Top 5 Cyclical Stocks To Buy Now

4. The TJX Companies, Inc. (NYSE:TJX)

Number of Hedge Fund Holders: 63     

The TJX Companies, Inc. (NYSE: TJX) is an off-price apparel and home fashions retailer. Investment advisory Jefferies recently named the company as one of the highest conviction recommendations out of the retail sector for 2022. The advisory has a Buy rating on The TJX Companies, Inc. (NYSE: TJX) stock with a price target of $90 and expects it to do well in the coming months based on “market-leading positioning, diversified offering and opportunity to drive sales and margin via pricing initiatives”. 

Hedge fund sentiment around the company is positive as well. At the end of September, 63 hedge funds in the database of Insider Monkey were bullish on The TJX Companies, Inc. (NYSE: TJX) with stakes worth $2.33 billion. This compared favorably to the end of June when just 56 funds had stakes in The TJX Companies, Inc. (NYSE: TJX). 

Giverny Capital, in their Q1 2021 investor letter, mentioned The TJX Companies, Inc. (NYSE:TJX). Here is what the fund said:

“We’re pretty happy with the current portfolio and so were not very active during the quarter. Our only consequential decision in the first quarter was to exit the off-price retailer The TJX Companies in January. My prior firm owned TJX for most of the past 20 years and enjoyed appreciation on the order of 20 times the original purchase price.

TJX is a great company, but the growth rate has slowed in recent years and the operating margin has been under pressure, mainly from rising wages for store workers. When the pandemic hit, I bought the stock for GCAM in the belief that if the US fell into a prolonged recession, TJX would be a winner because of its extreme value position.

The US didn’t fall into a prolonged recession. Rather, many consumers are flush with cash thanks to government relief programs. But brick-and-mortar stores are losing out to online competitors for reasons of safety and convenience. TJX has fared much better than most of its competitors during this time and should continue to do so, thanks to its model of buying inventory close to need and reacting to what is happening in the marketplace rather than trying to create hot product. But the stock rose about 50% in the few months we owned it and that increase seemed to price in a complete recovery and more. We sold in early January.”