In this article, we discuss the 10 long-term stocks to buy during recessions.
Over the past few weeks, there had been renewed optimism on Wall Street that the central bank would succeed in bringing down inflation without aggressive rate hikes, initiating a soft landing for the United States economy. These hopes were dealt a fatal blow in mid-September as the US government released the latest inflation numbers. Per the new figures, the consumer price index, the standard measure of inflation, increased 0.1% in August, above expectations for a 0.1% drop following a flat July.
Another worrying indicator for investors was the rise in core inflation, a measure that strips out volatile items like energy and food from the index, that climbed 0.6% during the time for an annual increase of 6.3%, compared with 5.9% in July. A mass selloff followed at the stock as the new data came in, hurting stocks like NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and Verizon Communications Inc. (NYSE:VZ), that had been buoyed by hopes that the US could avoid a recession.
Benchmark indexes like the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average are all trading lower as a result, registering drops of 5.82%, 6.58%, and 5% over the past five days as of September 16, respectively. Analysts are now warning investors to prepare for aggressive rate hikes that could trigger a recession. Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, recently predicted a 100 basis point hike in interest rates before the month is over. The dollar is also taking a hit amid this chaos.
Our Methodology
The companies that have long-term growth catalysts were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. A database of around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to quantify the popularity of each stock in the hedge fund universe.
Speedcurve Performance Analytics
Long-Term Stocks to Buy During Recessions
10. Verastem, Inc. (NASDAQ:VSTM)
Number of Hedge Fund Holders: 18
Verastem, Inc. (NASDAQ:VSTM), a development-stage biopharmaceutical company, focuses on cancer treatment. In mid-May, the company announced that it had been selected for the first Therapeutic Accelerator Award of $3.8 million from the Pancreatic Cancer Network. Per the firm, the award would support a phase 1b/2 trial of leading drug candidates like VS-6766 and defactinib to see if a more complete blockade of KRAS signaling, which is mutated in more than 95% of pancreatic cancer tumors, will improve outcomes for patients.
On September 7, Alliance Global Partners analyst James Molloy resumed coverage of Verastem, Inc. (NASDAQ:VSTM) stock with a Buy rating and a price target of $6, noting that the firm had multiple potentially positive catalysts over the next 6-12 months.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Baker Bros. Advisors is a leading shareholder in Verastem, Inc. (NASDAQ:VSTM), with 27 million shares worth more than $31 million.
Just like NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and Verizon Communications Inc. (NYSE:VZ), Verastem, Inc. (NASDAQ:VSTM) is one of the stocks that elite investors are buying amid recession fears.
9. Etsy, Inc. (NASDAQ:ETSY)
Number of Hedge Fund Holders: 29
Etsy, Inc. (NASDAQ:ETSY) operates two-sided online marketplaces that connect buyers and sellers. On July 27, the company posted earnings for the second quarter of 2022, reporting earnings per share of $0.51, beating market estimates by $0.19. The revenue over the period was $585 million, up over 10% compared to the revenue over the same period last year and beating analyst estimates by $28 million. The firm said the marketplace acquired approximately 6 million new buyers, a number that showed the elevated rate of new buyer acquisition when compared to pre-pandemic levels.
On August 16, Truist analyst Naved Khan maintained a Buy rating on Etsy, Inc. (NASDAQ:ETSY) stock and raised the price target to $130 from $215, noting that the firm had long term growth prospects despite the near-term slowdown.
At the end of the second quarter of 2022, 29 hedge funds in the database of Insider Monkey held stakes worth $600 million in Etsy, Inc. (NASDAQ:ETSY), compared to 43 in the preceding quarter worth $668 million.
In its Q2 2022 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Etsy, Inc. (NASDAQ:ETSY) was one of them. Here is what the fund said:
“We became interested in Etsy (NASDAQ:ETSY) when Josh Silverman took over as CEO in 2017. The company had long been recognized as a great marketplace, but prior management was not focused on maximizing shareholder value. In short order, Silverman transformed Etsy from a borderline non-profit into a higher-margin, faster-growing enterprise. The pandemic helped accelerate already strong fundamental business results as millions of new customers were introduced to the platform while stuck at home. But like so many other Covid-19 “winners,” Etsy has since fallen deeply out of favor with investors, which prompted us to take a closer look. Following a 75% decline in its stock price, the company now trades for 3.5x next year’s revenue or just a low double-digit multiple of operating profit using our estimate of normalized margins. We believe this is an attractive price to pay for a unique digital marketplace with a long runway for future growth. Note that our exposure to Etsy is currently established via options.”
8. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
NextEra Energy, Inc. (NYSE:NEE) generates, transmits, distributes, and sells electric power. The company has an impressive dividend profile. It has consistently paid a dividend to shareholders for the past thirty-two years. These payouts have also registered uninterrupted growth in the past twenty-six years. The sector median in this regard is just eight years, attesting to the solidity of the business model of the firm compared to peers. On July 29, the firm declared a quarterly dividend of $0.425 per share, in line with previous.
On September 12, Guggenheim analyst Shahriar Pourez maintained a Buy rating on NextEra Energy, Inc. (NYSE:NEE) stock and raised the price target to $108 from $91, noting the firm was a clear winner from renewables and decarbonisation provisions of new laws.
At the end of the second quarter of 2022, 59 hedge funds in the database of Insider Monkey held stakes worth $2.76 billion in NextEra Energy, Inc. (NYSE:NEE), compared to 64 in the preceding quarter worth $2.8 billion.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NextEra Energy, Inc. (NYSE:NEE) was one of them. Here is what the fund said:
“We increased our exposure to the energy transition during the quarter with new positions in Iberdrola (OTCPK:IBDSF), a Spanish-based integrated utility that is also one of the leading renewable energy developers in the world, and NextEra Energy, Inc. (NYSE:NEE), an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. The war has opened the eyes of the world that energy independence is critical. Renewables are for many countries the only way to get to the target. It is expected that existing renewable project pipelines will be executed faster, and more projects added to existing pipelines.(…read more)”
7. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 64
Costco Wholesale Corporation (NASDAQ:COST) engages in the operation of membership warehouses. In late August, the company announced that comparable sales growth in August had climbed to more than 10% and net sales had jumped to over $17.5 billion, up 11.4% compared to the same period last year. The firm also revealed that e-commerce comparable sales grew 3.9%, and excluding impact from gas prices and forex, increased 4.8%, while comparable sales, excluding impacts from changes, increased 8.7%.
On September 12, UBS analyst Michael Lasser maintained a Buy rating on Costco Wholesale Corporation (NASDAQ:COST) stock with a price target of $595, noting that steady membership acquisition would accelerate same store sales growth.
Among the hedge funds being tracked by Insider Monkey, Washington-based Fisher Asset Management is a leading shareholder in Costco Wholesale Corporation (NASDAQ:COST), with 4.3 million shares worth more than $2.1 billion.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ:COST) was one of them. Here is what the fund said:
“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco Wholesale Corporation (NASDAQ:COST), 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.”
6. Sea Limited (NYSE:SE)
Number of Hedge Fund Holders: 65
Sea Limited (NYSE:SE) engages in digital entertainment, e-commerce, and digital financial services. In mid-May, the sovereign wealth fund of Saudi Arabia, one of the biggest investors in the world, took a large stake in the company. The fund bought close to 240,000 shares in the tech firm. The purchase came even as video game sales, one of the biggest sources of revenue for the firm, continued to fall. However, despite the falling sales, there are signs video game demand is stabilizing back to pre-pandemic levels.
On August 18, Barclays analyst Jiong Shao maintained an Overweight rating on Sea Limited (NYSE:SE) stock and lowered the price target to $114 from $125, noting that it was sensible for management to withdraw Shopee fiscal 2022 revenue guidance amid macro uncertainty.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management is a leading shareholder in Sea Limited (NYSE:SE), with 8.2 million shares worth more than $548 million.
Alongside NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and Verizon Communications Inc. (NYSE:VZ), Sea Limited (NYSE:SE) is one of the stocks on the radar of elite investors as recession fears gather pace.
In its Q1 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Sea Limited (NYSE:SE) was one of them. Here is what the fund said:
“Sea Limited (NYSE:SE), a global digital gaming and e-commerce company, detracted from performance for the period held. Similar to other online consumer businesses, Sea faced significant multiple compression in the quarter, exacerbated by a slowdown in user growth at its key Free Fire digital game and mounting investments in its e-commerce operation, particularly in new markets like Brazil. We exited our position as we lost confidence in the long- term unit economics in some of Sea’s new markets and were concerned by the simultaneous slowdown in revenue growth and increase in underlying cash burn.”
5. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 70
Pfizer Inc. (NYSE:PFE) discovers, develops, manufactures, and sells biopharmaceutical products. In mid-September, the company announced that it had begun trials of an mRNA-based influenza vaccine. Initially, the firm said that first participants were dosed in a phase 3 of quadrivalent modified RNA influenza vaccine in some 25,000 healthy US adults that were aged 18 years and older. Pfizer has the exclusive right to carry out development and commercialization of mRNA-based influenza vaccines under a deal with BioNTech.
On August 1, investment advisory Barclays maintained an Equal Weight rating on Pfizer Inc. (NYSE:PFE) stock and raised the price target to $52 from $50. Analyst Carter Gould issued the ratings update.
At the end of the second quarter of 2022, 70 hedge funds in the database of Insider Monkey held stakes worth $2.8 billion in Pfizer Inc. (NYSE:PFE), compared to 79 in the preceding quarter worth $4.1 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Pfizer Inc. (NYSE:PFE) was one of them. Here is what the fund said:
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer Inc. (NYSE:PFE) vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. (…read more)
4. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 96
T-Mobile US, Inc. (NASDAQ:TMUS) provides mobile communications service. The stock has climbed in recent weeks on the back of reports that the board of directors of the firm had authorized a share repurchase program worth up to $14 billion of common stock. The program runs through September 2023 and allows for purchases to be made from time to time through a variety of methods. The firm said that the program may also include up to $3 billion in share purchases through the remainder of 2022.
On September 9, Raymond James analyst Ric Prentiss maintained a Strong Buy rating on T-Mobile US, Inc. (NASDAQ:TMUS) stock and raised the price target to $178 from $175, noting that the board had authorized a $14 billion stock repurchase, which is positive for value creation.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. (NASDAQ:TMUS), with 9.2 million shares worth more than $1.2 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and T-Mobile US, Inc. (NASDAQ:TMUS) was one of them. Here is what the fund said:
“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile US, Inc. (NASDAQ:TMUS). Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”
3. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 137
Mastercard Incorporated (NYSE:MA) provides transaction processing and other payment-related products and services. On July 28, the company posted earnings for the second quarter of 2022, reporting earnings per share of $2.56, beating market estimates by $0.20. The revenue over the period was $5.5 billion, up over 10% compared to the revenue over the same period last year and beating analyst estimates by $240 million. The firm said the gross dollar volume growth was 14% over the time.
On September 2, Deutsche Bank analyst Bryan Keane maintained a Buy rating on Mastercard Incorporated (NYSE:MA) stock with a price target of $440, noting that despite the recent downturn in crypto, the underlying block chain technology is here to stay.
Among the hedge funds being tracked by Insider Monkey, Middleburg, Virginia-based investment firm Akre Capital Management is a leading shareholder in Mastercard Incorporated (NYSE:MA), with 5.9 million shares worth more than $1.8 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Mastercard Incorporated (NYSE:MA) was one of them. Here is what the fund said:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Mastercard Incorporated (NYSE:MA) added the most value. These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
2. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 166
Visa Inc. (NYSE:V) operates as a payments technology company worldwide. On August 30, the company announced that the US payments volume in August had increased by 11% compared to a year ago. The increase came even after the company suspended operations in Russia in March 2022, and reported flat results in July 2022. The firm also revealed that credit payments volume had increased by 17% and debit volume rose 7% year-on-year, both up one point from July.
At the end of the second quarter of 2022, 166 hedge funds in the database of Insider Monkey held stakes worth $24 billion in Visa Inc. (NYSE:V), compared to 159 in the preceding quarter worth $28 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE:V) was one of them. Here is what the fund said:
“The Fund’s holdings in the Payments and Information Services themes also contributed to relative performance. Within Payments, lower exposure to this lagging theme and outperformance of Visa, Inc. (NYSE:V). These global payment networks are viewed as safe havens during market downturns but are also benefiting from resilient payment volumes and a sharp rebound in international travel.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Microsoft Corporation (NASDAQ:MSFT) develops, licenses, supports software, services, devices, and solutions worldwide. Reports suggest that the $69 billion purchase of video game firm Activision by the tech giant is going to undergo an antitrust review in Europe. The tech firm is expected to file the necessary paperwork with authorities in the region within the next two weeks. Microsoft has stepped up investments in the gaming and metaverse domains as the competition heats up in the tech sector.
On July 27, Wedbush analyst Daniel Ives maintained an Outperform rating on Microsoft Corporation (NASDAQ:MSFT) stock and lowered the price target to $320 from $340, noting that the metrics around cloud and commercial bookings looked strong for the firm.
At the end of the second quarter of 2022, 258 hedge funds in the database of Insider Monkey held stakes worth $56 billion in Microsoft Corporation (NASDAQ:MSFT), compared to 259 in the previous quarter worth $66 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Shares of Microsoft Corporation (NASDAQ:MSFT), a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues. (read more…)
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Disclosure. None. 10 Long-Term Stocks to Buy During Recessions is originally published on Insider Monkey.
