5 Best Recession-Proof Stocks to Buy Now

4. Abbott Laboratories (NYSE:ABT)

Number of Hedge Fund Holders: 70

Abbott Laboratories (NYSE:ABT) is a healthcare equipment company based in North Chicago, Illinois. While many expect healthcare companies to do well during a recession, Abbott Laboratories (NYSE:ABT) proved this was possible by outperforming the S&P 500 by 33.6% during the 2008 financial crisis.

There were 70 hedge funds long Abbott Laboratories (NYSE:ABT) in the first quarter. Their total stake value in the company was $2.4 billion.

Analysts at Raymond James hold an Outperform rating on Abbott Laboratories (NYSE:ABT) shares as of April 20, alongside a raised price target of $123.

Polen Capital made the following comment about Abbott Laboratories (NYSE:ABT) in its first-quarter 2023 investor letter:

“As stated below in the portfolio activity section, Abbott Laboratories (NYSE:ABT) is expected to see roughly $6 billion in COVID test sales evaporate this year, creating a headwind for margins and underlying earnings per share. As long-term owners of the business, these test sales were never part of our original investment case. The core business, our primary focus, has a clear path of growing high single digits in 2023 with durable growth beyond, in our view. We believe the current price of 23x NTM P/E , while reasonable, is also misleading considering earnings this year will be artificially depressed because of the drop in COVID testing sales. On normalized earnings, the price is lower. We anticipate underlying EPS growth of at least low-teens over the next three to five years.

Lastly, we trimmed Abbott Laboratories, bringing it back to a more average position size and to also fund our increase in Thermo Fisher. Abbott is entering a year in which the company is expected to see approximately $6bn in COVID-19 test sales disappear, thus, creating a headwind for margins and EPS. That said, the core business has a clear path to growing high single digits in FY23. EPS grew at a 20% CAGR from 2019-2022, far beyond our expectations when we initiated our investment. Now, we expect a more normal growth rate of low teens EPS beyond this year. Further, management’s adeptness at allocating capital continues to impress us. We expect Abbott to drive top line growth without heavily investing in R&D and SG&A this year— management effectively “front-loaded” those investments in 2021 and 2022 when COVID test sales created a bolus of cash. We believe this should allow for leverage on the operating margin going forward. Combined, Abbott and Thermo Fisher now represent 7% of the Portfolio.”