In this article, we discuss 10 best hard landing stocks to buy now.
The stock market has been extremely tumultuous in the last two years, and the Fed’s relentless hike in rates indicate economic pessimism. In May, Fed Chair Jerome Powell said he couldn’t promise a so-called soft landing for the economy because of the gravity of the economic situation. And it seems he was right. That’s why long-term investors are preparing for a possible hard landing.
A hard landing refers to slower economic activity after a period of fast growth. A hard landing usually occurs when the monetary policy is tightened suddenly to keep the rapid growth and resultant inflation in check. Hard landings usually lead an economy into stagflation or recession. The Federal Reserve is now popping the wealth bubble by increasing interest rates aggressively, and Powell said that they have no intention of ceasing the increase in rates until inflation is effectively curbed.
In order to preserve money in an economy faced with a hard landing, investors seek out securities that would do well in a recessionary environment. This includes tobacco, healthcare, consumer staples, precious metals, and food stocks. Some of the best hard landing stocks to consider include McDonald’s Corporation (NYSE:MCD), Walmart Inc. (NYSE:WMT), and Johnson & Johnson (NYSE:JNJ).
Our Methodology
We picked securities that are positioned to benefit in a recessionary environment in case the soaring interest rates result in a hard landing. These stocks have solid business fundamentals and a robust history of surviving past economic crises. These companies have received positive analyst ratings recently as well, and strong hedge fund sentiment surrounds them as of Q1 2022.
Image by Sergei Tokmakov Terms.Law from Pixabay
Best Hard Landing Stocks to Buy Now
10. British American Tobacco p.l.c. (NYSE:BTI)
Number of Hedge Fund Holders: 19
British American Tobacco p.l.c. (NYSE:BTI) is a British multinational company that manufactures and markets cigarettes and nicotine products. British American Tobacco p.l.c. (NYSE:BTI) will be a primary beneficiary if JUUL’s products are taken off the market. The company is expected to consolidate its leadership position further in the U.S. e-cigarettes segment. British American Tobacco p.l.c. (NYSE:BTI)’s dividend yield of 7% and valuation are also attractive for investors. Additionally, people do not cut off smoking completely even if they shift their spending habits towards necessities, and stress amid potential unemployment and economic uncertainty can lead many people to start smoking, which bodes well for British American Tobacco p.l.c. (NYSE:BTI).
Morgan Stanley analyst Rashad Kawan on July 5 raised the price target on British American Tobacco p.l.c. (NYSE:BTI) to 4,000 GBp from 3,780 GBp and maintained an Overweight rating on the shares.
According to Insider Monkey’s Q1 data, 19 hedge funds were bullish on British American Tobacco p.l.c. (NYSE:BTI), with combined stakes worth about $2.3 billion, compared to 18 funds in the earlier quarter, holding stakes in the company valued at about $1.5 billion. Rajiv Jain’s GQG Partners is the largest shareholder of British American Tobacco p.l.c. (NYSE:BTI), with 29 million shares worth $1.2 billion.
In addition to McDonald’s Corporation (NYSE:MCD), Walmart Inc. (NYSE:WMT), and Johnson & Johnson (NYSE:JNJ), elite hedge funds are piling into British American Tobacco p.l.c. (NYSE:BTI).
Here is what Distillate Capital has to say about British American Tobacco p.l.c. (NYSE:BTI) in its Q1 2022 investor letter:
“Distillate Capital’s International FSV Strategy is less expensive, more fundamentally stable, and less levered than the benchmark All Country World Ex U.S. (ACWI-EX US) Index.The largest new position is British American Tobacco (NYSE:BTI), which was not owned previously due to leverage, but now passes that threshold and offers an 11% free cash flow to market cap yield.”
9. Coeur Mining, Inc. (NYSE:CDE)
Number of Hedge Fund Holders: 20
Coeur Mining, Inc. (NYSE:CDE) is an American precious metals mining company that extracts and distributes silver and gold. As the stock market has crashed so far in 2022, investors and laymen alike look towards preserving their money in the form of gold. This bodes well for companies like Coeur Mining, Inc. (NYSE:CDE).
Canaccord analyst Dalton Baretto on May 6 upgraded Coeur Mining, Inc. (NYSE:CDE) to Buy from Hold with an unchanged price target of $5.50 after the Q1 results and liquidity update. The company reported a strong quarter and its balance sheet looks solid ahead of a “capital-heavy” 2022 and 2023, the analyst told investors. The analyst thinks liquidity concerns have weighed significantly on Coeur Mining, Inc. (NYSE:CDE)’s share price this year. He sees the present share price as an attractive buying point given Coeur Mining, Inc. (NYSE:CDE)’s improved liquidity profile.
According to Insider Monkey’s first quarter database, 20 hedge funds reported long positions in Coeur Mining, Inc. (NYSE:CDE), up from 14 funds in the last quarter. D E Shaw is the leading shareholder of the company, with more than 5 million shares worth $22.2 million.
8. Kinross Gold Corporation (NYSE:KGC)
Number of Hedge Fund Holders: 22
Kinross Gold Corporation (NYSE:KGC) is a Canadian gold and silver mining company, with mines located in Brazil, Ghana, Mauritania, and the United States. On June 30, Stifel analyst Ingrid Rico reaffirmed a Buy rating on Kinross Gold Corporation (NYSE:KGC) and lowered the price target on the shares to C$11 from C$11.50. On June 16, Canaccord analyst Carey MacRury also maintained a Buy recommendation on the stock but cut the price target on Kinross Gold Corporation (NYSE:KGC) to C$11 from C$12 to account for the company exiting Russia. However, the analyst’s estimates for the stock remain unchanged.
According to Insider Monkey’s records, 22 hedge funds were long Kinross Gold Corporation (NYSE:KGC) at the end of Q1 2022, with collective stakes worth $276.4 million. Jim Simons’ Renaissance Technologies held the leading position in the company, comprising 24.60 million shares worth $144.6 million.
7. Corteva, Inc. (NYSE:CTVA)
Number of Hedge Fund Holders: 39
Corteva, Inc. (NYSE:CTVA) was incorporated in 2018 and is headquartered in Indianapolis, Indiana. It operates in the agriculture sector, with two primary segments – Seed and Crop Protection. Corteva, Inc. (NYSE:CTVA) is operating in the essential products market which makes it a suitable investment for hard landing scenario. The shares have gained about 10% year to date as of July 5.
Barclays analyst Benjamin Theurer initiated coverage of Corteva, Inc. (NYSE:CTVA) on June 1 with an Overweight rating and a $71 price target. The analyst sees long-term supply/demand tightness beyond 2023, which he said will benefit the broader group despite outperformance against major indexes.
The Q1 database of Insider Monkey suggests that 39 hedge funds were bullish on Corteva, Inc. (NYSE:CTVA), compared to 42 funds in the earlier quarter. Jeffrey Smith’s Starboard Value LP is the largest shareholder of the company, with roughly 6 million shares worth $344.6 million.
Here is what Aristotle Capital Management Value Equity has to say about Corteva, Inc. (NYSE:CTVA) in its Q1 2022 investor letter:
“Corteva Agriscience, one of the world’s largest seed and crop protection companies, was a primary contributor for the quarter. Due to its respected brand and the value-added benefits of its patented seeds and crop protection solutions for farmers, Corteva has been able to more than offset input cost inflation with sustainable price increases. In addition, the company’s ongoing mix shift to higher-margin, premium products, a catalyst we previously identified, is aiding both sales and profit growth. Shares were likely also buoyed by the rise in crop prices. Market participants, perhaps eager to chase short-term trends, poured into the sector. At Aristotle Capital, we look past such gyrations and, as long-term investors, do not attempt to predict short-term changes in commodity prices. We remain excited about what we view to be high-quality characteristics and fundamental improvements that permeate Corteva’s business, not the least of which include its pricing power.”
6. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE:DG) is an American discount retailer that sells household and consumable products. In a recessionary environment, consumers naturally gravitate towards discount products, which is a positive sign for Dollar General Corporation (NYSE:DG). The stock has climbed about 6% year to date as of July 5.
On June 16, Morgan Stanley analyst Simeon Gutman upgraded Dollar General Corporation (NYSE:DG) to Overweight from Equal Weight, raising the price target to $250 from $225. The analyst said that Dollar General Corporation (NYSE:DG) fits his preferred idea of “favoring quality, defensive retailers with offensive characteristics”. It could be the most defensive, counter-cyclical company in the space but its stock is in-line with other defensive retail names in terms of performance, the analyst informed investors. He sees an attractive risk/reward skew, with 50% upside in his $340 bull case and 25% downside in his $175 bear scenario.
In Q1 2022, 53 hedge funds reported long positions in Dollar General Corporation (NYSE:DG), up from 44 funds in the preceding quarter. William B. Gray’s Orbis Investment Management is the biggest shareholder of the company, with 2.3 million shares worth $519.2 million.
Like McDonald’s Corporation (NYSE:MCD), Walmart Inc. (NYSE:WMT), and Johnson & Johnson (NYSE:JNJ), institutional investors are monitoring Dollar General Corporation (NYSE:DG) amid fears of a hard landing.
Here is what LRT Capital Management has to say about Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.
The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.
Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”
5. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Philip Morris International Inc. (NYSE:PM) is a New York-based tobacco company that manufactures and sells cigarettes and smoke-free products. The recent FDA ruling against Juul is a positive indicator for Philip Morris International Inc. (NYSE:PM), which may have the chance to push IQOS growth with Juul removed from the market. Philip Morris International Inc. (NYSE:PM) has received approval for the IQOS HNB device and its e-cigarette, VEEV.
On April 24, BofA analyst Lisa Lewandowski raised the price target on Philip Morris International Inc. (NYSE:PM) to $117 from $107 and maintained a Buy rating on the shares. Despite headwinds in 2022, the analyst expects Philip Morris International Inc. (NYSE:PM) to shift its attention to different potential markets in order to survive the temporary cost pressures of moving production away from Russia. The analyst also observed that Philip Morris International Inc. (NYSE:PM)’s underlying business is strong and offers upside potential. She also likes the attractive yield, the transition to a smoke-free future, and the company’s focus on higher margin products.
According to Insider Monkey’s Q1 data, 55 hedge funds were bullish on Philip Morris International Inc. (NYSE:PM), up from 47 funds in the previous quarter. Rajiv Jain’s GQG Partners is the largest shareholder of the company, with approximately 30 million shares worth $2.8 billion.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm had to say:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
4. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 58
McDonald’s Corporation (NYSE:MCD) is one of the best hard landing stocks to consider. During a recession, people gravitate towards cheap value meals provided by companies like McDonald’s Corporation (NYSE:MCD), giving the stock a boost even amid hard economic conditions. In June, surveys with franchisees by investment advisory BTIG indicated strength in sales despite the macro headwinds.
On June 29, Atlantic Equities analyst Edward Lewis upgraded McDonald’s Corporation (NYSE:MCD) to Overweight from Neutral with a price target of $278, up from $245. The quick service restaurant model has been resilient during economic headwinds and McDonald’s Corporation (NYSE:MCD) operates a solid business with massive experience in managing through such challenging times, the analyst observed. The positive changes McDonald’s Corporation (NYSE:MCD) has been making as it transitions into primarily a franchise business are “adding to the company’s appeal”, the analyst told investors.
According to Insider Monkey’s Q1 database, 58 hedge funds reported owning stakes in McDonald’s Corporation (NYSE:MCD), up from 57 funds in the prior quarter. Ray Dalio’s Bridgewater Associates held a prominent position in the company, with 2.30 million shares worth $571 million.
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 60
Walmart Inc. (NYSE:WMT) is an American retailer that operates supercenters, supermarkets, hypermarkets, cash and carry stores, discount stores, membership-only warehouse clubs, and ecommerce websites. Walmart Inc. (NYSE:WMT) is one of the best defensive plays in a hard landing scenario, as demand for daily household merchandise never subsides despite a cut back in consumer spending. On June 27, Goldman Sachs analyst Kate McShane reiterated a Conviction Buy rating but lowered the price target on Walmart Inc. (NYSE:WMT) to $138 from $160. The analyst slashed fiscal 2022 earnings estimates by 2% on a reduced margin outlook.
According to Insider Monkey’s database, 60 hedge funds were bullish on Walmart Inc. (NYSE:WMT) at the end of Q1 2022, compared to 63 funds in the preceding quarter. D E Shaw is a prominent position holder in the company, with 5.6 million shares worth $783 million.
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 61
Costco Wholesale Corporation (NASDAQ:COST) is an American retailer that offers branded and private-label products in multiple merchandise categories. Demand for groceries and household products does not wane despite economic pressures, which makes Costco Wholesale Corporation (NASDAQ:COST) one of the safest hard landing stocks to buy.
On June 9, Atlantic Equities analyst Daniela Nedialkova said Costco Wholesale Corporation (NASDAQ:COST) delivers “strong comp momentum”, which should be sufficient to negate gross margin headwinds. According to the analyst, Costco Wholesale Corporation (NASDAQ:COST)’s “unique” business model, the steadiness of its membership revenue, and the higher-income customer base makes it more robust in the face of inflationary challenges. The analyst expects the retail sector to remain highly volatile in the short-term and would use any pullback in Costco Wholesale Corporation (NASDAQ:COST) stock as a chance to strengthen positions. She reiterated an Overweight rating on the shares with a $615 price target.
Among the hedge funds tracked by Insider Monkey, 61 funds were bullish on Costco Wholesale Corporation (NASDAQ:COST) at the end of Q1 2022, up from 57 funds in the preceding quarter. Fisher Asset Management is the largest shareholder of the company, with 4.2 million shares worth $2.4 billion.
Here is what ClearBridge Investments Sustainability Leaders Strategy has to say about Costco Wholesale Corporation (NASDAQ:COST) in its Q4 2021 investor letter:
“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco, which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is an American healthcare company that operates via Pharmaceutical and MedTech segments. 2022 marks the 60th annual dividend increase by Johnson & Johnson (NYSE:JNJ), making it a reliable dividend stock. Johnson & Johnson (NYSE:JNJ) has a history of outperformance amid previous economic crises, which makes it an ideal stock to consider for a hard landing. Daiwa initiated coverage of Johnson & Johnson (NYSE:JNJ) on June 22 with an Outperform rating and a $180 price target.
On April 19, Johnson & Johnson (NYSE:JNJ) declared a $1.13 per share quarterly dividend, a 6.6% increase from its prior dividend of $1.06. The dividend was distributed to shareholders on June 7. The stock delivers a dividend yield of 2.54% as of July 5.
Among the hedge funds tracked by Insider Monkey, 83 funds were bullish on Johnson & Johnson (NYSE:JNJ) at the end of Q1 2022, with combined stakes worth $7.40 billion. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest shareholder of the company, with 6.65 million shares worth about $1.18 billion.
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Disclosure: None. 10 Best Hard Landing Stocks to Buy Now is originally published on Insider Monkey.
