicotine products under its QOS and ZYN brands. It also provides consumer accessories including lighters and matches.
54 of the 910 hedge funds profiled by the Insider Monkey database at the end of the second quarter of this year had invested in Philip Morris International Inc. (NYSE:PM) with Fundsmith LLP being the largest shareholder having 15.8 million shares of the tobacco firm with a consolidated value of $1.5 billion.
The stock of Philip Morris International Inc. (NYSE:PM) is currently trading at $93 and the company will report its third quarter results on Oct. 19.
8. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 55
The snack food and beverage products company, Mondelez International, Inc. (NASDAQ:MDLZ) shares jumped around 27% during the last one year. The Chicago-based firm operates in the Latin America, North America, Asia, the Middle East, Africa, and Europe. In July, Mondelez International, Inc. (NASDAQ:MDLZ) raised its quarterly dividend by 10% to $0.425 per share. LU, Ritz, Oreo, Tate’s Bake Shop, and Cadbury Dairy Milk, Milka, Toblerone are some of the brands of Mondelez International, Inc. (NASDAQ:MDLZ).
55 of the 910 hedge funds profiled by Insider Monkey database had held a stake in Mondelez International, Inc. (NASDAQ:MDLZ). During that time, the largest shareholder was Holocene Advisors which owned about 3.4 million shares with a value of $247.1 million. It ranks 8th in our list of best stocks to buy in falling markets.
7. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 57
Dollar General Corporation (NYSE:DG) recent fiscal Q2 earnings disappointed analysts as its stock was downgraded by JPMorgan, Oppenheimer, Loop Capital, Evercore ISI, and others. But it ranks 7th in our list of best stocks to buy in falling markets because it’s a discount retailer and during recessions, consumers shift their focus to discounted retailers for affordable products. Out of 910 hedge funds compiled by Insider Monkey, 57 had a stake in Dollar General Corporation (NYSE:DG). The largest shareholder was Holocene Advisors which owned 1.2 million shares of the discounted retailer with a combined value of $202.5 million.
Tennessee-based Dollar General Corporation (NYSE:DG) was founded in 1939 and is currently trading at $106.
Along with General Mills, Inc. (NYSE:GIS), Philip Morris International Inc. (NYSE:PM), Johnson & Johnson (NYSE:JNJ), Walmart Inc. (NYSE:WMT) and PepsiCo, Inc. (NASDAQ:PEP), Dollar General Corporation (NYSE:DG) is one of the best stocks to buy in falling markets according to hedge funds.
6. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 58
Colgate-Palmolive Company (NYSE:CL) is a New York-based consumer products firm which manufactures and sells its products globally and is currently trading at $71. Its dividend history has been impressive as it raised dividends for consecutive 61 years. Some of the Colgate-Palmolive Company (NYSE:CL) brands include Palmolive, Colgate, Protex, Tom’s of Maine, Darlie, Axion, meridol, Irish Spring, Ajax, Murphy, Suavitel, Filorga, Cuddly, Sorriso and others make the company one of the best stocks to buy in falling markets.
Insider Monkey database of the second quarter of 2023 showed that out of 910 hedge funds profiled, 58 had a stake in Colgate-Palmolive Company (NYSE:CL). The largest stockholder was First Eagle Investment Management which had 11.1 million shares of Colgate-Palmolive Company (NYSE:CL) with a combined value of $854.6 million.
4. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 67
Costco Wholesale Corporation (NASDAQ:COST) provides membership warehouse services in roughly 13 countries. It also has private-label products in different categories. Costco Wholesale Corporation (NASDAQ:COST) was founded in 1976 and is headquartered in Issaquah, Washington.
As of June 30, 2023, the Insider Monkey database ranks Costco Wholesale Corporation (NASDAQ:COST) on the 4th spot in terms of best stocks to buy in falling markets. The firm had 67 hedge fund investors out of 910 profiled. The largest shareholder was Citadel Investment Group which owned 1.3 million shares of Costco Wholesale Corporation (NASDAQ:COST) that valued at $689.9 million. The stock has gained roughly 20% year-over-year as of Oct. 1.
3. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 68
Ranked 3rd in our list of best stocks to buy in falling markets, PepsiCo, Inc. (NASDAQ:PEP) is one of the world’s largest and oldest branded beverage producers. Founded in 1898, the company distributes its products globally. With a diverse convenient product portfolio, PepsiCo, Inc. (NASDAQ:PEP) lies in the consumer staples sector and thus the shares are recession resilient when uncertainties hit. Some of PepsiCo, Inc. (NASDAQ:PEP) brands include Gatorade, Lay’s, Kurkure, Doritos, Pepsi-Cola, Mountain Dew, Cheetos, Quaker, Aquafina, Ruffles, Sabritas, Tostitos, 7UP, Mirinda, Pepsi Black, Toddy, SodaStream, Chipsy, Walkers, White Star, Smith’s, Sting, Lubimy Sad, Pepsi, and others.
PepsiCo, Inc. (NASDAQ:PEP) was a part of 68 hedge fund portfolios at the end of Q2 2023, as per Insider Monkey’s database. The largest shareholder was Fundsmith LLP which retained 6.6 million shares of the New York-based beverage manufacturer that were worth $1.2 billion. In the last 5 years, its shares have surged roughly 51%.
2. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 74
As a producer of branded consumer packaged goods, The Procter & Gamble Company (NYSE:PG) ranks second on our list of 11 best stocks to buy in falling markets. The firm offers products through five different segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. The Procter & Gamble Company (NYSE:PG) was founded almost 2 centuries ago and is headquartered in Cincinnati, Ohio.
At the end of the second quarter this year, 74 hedge funds had their stakes in the company. The largest stake in the company was held by Fundsmith LLP which bought about 4.8 million shares of The Procter & Gamble Company (NYSE:PG) that were worth about $735.8 million. The stock is currently trading at $146.
1.Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 81
Walmart Inc. (NYSE:WMT) is an Arkansas-based retail giant that has been in the industry since 1945. Its three segments, Walmart US, Walmart International, and Sam’s Club have proven to be a tough competitor in the retail industry. Walmart Inc. (NYSE:WMT) tops the list of 11 best stocks to buy in falling markets as 81 hedge fund investors were bullish on Walmart Inc. (NYSE:WMT) in Q2 against 910 profiled this year. The largest shareholder was D E Shaw which had 5.5 million shares of Walmart Inc. (NYSE:WMT) that were worth about $862 million.
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Disclosure: None. 11 Best Stocks to Buy in Falling Markets According to Hedge Funds is originally published on Insider Monkey.
