In this article, we discuss the 5 best stocks to buy for deflation. If you want to see more stocks in this selection, click 11 Best Stocks To Buy For Deflation.
05. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders as of Q3, 2022: 66
Chevron Corporation (NYSE:CVX) is a San Ramon, California-based diversified, integrated oil company that is involved in the upstream, midstream, and downstream segments of the energy value chain. Chevron Corporation (NYSE:CVX) was able to capitalize on the high oil prices in the wake of Russia’s Ukraine invasion as it reported $11.2 billion in profits for its third fiscal quarter – almost double what the firm had raked in during the year-ago quarter. In the third quarter of 2022, Chevron Corporation (NYSE:CVX) distributed $2.7 billion in dividends to shareholders, up 6% from the same period last year. It currently pays a quarterly dividend of $1.42 per share and has a dividend yield of 3.25%, as recorded on December 21. The company has raised its dividends for 25 years in a row, which makes it one of the best stocks to buy for deflation.
Piper Sandler analyst Ryan Todd on December 19, maintained an Overweight rating on Chevron Corporation (NYSE:CVX) but lowered the price target on the shares to $199 from $206. “Even after two years of outperformance,” the analyst remains constructive on the energy complex into 2023.
66 of the 920 hedge funds polled by Insider Monkey for 2022’s September quarter had bought Chevron Corporation (NYSE:CVX)’s shares. Warren Buffett’s Berkshire Hathaway is Chevron Corporation (NYSE:CVX)’s largest shareholder. It owns 165 million shares that are worth $23 billion.
In its Q1 2022 investor letter, Diamond Hill, an asset management firm, highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:
“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”
04. PepsiCo, Inc. (NYSE:PEP)
Number of Hedge Fund Holders as of Q3, 2022: 72
PepsiCo, Inc. (NASDAQ:PEP) is one of the best stocks to monitor in a deflationary economic situation. PepsiCo, Inc. (NASDAQ:PEP) has paid consecutive quarterly cash dividends since 1965, and 2022 marks the company’s 50th consecutive annual dividend increase. On November 17, the company declared a $1.15 per share quarterly dividend, in line with the previous. The dividend is payable on January 6, 2023, to shareholders of record on December 2.
On December 7, Argus analyst John Staszak raised his price target on PepsiCo, Inc. (NASDAQ:PEP) to $206 from $195 and maintained a Buy rating on the shares. The company is well-managed, offers a valuable brand portfolio, and continues to offer strong growth amid soft demand for many consumer staples; the analyst told investors. The analyst added that he expects cost-cutting to continue to benefit earnings and PepsiCo, Inc. (NASDAQ:PEP) to achieve its goal of $1 billion in annual cost savings.
According to Insider Monkey’s data, 72 hedge funds were bullish on PepsiCo, Inc. (NASDAQ:PEP) at the end of the third quarter of 2022, compared to 65 funds in the earlier quarter. Terry Smith’s Fundsmith LLP is the largest stakeholder of the company, with 7.14 million shares worth $1.16 billion.
Here is what Lindsell Train has to say about PepsiCo, Inc. (NYSE:PEP) in its Q3 2022 investor letter:
“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindy compatible anti-ageing properties. Consider that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan. There are plenty of long-lived portfolio franchises I could reference here, but I’ve gone with PepsiCo (NYSE:PEP); partly because we have good time-series stats on it (beware data bias!) but also, as I hope will become evident, because Pepsi over its 129 years has succeeded in creating some wonderfully deep moats.
With Pepsi Cola you get the flagship soft drinks brand, which is both global and generational, but you also get the Frito-Lay salty snacks portfolio assembled alongside it, claiming nearly 40% of the global market. That’s ten-times greater than the nearest competitor and likely higher than the next 65 competitors combined. These are exceptionally strong global bands with market shares to match; the long-term empirical result being Pepsi’s dividend record which over the past 66 years (as far back as we’ve been able to go) has compounded at an annualized rate of 10%. Pepsi is no ‘in at the ground floor’ start-up today, but it wasn’t six decades ago either. Early growth investor Philip Fisher put it well when in 1958 (two years into Pepsi’s current winning streak) he wrote of “companies which in spite of outstanding prospects of major further growth are so financially strong, with roots going so deep into the economic soil, that they qualify under the general classification of ‘institutional stocks’”. PepsiCo fits this description well…” (Click here to see the full text)
03. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders as of Q3, 2022: 75
Exxon Mobil Corporation (NYSE:XOM) is a diversified energy company that not only produces crude oil and gas but is also expanding its presence in the renewables arena. Exxon Mobil Corporation (NYSE:XOM) raked in $19.6 billion in profits during this year’s third quarter, its highest earnings in history due to price pressure from the Ukraine invasion. Exxon Mobil Corporation (NYSE:XOM) has a 40-year run of raising its dividends. It currently offers a per-share dividend of $0.91 every quarter, with a dividend yield of 3.35%, as of December 27.
By the end of Q3 2022, 75 of the 920 hedge funds polled by Insider Monkey had bought Exxon Mobil Corporation (NYSE:XOM)’s shares. Exxon Mobil Corporation (NYSE:XOM)’s largest shareholder is Rajiv Jain’s GQG Partners, which owns 33 million shares worth $2.9 billion.
First Eagle Investments mentioned Exxon Mobil Corporation (NYSE:XOM) in their second-quarter 2022 investor letter. Here are the details:
“Integrated oil and gas giant Exxon Mobil performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industrywide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”
02. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders as of Q3, 2022: 80
AbbVie Inc. (NYSE:ABBV) is an American biotech company that was formed after the spin-off of Abbott Laboratories in 2013. The company is one of the best stocks to buy for deflation. It has been raising its payouts consistently for the past 50 years. It currently pays a quarterly dividend of $1.48 per share and has a dividend yield of 3.63% as of December 27.
AbbVie Inc. (NYSE:ABBV) was a part of 80 hedge fund portfolios in Q3 2022, up from 71 in the previous quarter. The stakes owned by these hedge funds have a total value of over $1.86 billion. With over 3.2 million shares, Arrowstreet Capital was one of the company’s leading stakeholders in Q3.
Baron Funds mentioned AbbVie Inc. (NYSE:ABBV) in its Q3 2022 investor letter. Here is what the firm has to say:
“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”
01. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders as of Q3, 2022: 85
Topping our list of best stocks to buy for deflation is Johnson & Johnson (NYSE:JNJ). Johnson & Johnson (NYSE:JNJ) is an American leading Big Pharma company that specializes in medical devices and offers other medical services. The stock delivered a 3.43% return to shareholders year-to-date, and its 12-month return came in at 4.57% as of December 27. Johnson & Johnson (NYSE:JNJ) has raised its payouts for 60 years in a row. It currently pays a quarterly dividend of $1.13 per share and has a dividend yield of 2.55%, as of December 27.
On December 12, Citi analyst Joanne Wuensch raised his price target on Johnson & Johnson (NYSE:JNJ) to $205 from $198 and kept a Buy rating on the shares. Looking into 2023, “many headwinds remain” for the North American medical supplies and technology group, but these should ease in the second half of next year, alleviating operating margin pressures, Wuensch tells investors in a research note.
As of the close of Q3 2022, 85 hedge funds in Insider Monkey’s database owned stakes in Johnson & Johnson (NYSE:JNJ), up from 83 in the previous quarter. The collective value of these stakes is over $5.4 billion. Among these hedge funds, Fisher Asset Management was the company’s leading stakeholder in Q3.
Here’s what Distillate Capital Partners LLC said about Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter:
“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”
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