5 Stocks Smart Investors Buy During Recessions

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In this article, we discuss 5 stocks smart investors buy during recessions. If you want to read about some stocks that investors buy during recessions, go directly to 10 Stocks Smart Investors Buy During Recessions

5. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 65   

Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer. On May 18, the firm posted earnings for the first quarter of 2022, reporting earnings per share of $3.51, beating estimates by $0.28. The revenue over the period was $23.6 billion, down nearly 3% compared to the revenue over the same period last year. In guidance for 2022, the firm said it expected total sales of around $97 billion to $99 billion against consensus estimates of $97.97 billion. The firm forecast share repurchases of around $12 billion in the 2022 fiscal year.  

On May 19, Jefferies analyst Jonathan Matuszewski maintained a Buy rating on Lowe’s Companies, Inc. (NYSE:LOW) stock and lowered the price target to $238 from $290, backing the firm to meet sales and margin guidance for 2022. 

At the end of the first quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Lowe’s Companies, Inc. (NYSE:LOW), compared to 62 in the preceding quarter worth $6.8 billion.

In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. (NYSE:LOW) was one of them. Here is what the fund said:

“Lowe’s Companies, Inc. (NYSE:LOW) is a high-quality business with significant long-term earnings growth potential

Supportive macroeconomic backdrop

 -Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog

-COVID-19 causing millennials to enter the housing market

Positioned to grow EPS largely independent of market conditions

-Idiosyncratic revenue opportunities driving share gains

-Self-help initiatives catalyzing operating margin expansion

-Buybacks representing ~8% of current market capitalization planned for 2022

Multi-year business transformation with substantial earnings upside

-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing

-Potential to generate high-teens EPS growth over the next several years.

Lowe’s Companies, Inc. (NYSE:LOW) continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”

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