In this article, we discuss 10 best bear market stocks to buy according to Morgan Stanley.
Morgan Stanley’s Chief US Equity Strategist Mike Wilson recently warned investors about the ongoing instability in financial markets, asserting that this bear market rally is far from over. According to him, the S&P 500 is expected to fall at least between 11% to 19% as firms face inflation and slow earnings growth. This can be seen from the performance of Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), which are down 18.30%, 19.19%, and 18.60% year-to-date, respectively.
On May 23, Morgan Stanley came up with a list of some high-quality stocks that have the potential to weather the bear market and could experience upside afterward as well. The firm chose the stocks due to their strong business fundamentals, consistent dividends, and positive free cash flow, yielding at pre-Covid levels. The firm kept an Overweight rating on all these stocks.
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Our Methodology
In this article, we analyze the best bear market stocks to buy according to Morgan Stanley. We chose the stocks from Morgan Stanley’s recent list in which the firm mentioned the defensive securities that are good investment options for investors in current conditions.
Best Bear Market Stocks to Buy According to Morgan Stanley
10. Johnson Controls International plc (NYSE:JCI)
Number of Hedge Fund Holders: 44
Johnson Controls International plc (NYSE:JCI) is an Irish-domiciled multinational company that specializes in security equipment for buildings. On May 5, the company announced its Q1 2022 earnings, posting an EPS of $0.63, in line with the estimates and up 21% from the previous year. Moreover, the company also reported sales of over $2.2 billion, which presented a 6% year-over-year growth.
Morgan Stanley chose Johnson Controls International plc (NYSE:JCI) from the industrial sector and lifted its price target to $71. In addition to this, Barclays also appreciated the company’s improving profile in May and set a $65 price target on the stock while maintaining an Overweight rating on the shares. In the past month, JCI delivered a 7.11% return to shareholders, as of June 8. However, the stock is down 30.8% year-to-date, like Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), which also delivered negative returns to shareholders in 2022 so far.
On March 9, Johnson Controls International plc (NYSE:JCI) declared a quarterly dividend of $0.35 per share, up 3% from its prior dividend. The dividend yield of the stock stood at 2.52%, as of the close of June 8.
At the end of Q1 2022, Johnson Controls International plc (NYSE:JCI) remained popular among hedge funds, as 44 funds owned positions in the company, up from 42 in the previous quarter. The consolidated value of these stakes is over $1.43 billion. Ken Griffin’s Citadel Investment Group was the largest shareholder of the Ireland-based company in Q1 2022, owning a stake worth over $385.5 million.
Aristotle Capital Management mentioned Johnson Controls International plc (NYSE:JCI) in its Q1 2022 investor letter. Here is what the firm has to say:
“As investors since the fourth quarter of 2017, we have enjoyed a front-row view of the large transformation that has taken place at Johnson Controls. Once a multi-industrial corporation, the company successfully turned itself into a pure-play buildings solutions and technology provider. Catalysts we previously identified for Johnson Controls included synergies following its merger with Tyco International, which provides fire safety and building security products, as well as benefits from its separation of non-building-focused businesses, such as automotive seating and batteries. With all catalysts in sight now nearing completion, and Johnson Controls now a better business for it – with higher recurring revenues and lower capital intensity – we decided to exit our investment to help fund the purchases of Xcel Energy and Atmos Energy.”
9. Becton, Dickinson and Company (NYSE:BDX)
Number of Hedge Fund Holders: 49
Becton, Dickinson and Company (NYSE:BDX) manufactures medical devices, reagents, and instrument systems. Recently, the company announced its collaboration with a European diagnostic device maker to develop a diagnostic test for Monkeypox. The test will be used to contain the global spread of the disease.
Becton, Dickinson and Company (NYSE:BDX) currently pays a quarterly dividend of $0.87 per share, raising it by 4.8% in November 2021. This was the company’s 50th consecutive year of dividend growth. The stock’s dividend yield was recorded at 1.35% on June 8.
As per Insider Monkey Q1 database, 49 hedge funds were bullish on Becton, Dickinson and Company (NYSE:BDX), compared with 54 funds in the previous quarter. These stakes hold a collective value of $2.75 billion.
Becton, Dickinson and Company (NYSE:BDX) is one of the best bear market stocks according to Morgan Stanley from the healthcare sector as the company showed strength in its Q1 earnings, reported on May 5. The medical device company posted an EPS of $3.18 and revenue of over $5 billion, which beat estimates by $0.23 and $230 million, respectively. Moreover, the stock is up 4.48% year-to-date, as of the market close of June 8. Morgan Stanley lifted its price target on Becton, Dickinson and Company (NYSE:BDX) to $282.
ClearBridge Investments mentioned Becton, Dickinson and Company (NYSE:BDX) in its Q4 2021 investor letter. Here is what the firm has to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like medical equipment (medical device and laboratory supplier Becton Dickinson). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
8. Linde plc (NYSE:LIN)
Number of Hedge Fund Holders: 54
Linde plc (NYSE:LIN) is one of the world’s largest industrial gas companies based in Dublin, Ireland. In Q1 2022, the company posted an EPS of $2.93, which beat estimates by $0.16. The company’s revenue for the quarter came in at $8.2 billion, up 13.3% from the same period last year.
At the end of Q1 2022, Linde plc (NYSE:LIN) was favored by hedge funds as 54 funds tracked by Insider Monkey were bullish on the chemical company, up from 45 in the previous quarter. These stakes hold a collective value of over $4.8 billion. Impax Asset Management was the company’s leading shareholder in the first quarter, with stakes worth $935.4 million.
On April 26, Linde plc (NYSE:LIN) declared a quarterly dividend of $1.17 per share, in line with the previous dividend. The dividend is payable to shareholders on June 17. The stock’s dividend yield came to be recorded at 1.39% on June 8.
In May, Evercore ISI appreciated the stable business model of Linde plc (NYSE:LIN) in the global chemicals sector and expects the company to generate double-digit returns in FY22. The firm upgraded the stock to Outperform, with a $355 price target.
In the past year, shares of Linde plc (NYSE:LIN) inched 14.7% higher, as of the market close of June 8. It is one of the best bear market stocks according to Morgan Stanley due to the company’s record Q1 result and operating cash flow. The firm lifted its price target on LIN to $365.
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
The Coca-Cola Company (NYSE:KO) has been able to generate stable returns for shareholders over the years irrespective of the market conditions. The stock is up 5.95% for 2022 so far, while delivering a 12.9% return in 2021, recovering its pandemic-era highs.
In the first quarter of 2022, The Coca-Cola Company (NYSE:KO) reported an 18% year-over-year in its organic revenues while its net revenues grew by 16% to $10.5 billion, from the same period last year. The beverage company posted an EPS of $0.64, up 23% from the prior-year quarter and beating estimates by $0.06.
The Coca-Cola Company (NYSE:KO) hiked its quarterly dividend by 4.8% in February for the 60th consecutive year. The company pays a quarterly dividend of $0.44 per share, with a dividend yield of 2.80%, as recorded on June 8. Morgan Stanley lifted its price target on the KO stock to $76, listing it as one of the best bear market stocks.
Berkshire Hathaway was the leading shareholder of The Coca-Cola Company (NYSE:KO) in the first quarter of 2022, owning nearly $24.8 worth of stakes. Overall, the Atlanta-based company suffered a decline in the hedge fund interest in Q1, as 54 funds in Insider Monkey’s database held stakes in the company, down from 60 in the previous quarter. The consolidated value of these stakes is over $29 billion.
ClearBridge Investments mentioned The Coca-Cola Company (NYSE:KO) in its Q4 2021 investor letter. Here is what the firm has to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 68
Abbott Laboratories (NYSE:ABT) proved its resilience during the recession of 2008, delivering year-over-year sales growth of 14% in its global businesses when major companies reported disappointing earnings reports. The medical device company gained 144% in the past five years while delivering a 7.25% return to shareholders in 2021, as of the market close of June 8.
Abbott Laboratories (NYSE:ABT) is Morgan Stanley’s pick from the healthcare sector as it reported solid Q1 results. The company posted an EPS of $1.73, beating Street estimates by $0.27, and its revenue of roughly $12 billion also surpassed analysts’ consensus by $900 million. Morgan Stanley set a $158 price target on Abbott Laboratories (NYSE:ABT). In addition to ABT, analysts are also hopeful about major stocks, such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), despite pressure on the tech sector.
As per Insider Monkey’s Q1 2022 database, 68 hedge funds were bullish on Abbott Laboratories (NYSE:ABT), up from 64 in the previous quarter. These stakes hold a consolidated value of over $4.09 billion, declining slightly from $4.25 billion worth of stakes held by hedge funds in the previous quarter.
On April 20, Abbott Laboratories (NYSE:ABT) declared a quarterly dividend of $0.47 per share, growing it by 4.7% in December 2021. This was the company’s 50th consecutive year of dividend increase, falling into the category of Dividend Kings. As of June 8, the stock’s dividend yield was recorded at 1.62%.
Here is what Richie Capital Group said about Abbott Laboratories (NYSE:ABT) in its Q4 2021 investor letter:
“Abbott Labs (ABT – up 20.08%) – Abbot Labs continues to benefit from resurging demand for Covid testing kits. The company is planning to increase their monthly production of BinaxNOW at home rapid tests to 100M a month, a 43% increase from current levels.”
5. Anthem, Inc. (NYSE:ANTM)
Number of Hedge Fund Holders: 69
Anthem, Inc. (NYSE:ANTM) is a global health insurance plan provider. On April 8, the stock hit its all-time high, reaching $520 per share. Keeping its stable performance intact, ANTM delivered a 7.29% return to shareholders in 2022 so far, while its one-year return came in at 27.2%, as of the market close of June 8.
At the end of March 2022, 69 hedge funds tracked by Insider Monkey were bullish on Anthem, Inc. (NYSE:ANTM), owning stakes worth over $5.7 billion. In the previous quarter, 63 hedge funds owned a $5.6 billion worth of stakes in the Indiana-based company.
Anthem, Inc. (NYSE:ANTM) has been raising its dividends consecutively for the last 11 years. The company currently pays a quarterly dividend of $1.28 per share, which grew from $0.80 per share in 2018. As of the close of June 8, the stock offered a yield of 1.03%.
In the first quarter of 2022, Anthem, Inc. (NYSE:ANTM) reported an 18% year-over-year growth in its operating revenue to $37.9 billion. The company’s medical enrolment also increased by over 3.3 million members, taking the total to 46.8 million members. Given the company’s growth in its core businesses, Morgan Stanley lifted its price target on Anthem, Inc. (NYSE:ANTM) to $607, including it in its list of one of the best bear market stocks. In May, Bernstein also lifted its price target on the stock to $596, with an Outperform rating on the shares.
ClearBridge Investments mentioned Anthem, Inc. (NYSE:ANTM) in its Q4 2021 investor letter. Here is what the firm has to say:
“The quarter also saw strong showings from Anthem; has been operating well and is a key player in the evolution of health care insurance and delivery, providing more integrated and cost-effective solutions and receiving a tailwind from an aging population. The company tends to be volatile based on changes in medical loss ratios (MLR), though we view this volatility as a short term for business models that are able to reprice policies relatively quickly. We added significantly to the position during the year.”
4. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 72
Consumer staples stocks fare well during recessionary periods as customers rely on their products for everyday use. The Procter & Gamble Company (NYSE:PG) is one such name that gained nearly 51% between March 2009 and December 2011, the period of high recession. Moreover, the company is a dividend champion, raising its dividends consistently for the past 66 years, with a dividend yield of 2.51%, as of June 8’s close.
In its fiscal Q3 2022 report, The Procter & Gamble Company (NYSE:PG) posted an EPS of $1.33, beating estimates by $0.04. The company’s revenue also exceeded analysts’ consensus by $710 million at $19.4 billion. For FY22, the company expects its organic sales growth in the range of 6% to 7%, with earnings per share growth to fall between 3% to 6%, versus the consensus of 3.5%.
According to Insider Monkey’s Q1 data, The Procter & Gamble Company (NYSE:PG) was a part of 72 hedge fund portfolios, compared with 67 funds a quarter earlier. These hedge funds hold a collective stake of over $6 billion in the company. Rajiv Jain’s GQG Partner was the company’s leading shareholder in Q1, with stakes worth over $1.5 billion.
In June, Deutsche Bank set a $171 price target on The Procter & Gamble Company (NYSE:PG), with a Buy rating on the shares, highlighting the company’s strong performance in the first half of 2022. Morgan Stanley added the company to its list of best bear market stocks, setting a $177 price target on PG.
3. Comcast Corporation (NASDAQ:CMCSA)
Number of Hedge Fund Holders: 78
Comcast Corporation (NASDAQ:CMCSA) is a Philadelphia-based communications company that also specializes in wireless services and markets televisions, internet, and telephones for its customers.
For the quarter ending March 31, Comcast Corporation (NASDAQ:CMCSA) posted an EPS of $0.86, exceeding analysts’ estimates by $0.05. The company also showed growth in its other segments as well, reporting net additions of 194,000 and 262,000 in its cable and broadband customers, respectively. Moreover, its revenue for the quarter showcased a 14% year-over-year growth at $31.01 billion.
Comcast Corporation (NASDAQ:CMCSA) has been paying regular dividends to shareholders for the past 14 years. Currently, the company offers a quarterly payout of $0.27 per share, with a 2.51% yield, as of the close of June 8. In view of its dividend growth, Comcast Corporation (NASDAQ:CMCSA) was added by Goldman Sachs to its list of top dividend picks in May.
Morgan Stanley lifted its price target on Comcast Corporation (NASDAQ:CMCSA) to $55, picking the communications company as one of the best bear market stocks. In addition to this, Benchmark also set a $60 price target on CMCSA in June, with a Buy rating on the shares.
At the end of March 2022, the number of hedge funds tracked by Insider Monkey owning stakes in Comcast Corporation (NASDAQ:CMCSA) stood at 78, declining slightly from 80 in the previous quarter. The collective value of these stakes is over $7 billion. With stakes worth over $1.4 billion, First Eagle Investment Management was the company’s leading shareholder in Q1 2022.
ClearBridge Investments mentioned Comcast Corporation (NASDAQ:CMCSA) in its Q4 2021 investor letter. Here is what the firm has to say:
“Weakness among our holdings in the communication services sector was the other detractor to performance. Comcast was hurt by tepid subscriber growth in its broadband business but demonstrated strong growth in free cash flow, positioning the company for accelerated capital return going forward.”
2. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 83
Exxon Mobil Corporation (NYSE:XOM) was the only stock from the energy sector added by Morgan Stanley to its list of best bear market stocks. The firm lifted its price target on the stock to $105. Since the beginning of the year, XOM gained 64.6%, while the stock delivered a 68.3% return to shareholders in the past year.
In Q1 2022, Exxon Mobil Corporation (NYSE:XOM) reported revenue of $90.5 billion, surpassing estimates by $6.93 billion. However, its earnings per share of $2.07 missed consensus by $0.16.
Of the 900+ elite funds tracked by Insider Monkey, 83 funds presented a bullish stance on Exxon Mobil Corporation (NYSE:XOM) in Q1 2022, compared with 71 a quarter earlier. The consolidated value of these stakes is over $8.5 billion. Rajiv Jain, Ken Griffin, and Jim Simons are some of the major stakeholders of the company at the end of March 2022.
Exxon Mobil Corporation (NYSE:XOM) is a Dividend Aristocrat, raising its payouts consistently for the past 39 years. It currently offers a quarterly dividend of $0.88 per share, with a dividend yield of 3.36%, recorded on June 8. In June, Evercore ISI lifted its price target on Exxon Mobil Corporation (NYSE:XOM) to $120, with an Outperform rating on the shares.
Saturna Capital mentioned Exxon Mobil Corporation (NYSE:XOM) in its Q4 2021 investor letter. Here is what the firm has to say:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
1. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 136
An American financial services company, Mastercard Incorporated (NYSE:MA) has evolved its business over the years. The company adopted blockchain technology and added digital payments to expand its payment-focused services. MA has gained 5.80% in the past six months, as of the market close of June 8.
Mastercard Incorporated (NYSE:MA) was the 10th most famous stock among hedge funds at the end of March 2022, as 136 funds in Insider Monkey’s database held stakes in the company, compared with 144 in the previous quarter. These stakes hold a consolidated value of over $15.4 billion.
From the information technology sector, Morgan Stanley included Mastercard Incorporated (NYSE:MA) in its list of best bear market stocks, setting a $452 price target on the stock. In May, Goldman Sachs also initiated its coverage of the stock with a $460 price target and a Buy rating on the shares, appreciating the company’s Q1 earnings beat.
Mastercard Incorporated (NYSE:MA) maintains an 11-year track record of consistent dividend growth, with its 5-year dividend CAGR standing at 20%. The company pays a quarterly dividend of $0.49 per share, offering a dividend yield of 0.54%, as recorded on June 8.
Saturna Capital mentioned Mastercard Incorporated (NYSE:MA) in its Q4 2021 investor letter. Here is what the firm has to say:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our position in Mastercard. Although Mastercard does not charge or collect interest, its association with credit activities was problematic.”
You can also take a look at 12 Best Bear Market Stocks to Buy Now and 10 Best Financial Stocks that Pay Dividends
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Disclosure. None. 10 Best Bear Market Stocks to Buy According to Morgan Stanley is originally published on Insider Monkey.
