We recently compiled a list of the 15 Best Stocks to Buy During Recession. In this article, we are going to take a look at where The Southern Company (NYSE:SO) stands against the other stocks.
As per BlackRock, 2025 started with a bumpy ride for the US stocks. That being said, the asset manager believes that the sentiment has been a critical driver, but fundamentals seem to be healthy. This makes up for an optimistic longer-run outlook. Despite the tariff shocks creating difficult markets, the firm is constructive in its outlook and opines that volatility is an opportunity to capitalize on stock dispersion. Furthermore, Asia continues to exhibit a diversification opportunity for making investments in the AI theme, with equities providing low correlation to US counterparts.
Amidst Worries, There Is a Silver Lining
The trade and tariff uncertainty, which fueled the early-year volatility, advanced at the beginning of Q2 due to the US tariff pronouncements, according to the investment management company. This resulted in a global market meltdown and revived fears related to recession. However, as the quarter progressed, the tariff tensions took a backseat, and there was some optimism visible in the broader US markets. The asset manager believes that, while tariffs remain a critical measure, the potential for market-supporting policies like deregulation and corporate tax cuts provides some room for emergent optimism.
The firm highlighted the importance of an active approach in a bid to capitalize on inefficiencies and to make precise and intentional decisions amidst historic change and transition. While the results of bilateral tariff negotiations remain unpredictable, having a pulse on company dynamics, mainly when the macro picture remains unclear, can act as a differentiator for portfolios.
Policy Measures Likely to Support Moving Forward
The firm opines that corporate strength has supported the US equities’ momentum, and it comes through in earnings and market share. As per the firm, relatively pro-industry policies have stimulated healthy FCF. Several companies throughout different time frames have deployed the cash for future business growth. Even though the policy uncertainty in the current time of transition led to the pause in large investment decisions, the company believes that moves toward deregulation and the reshoring of supply chains once policy gets settled can result in the revival of CapEx spending throughout industries, such as technology and industrials. Despite tariffs dominating, the asset manager expects that deregulation and other policy priorities can regain attention. The high drive for innovation is the long-term secular trend that can support the US equities.
Our Methodology
To list the 15 Best Stocks to Buy During Recession, we considered the stocks from recession-proof industries such as utilities, consumer defensive, and healthcare. After getting an extensive list of 25-30 stocks, we chose the ones popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiments, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A technician working with a control panel in a gas distribution center.
The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 53
The Southern Company (NYSE:SO) is engaged in the generation, transmission, and distribution of electricity. Barclays upped the company’s price objective to $90 from $83, keeping an “Equal Weight” rating. Notably, the firm has adjusted the utilities and power sector models moving into Q1 earnings in a bid to exhibit the macro positioning as well as updated thoughts on the US utilities tariff outlook. Furthermore, the analyst has highlighted the defensive characteristics of the industry. Elsewhere, Morgan Stanley exhibited optimism on The Southern Company (NYSE:SO)’s stock. Some important takeaways from the firm’s annual energy & power conference include robust demand from data centers, renewables defense with safe harboring, equipment onshoring, among others.
The Southern Company (NYSE:SO)’s strategic position places it as the frontrunner in the trend of data center development. Furthermore, the elevated demand trends for cloud computing, AI as well as other data-intensive technologies continue to fuel significant investments in data center infrastructure throughout the region. Data center operators tend to make long-term power purchase agreements, which provide The Southern Company (NYSE:SO) with predictable cash flows and justify the robust infrastructure investments. The requirement to support data center operations fuels investments in grid reliability as well as capacity, which could be beneficial for all the customers and potentially result in favorable regulatory outcomes.
Overall SO ranks 12th on our list of the best stocks to buy during recession. While we acknowledge the potential of SO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than SO but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.