In this article, we discuss the market crash predictions and 5 stocks to buy for bad times. If you want to read our detailed analysis of these stocks, go directly to the Market Crash Predictions and 10 Stocks to Buy for Bad Times.
5. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 60
On January 12, Truist analyst Scot Ciccarelli assumed coverage of Lowe’s Companies, Inc. (NYSE:LOW) stock with a Buy rating and raised the price target to $293 from $284, noting that key industry drivers like aging household infrastructure, imbalances in housing market, and consumer behavioral changes due to COVID-19 would all combine to drive home improvement growth, allowing Lowe’s Companies, Inc. (NYSE:LOW) to expand margins through systems and process improvements in 2022.
Hedge funds have expressed a lot of confidence in the ability of Lowe’s Companies, Inc. (NYSE:LOW) to deliver solid returns as a new fiscal year begins. At the end of the third quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Lowe’s Companies, Inc. (NYSE:LOW).
In its Q2 2021 investor letter, Pershing Square Holdings, Ltd., 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:
“Since the onset of the COVID-19 pandemic, Lowe’s has experienced a signifi cant acceleration in demand driven by consumers nesting at home, higher home asset utilization and the reallocation of discretionary spend. In the three years since Marvin Ellison became CEO, the company has executed a multi-year transformation plan to bolster Lowe’s retail fundamentals, reduce structural costs, expand distribution capabilities, and modernize systems and the company’s online capabilities. This transformation has allowed Lowe’s to meet consumers’ needs during this highly elevated period of demand, and positioned the company for continued success and accelerated earnings growth.
In the second quarter, Lowe’s reported U.S. same-store-sales growth of 2.2%. Growth was bolstered by strength from the critical Pro consumer, where Lowe’s reported growth of 21%, off setting moderating do-it-yourself (“DIY”) demand. While DIY demand has receded from peak-COVID-19 periods, Pro customer demand has accelerated as consumers engage Pro’s for larger renovation projects.
Notwithstanding the headline growth figure, which is impacted by comparisons to COVID-19-aff ected months from spring of 2020, demand remains extremely elevated relative to baseline 2019 levels. July same-store-sales, the most recent full month for which the company has provided disclosure, were up 31.5% on a two-year basis and management indicated August month-to-date results are substantially similar. More significantly, Lowe’s reported Pro growth of +49% on a two-year basis in Q2, evidence that Lowe’s focus on the Pro is bearing fruit. Share gains with the critical Pro customer will provide a tailwind to growth that should allow Lowe’s to outperform market-level growth going forward.
Even as the robust demand experienced during the height of COVID-19 stabilizes at a new base, the medium and longer-term macro environment remain very attractive for the home improvement sector and Lowe’s in particular. This favorable context for the sector is evidenced by consumers’ enhanced focus and appreciation of the importance of the home, higher home asset utilization, rising home prices, historically low mortgage rates, an aging housing stock, strong consumer balance sheets, and the general lack of new housing inventory.
Against this backdrop, Lowe’s is focused on taking market share and expanding margins. Pro penetration today is still only 25% of revenue as compared to Lowe’s medium-term target of 30% to 35%, providing a runway for continued above market growth. Management continues to execute against various operational initiatives (Lowe’s “Perpetual Productivity Improvement” program) designed to improve the customer experience while enhancing the company’s margins and longterm earnings power. The company’s long-term outlook implies significant opportunity for continued margin expansion and earnings appreciation as it executes its business transformation.
Lowe’s currently trades at approximately 17 times forward earnings. Home Depot, its closest competitor, trades at approximately 22 times forward earnings despite Lowe’s superior prospective earnings growth. We find this valuation disparity to be anomalous in light of Lowe’s strong execution and potential for further operational optimization.”
4. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
The Procter & Gamble Company (NYSE:PG) has featured high on the list of popular stocks among hedge funds consistently over the past decade or so. 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 7.4 million shares worth more than $1 billion.
The Procter & Gamble Company (NYSE:PG) stock offers a unique mix of high profitability and asset efficiency. In 2022, The Procter & Gamble Company (NYSE:PG) stock would be a great wealth preservation vehicle as interest rates rise and the market becomes more volatile. The Procter & Gamble Company (NYSE:PG) has grown free cash flow at a rate of close to 6% in the past six years. As retail sales improve, The Procter & Gamble Company (NYSE:PG) revenues look to increase as well.
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 71
Despite divestment of business units in the UK, Japan, and Argentina in the past year, Walmart Inc. (NYSE:WMT) has seen international sales climb and registered strong turnover and growth. The comparable sales of Walmart Inc. (NYSE:WMT) outside the US have grown by 16% in China and 6% in Canada. The online marketplace of Walmart Inc. (NYSE:WMT) is also growing. In the third of 2021, Walmart Inc. (NYSE:WMT) added 21 million new items to the marketplace. During the period, ecommerce sales jumped 8% year-on-year.
Walmart Inc. (NYSE:WMT) has attracted the interest of major hedge funds as it ramps up the business profile to compete with giants like Amazon. Among the hedge funds being tracked by Insider Monkey, Washington-based firm Bill & Melinda Gates Foundation Trust is a leading shareholder in Walmart Inc. (NYSE:WMT) with 7.6 million shares worth more than $1 billion.
2. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 74
Bristol-Myers Squibb Company (NYSE:BMY) makes and sells biopharma products. The stock offers much needed stability to large investment portfolios during crisis times because of stable revenues and a predictable business model. 74 hedge funds in the database of Insider Monkey hold stakes worth $4.5 billion in Bristol-Myers Squibb Company (NYSE:BMY).
In late December, JPMorgan analyst Chris Schott reiterated an Overweight rating on Bristol-Myers Squibb Company (NYSE:BMY) stock with a price target of $80, noting that the stock would rebound in 2022 with “new launched and pipeline catalysts”. Goldman Sachs analyst Chris Shibutani is also bullish on Bristol-Myers Squibb Company (NYSE:BMY) for 2022.
In its Q4 2020 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Bristol-Myers Squibb Company (NYSE:BMY) was one of them. Here is what the fund said:
“Bristol-Myers Squibb recently reported accelerating sales as much of the medical services industry returned to work. The Company continues to expect double-digit earnings growth over the next few years, driven by existing drugs, in addition to a broad pipeline of new drugs and indications. While the market remains fixated on a couple of patent expirations that could occur over the next several years, we think this is well-known at this point, yet the market still undervalues a couple of key acquisitions the Company has made in the past few years, particularly Celgene, which was acquired for a song.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE:JNJ) markets healthcare products. Johnson & Johnson (NYSE:JNJ) is one of the most dependable companies on the market when it comes to dividend growth. It has an impressive growth history stretching back close to six decades. The performance underlines the importance of the everyday healthcare products that Johnson & Johnson (NYSE:JNJ) sells and the stability of the business regardless of overall economic situation. Johnson & Johnson (NYSE:JNJ) recently announced it would be splitting up the consumer products and pharma business to form two companies.
Hedge funds remain bullish on Johnson & Johnson (NYSE:JNJ) and have backed the split to bear even more fruit for Johnson & Johnson (NYSE:JNJ) in the long-term. At the end of the third quarter of 2021, 88 hedge funds in the database of Insider Monkey held stakes worth $6.8 billion in Johnson & Johnson (NYSE:JNJ).
You can also take a peek at 10 Best Healthcare Dividend Stocks to Buy Now and 10 Dividend Stocks with Over 20 Years of Dividend Increases.
