In this article, we discuss 10 best bear market stocks to buy according to Morgan Stanley. You can skip our detailed analysis of the current market situation, and go directly to read 5 Best Bear Market Stocks to Buy According to Morgan Stanley.
Morgan Stanley’s Chief US Equity Strategist Mike Wilson recently warned investors about the ongoing instability in financial markets, asserting that this bear market rally is far from over. According to him, the S&P 500 is expected to fall at least between 11% to 19% as firms face inflation and slow earnings growth. This can be seen from the performance of Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), which are down 18.30%, 19.19%, and 18.60% year-to-date, respectively.
On May 23, Morgan Stanley came up with a list of some high-quality stocks that have the potential to weather the bear market and could experience upside afterward as well. The firm chose the stocks due to their strong business fundamentals, consistent dividends, and positive free cash flow, yielding at pre-Covid levels. The firm kept an Overweight rating on all these stocks.
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Our Methodology
In this article, we analyze the best bear market stocks to buy according to Morgan Stanley. We chose the stocks from Morgan Stanley’s recent list in which the firm mentioned the defensive securities that are good investment options for investors in current conditions.
Best Bear Market Stocks to Buy According to Morgan Stanley
10. Johnson Controls International plc (NYSE:JCI)
Number of Hedge Fund Holders: 44
Johnson Controls International plc (NYSE:JCI) is an Irish-domiciled multinational company that specializes in security equipment for buildings. On May 5, the company announced its Q1 2022 earnings, posting an EPS of $0.63, in line with the estimates and up 21% from the previous year. Moreover, the company also reported sales of over $2.2 billion, which presented a 6% year-over-year growth.
Morgan Stanley chose Johnson Controls International plc (NYSE:JCI) from the industrial sector and lifted its price target to $71. In addition to this, Barclays also appreciated the company’s improving profile in May and set a $65 price target on the stock while maintaining an Overweight rating on the shares. In the past month, JCI delivered a 7.11% return to shareholders, as of June 8. However, the stock is down 30.8% year-to-date, like Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), which also delivered negative returns to shareholders in 2022 so far.
On March 9, Johnson Controls International plc (NYSE:JCI) declared a quarterly dividend of $0.35 per share, up 3% from its prior dividend. The dividend yield of the stock stood at 2.52%, as of the close of June 8.
At the end of Q1 2022, Johnson Controls International plc (NYSE:JCI) remained popular among hedge funds, as 44 funds owned positions in the company, up from 42 in the previous quarter. The consolidated value of these stakes is over $1.43 billion. Ken Griffin’s Citadel Investment Group was the largest shareholder of the Ireland-based company in Q1 2022, owning a stake worth over $385.5 million.
Aristotle Capital Management mentioned Johnson Controls International plc (NYSE:JCI) in its Q1 2022 investor letter. Here is what the firm has to say:
“As investors since the fourth quarter of 2017, we have enjoyed a front-row view of the large transformation that has taken place at Johnson Controls. Once a multi-industrial corporation, the company successfully turned itself into a pure-play buildings solutions and technology provider. Catalysts we previously identified for Johnson Controls included synergies following its merger with Tyco International, which provides fire safety and building security products, as well as benefits from its separation of non-building-focused businesses, such as automotive seating and batteries. With all catalysts in sight now nearing completion, and Johnson Controls now a better business for it – with higher recurring revenues and lower capital intensity – we decided to exit our investment to help fund the purchases of Xcel Energy and Atmos Energy.”
9. Becton, Dickinson and Company (NYSE:BDX)
Number of Hedge Fund Holders: 49
Becton, Dickinson and Company (NYSE:BDX) manufactures medical devices, reagents, and instrument systems. Recently, the company announced its collaboration with a European diagnostic device maker to develop a diagnostic test for Monkeypox. The test will be used to contain the global spread of the disease.
Becton, Dickinson and Company (NYSE:BDX) currently pays a quarterly dividend of $0.87 per share, raising it by 4.8% in November 2021. This was the company’s 50th consecutive year of dividend growth. The stock’s dividend yield was recorded at 1.35% on June 8.
As per Insider Monkey Q1 database, 49 hedge funds were bullish on Becton, Dickinson and Company (NYSE:BDX), compared with 54 funds in the previous quarter. These stakes hold a collective value of $2.75 billion.
Becton, Dickinson and Company (NYSE:BDX) is one of the best bear market stocks according to Morgan Stanley from the healthcare sector as the company showed strength in its Q1 earnings, reported on May 5. The medical device company posted an EPS of $3.18 and revenue of over $5 billion, which beat estimates by $0.23 and $230 million, respectively. Moreover, the stock is up 4.48% year-to-date, as of the market close of June 8. Morgan Stanley lifted its price target on Becton, Dickinson and Company (NYSE:BDX) to $282.
ClearBridge Investments mentioned Becton, Dickinson and Company (NYSE:BDX) in its Q4 2021 investor letter. Here is what the firm has to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like medical equipment (medical device and laboratory supplier Becton Dickinson). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
8. Linde plc (NYSE:LIN)
Number of Hedge Fund Holders: 54
Linde plc (NYSE:LIN) is one of the world’s largest industrial gas companies based in Dublin, Ireland. In Q1 2022, the company posted an EPS of $2.93, which beat estimates by $0.16. The company’s revenue for the quarter came in at $8.2 billion, up 13.3% from the same period last year.
At the end of Q1 2022, Linde plc (NYSE:LIN) was favored by hedge funds as 54 funds tracked by Insider Monkey were bullish on the chemical company, up from 45 in the previous quarter. These stakes hold a collective value of over $4.8 billion. Impax Asset Management was the company’s leading shareholder in the first quarter, with stakes worth $935.4 million.
On April 26, Linde plc (NYSE:LIN) declared a quarterly dividend of $1.17 per share, in line with the previous dividend. The dividend is payable to shareholders on June 17. The stock’s dividend yield came to be recorded at 1.39% on June 8.
In May, Evercore ISI appreciated the stable business model of Linde plc (NYSE:LIN) in the global chemicals sector and expects the company to generate double-digit returns in FY22. The firm upgraded the stock to Outperform, with a $355 price target.
In the past year, shares of Linde plc (NYSE:LIN) inched 14.7% higher, as of the market close of June 8. It is one of the best bear market stocks according to Morgan Stanley due to the company’s record Q1 result and operating cash flow. The firm lifted its price target on LIN to $365.
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
The Coca-Cola Company (NYSE:KO) has been able to generate stable returns for shareholders over the years irrespective of the market conditions. The stock is up 5.95% for 2022 so far, while delivering a 12.9% return in 2021, recovering its pandemic-era highs.
In the first quarter of 2022, The Coca-Cola Company (NYSE:KO) reported an 18% year-over-year in its organic revenues while its net revenues grew by 16% to $10.5 billion, from the same period last year. The beverage company posted an EPS of $0.64, up 23% from the prior-year quarter and beating estimates by $0.06.
The Coca-Cola Company (NYSE:KO) hiked its quarterly dividend by 4.8% in February for the 60th consecutive year. The company pays a quarterly dividend of $0.44 per share, with a dividend yield of 2.80%, as recorded on June 8. Morgan Stanley lifted its price target on the KO stock to $76, listing it as one of the best bear market stocks.
Berkshire Hathaway was the leading shareholder of The Coca-Cola Company (NYSE:KO) in the first quarter of 2022, owning nearly $24.8 worth of stakes. Overall, the Atlanta-based company suffered a decline in the hedge fund interest in Q1, as 54 funds in Insider Monkey’s database held stakes in the company, down from 60 in the previous quarter. The consolidated value of these stakes is over $29 billion.
ClearBridge Investments mentioned The Coca-Cola Company (NYSE:KO) in its Q4 2021 investor letter. Here is what the firm has to say:
“Over the last year, we have repositioned our portfolio to navigate the course we see ahead. We added to more defensive areas of the portfolio like consumer staples (Coca-Cola). While the next month or two will likely prove choppy on account of the Omicron variant, we believe that Omicron, like Delta, represents a speed bump on the way to recovery rather than a true change in course. We see strong economic momentum continuing in 2022 and we expect interest rates to rise. After a decade of remarkably low rates, we would not be surprised if this change in direction is accompanied by some fits and starts in the markets. With our emphasis on pricing power, purposeful sector exposure, valuation discipline, and a strong dividend profile, we believe we are well-positioned for the year ahead.”
6. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 68
Abbott Laboratories (NYSE:ABT) proved its resilience during the recession of 2008, delivering year-over-year sales growth of 14% in its global businesses when major companies reported disappointing earnings reports. The medical device company gained 144% in the past five years while delivering a 7.25% return to shareholders in 2021, as of the market close of June 8.
Abbott Laboratories (NYSE:ABT) is Morgan Stanley’s pick from the healthcare sector as it reported solid Q1 results. The company posted an EPS of $1.73, beating Street estimates by $0.27, and its revenue of roughly $12 billion also surpassed analysts’ consensus by $900 million. Morgan Stanley set a $158 price target on Abbott Laboratories (NYSE:ABT). In addition to ABT, analysts are also hopeful about major stocks, such as Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), despite pressure on the tech sector.
As per Insider Monkey’s Q1 2022 database, 68 hedge funds were bullish on Abbott Laboratories (NYSE:ABT), up from 64 in the previous quarter. These stakes hold a consolidated value of over $4.09 billion, declining slightly from $4.25 billion worth of stakes held by hedge funds in the previous quarter.
On April 20, Abbott Laboratories (NYSE:ABT) declared a quarterly dividend of $0.47 per share, growing it by 4.7% in December 2021. This was the company’s 50th consecutive year of dividend increase, falling into the category of Dividend Kings. As of June 8, the stock’s dividend yield was recorded at 1.62%.
Here is what Richie Capital Group said about Abbott Laboratories (NYSE:ABT) in its Q4 2021 investor letter:
“Abbott Labs (ABT – up 20.08%) – Abbot Labs continues to benefit from resurging demand for Covid testing kits. The company is planning to increase their monthly production of BinaxNOW at home rapid tests to 100M a month, a 43% increase from current levels.”
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Disclosure. None. 10 Best Bear Market Stocks to Buy According to Morgan Stanley is originally published on Insider Monkey.
