In this article, we discuss the 5 stocks to buy before stagflation begins. If you want to read about some more stocks to buy before stagflation, go directly to the 10 Stocks to Buy Before Stagflation Begins.
5. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 67
The Procter & Gamble Company (NYSE:PG) markets consumer packaged goods. It is one of the favorite consumer goods stocks in the finance world. Among the hedge funds being tracked by Insider Monkey, London-based investment firm Cedar Rock Capital is a leading shareholder in The Procter & Gamble Company (NYSE:PG) with 6 million shares worth more than $985 million.
On March 22, Truist analyst Bill Chappell upgraded The Procter & Gamble Company (NYSE:PG) stock to Buy from Hold and raised the price target to $175 from $165, backing the firm to “break away from the pack in 2022” given the trusted brand name and product superiority over peers.
4. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 68
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer. On March 28, Gordon Haskett analyst Chuck Grom maintained a Buy rating on the stock with a price target of $355. The company recently also raised the quarterly dividend by 15% to $1.90.
Elite hedge funds hold bullish positions in The Home Depot, Inc. (NYSE:HD) stock. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in The Home Depot, Inc. (NYSE:HD) with 7.8 million shares worth more than $3.2 billion.
In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and The Home Depot, Inc. (NYSE:HD) was one of them. Here is what the fund said:
“Notable contributors to the Fund’s returns this quarter (included) Home Depot. The Home Depot, Inc. (NYSE:HD) (8.9% weight in the Fund) continued to benefit from a red-hot housing and home improvement market, delivering record financial performance in 2020. As a high return on invested capital business, any step-up in growth results in considerable shareholder value creation. While 2021 comparable sales may not yield impressive headline results, we believe there are several secular tailwinds supporting continued housing investment, including millennials entering prime household formation/peak earnings years, relatively low interest rates, and government policies.
The Home Depot, Inc. (NYSE:HD) (8.9% weight in the Fund): The big orange sign of Home Depot is a familiar sight for homeowners across the country. Despite the rise of Amazon, Home Depot has generated outstanding results for shareholders during the rise of eCommerce, even as Home Depot’s end market in housing suffered the worst collapse in a century. Over the last fifteen years, a period which began at the peak of the housing bubble, Home Depot’s stock has generated annual returns of 17% a year, outperforming the S&P 500 by approximately 7% a year.
But while homeowners can attest to their continued shopping at Home Depot, they may not be aware that only about half the company is dedicated to serving Do It Yourself homeowners, with the other half acting as a key supplier to small contractors – which the company calls Pros – who depend on Home Depot as a mission critical business partner.
While The Home Depot, Inc. (NYSE:HD) does not report on their contractor business separately from their homeowner business, they have regularly offered comments indicating that contractors make up just 4% of their customer base, but about 45% of revenue. Basic math implies…”[read the entire letter here]
3. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
Exxon Mobil Corporation (NYSE:XOM) is an integrated oil and gas firm. As energy prices rise, hedge funds have been loading up on the stock. At the end of the fourth quarter of 2021, 71 hedge funds in the database of Insider Monkey held stakes worth $5.3 billion in Exxon Mobil Corporation (NYSE:XOM), compared to 64 in the previous quarter worth $4.6 billion.
On March 9, Barclays analyst Jeanine Wai kept an Overweight rating on Exxon Mobil Corporation (NYSE: XOM) stock and raised the price target to $98 from $91. The company is exploring using excess natural gas for crypto mining operations as it seeks to diversify beyond energy.
In its Q1 2021 investor letter, Harding Loevner highlighted a few stocks and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here is what the fund said:
“We felt that our remaining energy holding, Exxon Mobil Corporation (NYSE: XOM), with its stronger balance sheet, was in a better position to ride out the cyclical slump in oil demand and even perhaps take advantage of it by investing counter-cyclically. While Exxon Mobil Corporation (NYSE: XOM) does plan to increase capital expenditure, we’ve been disappointed in its regrettable failure to address ongoing emission trends, which reflects poorly on management’s foresight. As a result, we sold our Exxon Mobil Corporation (NYSE: XOM) holdings.”
2. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 83
Pfizer Inc. (NYSE:PFE) makes and sells biopharma products. The company has an impressive dividend history stretching back over three decades with twelve consecutive years of growing payouts, making the stock one of the most trustworthy names in the biopharma industry.
The hedge fund sentiment around Pfizer Inc. (NYSE:PFE) stock is overwhelmingly positive. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Pfizer Inc. (NYSE:PFE), up from 74 in the preceding quarter worth $2.6 billion.
In its Q1 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:
“Our underweights in health care and staples contributed to relative performance during the period. As we continue to focus the portfolio on high-conviction ideas, we sold Pfizer Inc. (NYSE:PFE) in late 2020, in the health care sector.”
1. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 83
Micron Technology (NASDAQ:MU) markets memory and storage products. Amid rising chip prices, hedge funds have been loading up on the stock. At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Micron Technology (NASDAQ:MU), compared to 63 in the previous quarter worth $3.8 billion.
On March 16, Bernstein analyst Mark Li upgraded Micron Technology (NASDAQ:MU) stock to Outperform from Underperform and raised the price target to $94 from $58, noting that the Ukraine war was unlikely to affect the supply or demand for the chip industry and the valuations of chip stocks seemed favorable given recent corrections.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron Technology (NASDAQ:MU) is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron Technology (NASDAQ:MU) showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron Technology (NASDAQ:MU) is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
You can also take a peek at 10 Stocks Reddit’s WallStreetBets is Buying in July 2021 and Top Robinhood Stocks Popular on Reddit.
