In this article, we will take a detailed look at the Top 10 Stocks to Watch as Investors Brace for Recession.
Despite some optimism in the market after President Donald Trump’s indication of possible talks with China, Wall Street analysts are warning about recession risks due to the impending impact of tariffs and an overall decline in consumer sentiment.
Adam Parker, Trivariate Research CEO, said in a recent interview with CNBC that it’s “hard” to be bullish in this market because the impact of tariffs is yet to be reflected in companies’ earnings.
Parker thinks that in the coming days, earnings reports of many companies will begin to show that we are indeed facing an economic slowdown:
“You know there’s a difference between a growth scare and and then an actual growth slowdown I think in this case it is a growth slowdown I don’t know how much of it is yet and that’s where I think the challenge is but you can’t just say oh it’s an irrational growth scare that everyone has and it’s like an uncertain I think if you have a business with pricing power if you have a business that you know you can be okay. But there’s a lot of economically sensitive businesses we’re going to hear from next week and the week after if you think about how earning season typically unfolds where we may get guidance that isn’t quite as peachy as we’ve seen from you know the original guys in the banks and then some of the higher quality tech companies have reported.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
For this article, we picked 10 stocks Wall Street is currently buzzing about. With each company, we have mentioned its hedge fund sentiment. 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).
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10. Powell Industries Inc (NASDAQ:POWL)
Number of Hedge Fund Investors: 26
Jim Cramer in a latest program on CNBC was asked about Powell Industries Inc (NASDAQ:POWL). Cramer said he’s bearish on the stock amid a broader slowdown in the data center industry:
“I know Powell Industries and it was in favor, kind of like an Emerson not that long ago, and suddenly it’s out of favor. If you’re willing to hold on for the next cycle, it’s fine. But I’ve got to tell you, it’s considered to be a data center play, and people think that data centers are slowing down. And that’s the case with Powell Industries too. I’m sorry, I wish I could be more positive. It’s a very inexpensive stock.”
Diamond Hill Capital Long-Short Fund stated the following regarding Powell Industries, Inc. (NASDAQ:POWL) in its first quarter 2024 investor letter:
“As valuations have risen, it has become increasingly challenging to find high-quality companies trading at interesting valuations. Accordingly, we didn’t initiate any new long positions during the quarter. However, we did introduce three new short positions, including Powell Industries, Inc. (NASDAQ:POWL), Royal Caribbean Group and YETI Holdings.
Powell Industries designs, manufactures and services complex electrical systems for several industries. While recent fundamentals have been solid, we believe the valuation has become stretched for what has historically been a highly cyclical business and accordingly initiated a new short position in Q1.”
9. Planet Fitness Inc (NYSE:PLNT)
Number of Hedge Fund Investors: 34
Jim Cramer in a latest program on CNBC gave some remarks about Planet Fitness Inc (NYSE:PLNT). Here is what he said:
“I want to know if that’s a good buy. You know, I do a memo each morning where I do the 10 things that I’m looking at, and it starts with a list of about 25 things. The only positive numbers I saw, only raising price target that I saw today, was Planet Fitness. So I took a look at it. They are doing better than expected. I think you have a winner.”
Vulcan Value Partners stated the following regarding Planet Fitness, Inc. (NYSE:PLNT) in its Q2 2024 investor letter:
“Planet Fitness, Inc. (NYSE:PLNT) pioneered the “high value, low price” (HVLP) gym model and operates over 2,500 gyms globally with 18.7 million members. Their straightforward, no-frills approach offers excellent value, appealing to a diverse and casual fitness demographic. Members enjoy a clean environment, regularly updated equipment, and accessible pricing starting at $10 per month, with their premium “Black Card” membership providing extensive benefits and access to all locations. Planet Fitness captured roughly 90% of U.S. gym membership growth from 2011-2019. The company’s dominant scale coupled with high advertising spend drives powerful growth, and the company plans to double its number of U.S. locations. Planet Fitness demonstrates robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion.”
8. NXP Semiconductors NV (NASDAQ:NXPI)
Number of Hedge Fund Investors: 44
Jim Cramer was recently asked about NXP Semiconductors. Here is what he said:
“NXP Semiconductors NV (NASDAQ:NXPI), it’s a semiconductor company. It’s closely connected with autos, which means it’s a semiconductor company that I do not want to own.”
Sound Shore Management stated the following regarding NXP Semiconductors N.V. (NASDAQ:NXPI) in its Q3 2024 investor letter:
“Meanwhile, detractors of note for the quarter were connected by a common theme: signs of a slowing economy. NXP Semiconductors N.V. (NASDAQ:NXPI), a leading chip maker for the auto industry, was lower on uncertain auto demand and package hauler FedEx lagged on muted volume trends. Importantly, both of these companies have ways to increase earnings outside of the business cycle, but are not entirely immune to the recent slowdown. Business cyclicality requires investor patience and a long-term perspective – we have both.”
7. Boeing Co (NYSE:BA)
Number of Hedge Fund Investors: 52
Jim Cramer in a latest program on CNBC said that there are other better ways to gain exposure to the aerospace industry instead of Boeing Co (NYSE:BA).
“I just think that if we don’t respond correctly to help Boeing, instead of just picking them all the time—and the old regime did do some things wrong—then Boeing’s going to be a tough stock to own. But they do have a lot of cash. They don’t have great cash flow. I think it’s okay. I’d rather—I’m picking other ways to play aerospace now because Boeing seems to just have—it’s snake bit. What can I say.”
Sound Shore Management stated the following regarding The Boeing Company (NYSE:BA) in its Q4 2024 investor letter:
“The Boeing Company (NYSE:BA): A detractor for the period was global aerospace leader Boeing. We were able to purchase the stock at a prospective 10% free cash flow yield on a normalized scenario. Over the past couple of years the stock rebounded from operational challenges and had surged on improved free cash generation from increasing order activity, driven by global demand for aircraft. It was one of our best performers in the fourth quarter of 2023 after its November plane deliveries increased. When additional manufacturing issues surfaced in January 2024, we believed it would push restructuring efforts back enough to warrant a review by our team. Reacting quickly, we sold our position at a gain in the first quarter, albeit less than before the news.”
6. Starbucks Corp (NASDAQ:SBUX)
Number of Hedge Fund Investors: 76
Jim Cramer was recently asked about Starbucks Corp (NASDAQ:SBUX). He reiterated his bullish view on the stock despite China-related concerns:
“We bought some for the Charitable Trust at great price, we let it go up, we sold some, we did not sell enough. Sometimes that happens. People think that the Chinese business is going to be written down badly if they try to sell it. I have so much faith in Brian Niccol. I am a buyer of Starbucks at $83.”
ClearBridge Large Cap Growth Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q1 2025 investor letter:
“Drilling further down, we have been engaging with management teams of portfolio companies with production outside the U.S. to understand supply change fungibility and the ability to pass through costs to end customers. We are specifically monitoring risks to the consumer sector from tariffs because consumers have already borne the burden of several years of cost inflation pressuring wallets and some areas of spending, like dining outside the home, have easy substitutes. That said, beverage holdings Starbucks Corporation (NASDAQ:SBUX) and Monster both held up well during the quarter. Starbucks is undergoing an earnings reset under new CEO Brian Nicoll that is being well received by investors. Monster, meanwhile, benefited from price increases and strength in its international business.”
5. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Investors: 81
Jim Cramer in a latest program on CNBC urged the Trump administration to step in and apply its deregulation principles to Johnson & Johnson’s (NYSE:JNJ) legal scenario.
“Johnson & Johnson, amazing company, reported today, trying to resolve a gigantic number of lawsuits involving talc that may have caused cervical cancer. The company had offered more than $8 billion to settle the cases. Some 83% of the plaintiffs accepted the deal, but a small group of plaintiffs convinced the judge to throw out the settlement. Now J&J is going to fight each case individually in the same old system of jackpot justice we’re so used to. Very bad for a lot of victims, and J&J’s now willing to settle. The administration could easily weigh in and end this plaintiff supremacy issue, an edict banning jackpot justice. Where are the capitalist instincts here?
Recently, a US bankruptcy judge rejected Johnson & Johnson’s (NYSE:JNJ) $10 billion proposal to end tens of thousands of lawsuits alleging that its baby powder and other talc products cause ovarian cancer.