In this article, we will take a look at the 12 stocks that will always grow.
Markets roared with optimism after Nvidia’s positive results as several warnings calling the AI-led rally a “hype” went on a back foot and recession calls were subdued by bullish cheering. However, there are notable analysts and experts who believe the economy is not out of the woods yet and we can face a recession in late 2023 and 2024. Bears believe we are yet to see the real effects of rising interest rates. They say tech stocks have gone too far when it comes to valuations, beyond justifiable levels. Talking to Bloomberg, Jeremy Grantham, co-founder of the Boston-based investment firm Grantham Mayo Van Otterloo (GMO), recently said the he believes there could be recession “running perhaps deep into next year” driven by the problems in the real estate industry, inflation and related market factors.
Answering a question about the Federal Reserve’s claim that it has cleared the recession hurdle, Grantham said that the Fed’s record is not impressive in this area and it has never called a recession especially the ones following bubbles. Grantham said that the Fed has taken credit for inflating bubbles and inflating asset prices but they have never taken credit for the disinflationary effects of asset prices breaking. Grantham believes the recession he’s warning about may start in 2023.
Recession Delayed not Cancelled
Jeffrey Klingelhofer, co-head of investments and managing director at Thornburg Investment Management, voiced similar concerns talking to Bloomberg recently. The analyst said that recession in the US is delayed, not cancelled. He said the economic indicators are reaffirming his expectations and there’s nothing surprising. Loan conditions are tightening, consumer spending is slowing and “sentiment wildly deteriorating.” He said that the world is emerging from a low inflationary environment to a high inflationary environment and that’s why changes are not taking places very quickly and the real effects of inflation and rate hikes are taking time to play out.
Klingelhofer also pointed to the slowdown in China and its effects on the global markets. He said that China’s growth is slowing and it’s aligned with the rest of the world which is also face serious economic challenges.
In this backdrop, wise investors are looking for defensive plays that are expected to grow despite recession risks.
Photo by Tech Daily on Unsplash
Our Methodology
For this article we first picked stocks that are market leaders in their industries, enjoying a near monopoly status. From these stocks we picked 12 stocks that are recession proof, which means they are operating in sectors that feel little or no effect during market downturns. These companies are mature, have consistent revenue growth, enjoy market dominance and sell essential products or services. These stocks are expected to keep gaining value because of the leverage they enjoy in the market. With each stock we have mentioned the number of hedge fund investors using Insider Monkey’s database of 910 hedge funds.
Stocks That Will Always Grow
12. EssilorLuxottica Société anonyme (NYSE:ESLOF)
Number of Hedge Fund Holders: N/A
EssilorLuxottica Société anonyme (NYSE:ESLOF) is enjoying a near monopoly in the sunglasses and eyewear market, which is expected to reach over $300 billion by 2030. EssilorLuxottica Société anonyme (NYSE:ESLOF) is behind literally every notable sunglasses brand including Ray-Ban, Oakley, Persol, Vogue Eyewear, Target Optical, Lenscrafters, Versace, Varilux, Alain Mikli, among many others.
It makes eyewear for many major brands through licensing agreements. EssilorLuxottica Société anonyme (NYSE:ESLOF) will also produce and distribute Jimmy Choo eyewear products.
In July EssilorLuxottica Société anonyme (NYSE:ESLOF) posted first half of 2023 results. Revenue in the period jumped 7.7% year over year.
11. Axon Enterprise, Inc. (NASDAQ:AXON)
Number of Hedge Fund Holders: 34
Axon Enterprise, Inc. (NASDAQ:AXON) is a weapons production company whose shares have gained about 200% over the past five years. Axon Enterprise, Inc. (NASDAQ:AXON) enjoys a near monopoly in the taser industry and owns a chunk of market share without any strong competition. It also enjoys dominance in the police body camera industry. Amid the demand of law enforcement products and the edge Axon Enterprise, Inc. (NASDAQ:AXON) enjoys, Axon shares are expected to keep growing.
During the second quarter Axon Enterprise, Inc. (NASDAQ:AXON)’s adjusted EPS came in at $1.11, beating estimates by $0.49. Revenue jumped 31.1% year over year to $375 million, surpassing estimates by $24.54 million. Axon Enterprise, Inc. (NASDAQ:AXON) also upped its outlook for the full-year.
Conestoga Small Cap Strategy made the following comment about Axon Enterprise, Inc. (NASDAQ:AXON) in its second quarter 2023 investor letter:
“Axon Enterprise, Inc. (NASDAQ:AXON)’s fundamentals remain robust but suffered from profit taking in the second quarter after strong performance from the stock over the last year. AXON is a public safety technology company and has been a portfolio leader in each of the three prior quarters. AXON’s fundamentals remain robust, with revenue growth of 34% in their most recently reported quarter. AXON is seeing robust growth internationally and in their Fleet product line, and the new Taser 10 is seeing the strongest initial demand in their history.”
10. Waste Management, Inc. (NSYE:WM)
Number of Hedge Fund Holders: 39
With over 400 subsidiaries, Waste Management, Inc. (NSYE:WM) is a market leader in the waste management industry, which is bound to keep growing in the future as the population grows and environmental requirements for waste management increase. Waste Management, Inc. (NSYE:WM) offers services for residential, commercial, industrial, and municipal customers. It also offers materials processing and commodity recycling.
Waste Management, Inc. (NSYE:WM) has gained about 74% in value over the past five years. It is considered one of the best recession-proof stocks that will always grow since humans continue to produce waste even during recessions and market turmoil.
As of the end of the second quarter of 2023, 39 hedge funds tracked by Insider Monkey were long Waste Management, Inc. (NSYE:WM).
9. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 43
The Kroger Co. (NYSE:KR) sells essential items and operates one of the biggest network of department stores in the US. Over the past five years the stock has gained about 50% in value. The Kroger Co. (NYSE:KR) is also a strong dividend payer. In June The Kroger Co. (NYSE:KR) announced an 11.5% increase in its dividend. To compete with other grocers, The Kroger Co. (NYSE:KR) is working on exclusive products that would be available only at Kroger stores. For example, The Kroger Co. (NYSE:KR) has partnered with Frito-Lay to offer a new flavor of Doritos that will be exclusive to Kroger.
The Kroger Co. (NYSE:KR) also played a master stroke with its planned $24.6 billion acquisition of Albertsons (ACI). The deal will create a grocery chain with nearly 5,000 locations. Albertsons currently has a 5.2% market share in the grocery industry in the US, and that will go to The Kroger Co. (NYSE:KR), which already enjoys a 9.9% market share, second only to Walmart.
As of the end of the second quarter of 2023, 43 hedge funds in Insider Monkey’s database of 910 hedge funds were long The Kroger Co. (NYSE:KR). The biggest stakeholder of the company during this period was
Oakmark Fund made the following comment about The Kroger Co. (NYSE:KR) in its Q1 2023 investor letter:
“The Kroger Co. (NYSE:KR is the second-largest grocery retailer in America, behind only Walmart. Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and-mortar grocery businesses. However, we believe Kroger’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption. The stock trades for just 10x our estimate of next year’s EPS, which we believe is attractive given Kroger’s competitive positioning and earnings growth outlook. The pending merger with Albertsons has the potential to drive accelerated earnings growth and further scale advantages. If the merger is not approved, the company will have the capacity to return over 25% of its market cap to shareholders.”
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 61
The Coca-Cola Company (NYSE:KO) dominates the carbonated soft drink and beverage industry. It has over 500 brands and operates in literally almost every country in the world. The Coca-Cola Company (NYSE:KO) owns the biggest market share in the soft drink industry. It’s a recession-proof stock since it’s operating in the consumer defensive industry. The Coca-Cola Company (NYSE:KO) has upped its dividends consistently for the last six decades.
Many hedge funds, including the legendary investor Warren Buffett’s, are fans of The Coca-Cola Company (NYSE:KO). The Oracle of Omaha owns a $24 billion stake in The Coca-Cola Company (NYSE:KO).
The Coca-Cola Company (NYSE:KO) shares have grown by 32% over the past five years and analyst price targets and fundamentals of the company show KO will keep growing.
7. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 74
The Procter & Gamble Company (NYSE:PG) is one of the top consumer products brands with an extremely wide lineup of products from various categories like beauty, hair care, grooming, skin care, oral care and more. The Procter & Gamble Company (NYSE:PG) has upped its dividends consistently for the past 67 years. According to Yahoo Finance, The Procter & Gamble Company (NYSE:PG)’s price target set by Wall Street analysts on average is $166, which is much higher than its August 24 price of $153.25
A total of 74 hedge funds out of the 910 funds in Insider Monkey’s database of hedge funds held stakes in The Procter & Gamble Company (NYSE:PG).
6. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 81
Walmart Inc. (NYSE:WMT) owns the biggest market share in the US grocery industry. It’s the biggest retailer in the country and enjoys huge penetration and dominance in the industry. Over the past five years Walmart Inc. (NYSE:WMT) has gained about 65% in value. Walmart Inc. (NYSE:WMT) also pays dividends. Walmart Inc. (NYSE:WMT) is one of the most favorite defensive plays since the company continues to perform well even during recessions.
As of the end of the second quarter of 2023, 81 hedge funds tracked by Insider Monkey were long Walmart Inc. (NYSE:WMT). The biggest stakeholder of Walmart Inc. (NYSE:WMT) during this period was D. E. Shaw with an $861 million stake in the company.
5. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 111
UnitedHealth Group Incorporated (NYSE:UNH) has become a giant in the healthcare and insurance sector in the US. Over the past few years, UnitedHealth Group Incorporated (NYSE:UNH) has bought several smaller players and increased its dominance in the sector. UnitedHealth Group Incorporated (NYSE:UNH) has the biggest chunk of the health insurance market in the US.
In May 2023 Ana Gupte, principal at AG Health Advisors., said, according to CNBC, that if they were to pick “one stock, only one stock to buy, I’d buy UnitedHealth.”
The analyst also noted that UnitedHealth Group Incorporated (NYSE:UNH) has become “immune” to economic cycles due to its diverse business model.
“It makes it very attractive from an economic cycle and a macro environment perspective,” Gupte added.
UnitedHealth Group Incorporated (NYSE:UNH) is also a strong dividend-paying stock.
As of the end of the second quarter of 2023, 111 hedge funds tracked by Insider Monkey were long UnitedHealth Group Incorporated (NYSE:UNH).
Mairs & Power Growth Fund made the following comment about UnitedHealth Group Incorporated (NYSE:UNH) in its second quarter 2023 investor letter:
“Notable detractors to performance in the first half were US Bank (USB), Charles Schwab (SCHW), and UnitedHealth Group Incorporated (NYSE:UNH), which were down 22.09%, 31.65%, and 8.65%, respectively. Another detractor from relative performance was UnitedHealth Group, which was down 8.65%. However, we have a positive long-term view of the company, headquartered in Minnesota, and especially its potential when it comes to harnessing its vast amounts of patient data via AI. Additionally, its Optum unit, which provides technology and data-driven care delivery, has AI-enabled tools that can help healthcare providers drive more efficient and accurate care to patients.”
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 204
Alphabet Inc. (NASDAQ:GOOG) shares will always grow because the company has a diverse business model, spanning advertising, Cloud, AI, and other innovative technologies like self-driving cars. Currently, Alphabet Inc. (NASDAQ:GOOG) dominates the search engine market, with a 93% market share. Its closest competitor (Bing) has just 3% market share. It’ll take years if not decades for other companies to catch-up. Alphabet Inc. (NASDAQ:GOOG) also owns YouTube, which is the go-to video platform for billions of people. Alphabet Inc. (NASDAQ:GOOG)’s Cloud and AI businesses will offset the threats the company faces from competitors in the search business.
As of the end of the second quarter of 2023, 204 hedge funds out of the 910 funds in Insider Monkey’s database were long Alphabet Inc. (NASDAQ:GOOG). The biggest stakeholder of Alphabet Inc. (NASDAQ:GOOG) was Natixis Global Asset Management’s Harris Associates which owns a $3.2 billion stake in the company.
Giverny Capital Asset Management made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its second quarter 2023 investor letter:
“I have believed for a while that we’re better served with a lower weight to the tech giants – we own Alphabet Inc. (NASDAQ:GOOG) (8.1% of our model portfolio at the end of June) and Meta (5.2%) for a 13.3% exposure, or about half the Index’s weight in the giants. And while Alphabet’s 36% return for the first half and Meta’s 138% return were gratefully received, I’m pleased to report that if we strip out that contribution to our overall return, the other 23 stocks we own, constituting 85% of our portfolio (with cash making up the balance), were up 10.2% on a weighted basis.
GCAM owns two of the seven tech mega caps in Alphabet and Meta, and they enjoyed similar rises. As mentioned, Alphabet A&C shares rose 36% while Meta rose 138%. Together, they added 2.38 percentage points to the overall Index return, meaning these seven tech giants cumulatively generated 12.4 percentage points of return, or roughly three-quarters of the Index’s return.
Alphabet and Meta combined sport a $2.25 trillion market cap and between them should generate roughly $120 billion of pretax profit this year. That’s a multiple of 19 times pretax profit, a substantial discount to Microsoft and Apple, and an even larger discount to Amazon, Nvidia and Tesla.”
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 225
Meta Platforms, Inc. (NASDAQ:META) has almost half of the world population hooked on its platforms – Facebook, Instagram, Messenger, WhatsApp and now Threads It remains the market leader in the social media industry, which will only grow despite massive changes in user behavior.
Wedbush Securities Managing Director Scott Devitt recently started covering Meta Platforms, Inc. (NASDAQ:META) and set a $350 price target. The analyst believes AI will be one of the boosters for Meta Platforms, Inc. (NASDAQ:META) in the future.
As of the end of the second quarter of 2023, 225 hedge funds tracked by Insider Monkey were long Meta Platforms, Inc. (NASDAQ:META).
Giverny Capital Asset Management made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its second quarter 2023 investor letter:
“I have believed for a while that we’re better served with a lower weight to the tech giants – we own Alphabet (8.1% of our model portfolio at the end of June) and Meta Platforms, Inc. (NASDAQ:META) (5.2%) for a 13.3% exposure, or about half the Index’s weight in the giants. And while Alphabet’s 36% return for the first half and Meta’s 138% return were gratefully received, I’m pleased to report that if we strip out that contribution to our overall return, the other 23 stocks we own, constituting 85% of our portfolio (with cash making up the balance), were up 10.2% on a weighted basis.
GCAM owns two of the seven tech mega caps in Alphabet and Meta, and they enjoyed similar rises. As mentioned, Alphabet A&C shares rose 36% while Meta rose 138%. Together, they added 2.38 percentage points to the overall Index return, meaning these seven tech giants cumulatively generated 12.4 percentage points of return, or roughly three-quarters of the Index’s return.
Alphabet and Meta combined sport a $2.25 trillion market cap and between them should generate roughly $120 billion of pretax profit this year. That’s a multiple of 19 times pretax profit, a substantial discount to Microsoft and Apple, and an even larger discount to Amazon, Nvidia and Tesla.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ:AMZN) is the biggest ecommerce retailer. Out of every $5 spent on ecommerce, $2 go to Amazon.com, Inc. (NASDAQ:AMZN), according to data by Insider Intelligence. With a 40% market share, Amazon.com, Inc. (NASDAQ:AMZN) has almost no major rival.
Amazon.com, Inc. (NASDAQ:AMZN) also leads the Cloud industry with its AWS business, which is offering new products and services to allow businesses to develop and deploy applications for AI and machine learning. Amazon.com, Inc. (NASDAQ:AMZN) enjoys a market share of about 32%-34% in the Cloud market, while its competitor MSFT only has a 23% market share.
Mairs & Power Growth Fund made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its second quarter 2023 investor letter:
“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.
Amazon had an impressive first half of the year as well with growth out of its retail segment but slightly slower growth in its cloud business. Customers optimized workloads for existing capacity they were already paying for rather than adding incremental capacity in the current environment. We remain very excited about the opportunity for the company to reduce the labor needs of its retail segment through the use of technology and automation in the future.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 289
Office. Operating system. Cloud computing. Xbox. And now AI. Microsoft Corporation (NASDAQ:MSFT) is literally everywhere and it’s evident how MSFT shares will keep growing in the years to come. Microsoft Corporation (NASDAQ:MSFT) is the second biggest player in the Cloud market, second only to Amazon, and continuously gaining. A 2021 study showed Microsoft Corporation (NASDAQ:MSFT) having a whopping 85% market share of the office productivity market. Microsoft Corporation (NASDAQ:MSFT) is bundling software and has become a one-stop shop for all things work productivity through Teams, Office, Skype, LinkedIn and other tools and platforms. Microsoft Corporation (NASDAQ:MSFT) is also expected to gain final approvals to buy Activision. And in the AI race Microsoft Corporation (NASDAQ:MSFT) is the frontrunner due to its huge investments in OpenAI. Microsoft Corporation (NASDAQ:MSFT) Bing search product is also expected to gain market share in the future.
Mairs & Power Growth Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its second quarter 2023 investor letter:
“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon and Microsoft Corporation (NASDAQ:MSFT) were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.
Microsoft (MSFT) was another positive contributor to performance in the first half. The company continued to take share in cloud computing. Its strong relationships with customers, as well as knowledge of their businesses, differentiates its offering, which is also helped by leading investments in AI. We expect the company will continue to integrate AI tools into most of its productivity suite of software in the not-too-distant future. This should help with employee productivity and the labor constraints of most of its customers.”
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Disclosure: None. 12 Stocks That Will Always Grow is originally published on Insider Monkey.
