In this article, we discuss 10 stocks that rebound after recessions. If you want to read about some more stocks that rebound after recessions, go directly to 5 Stocks that Rebound After Recessions.
The United States economy is in the midst of recession fears as rising prices and interest rates spook investors. In the middle of this turmoil, the US Department of Labor released the job numbers from April, reporting solid growth in the sector and marking the 16th consecutive month of gains. The US economy added 428,000 jobs in April despite inflation and the unemployment rate in the period remained steady at 3.6%. The numbers are all the more remarkable considering the US economy lost nearly 22 million jobs during the pandemic.
Federal Reserve chairman Jerome Powell, who has faced criticism for his tackling of the situation from several quarters on Wall Street, has pointed to the labor market to justify his actions, saying recently that the tight labor market in which openings outnumber available workers by nearly two to one was a sign there was room to reduce demand without inducing a sharp downturn. He also added that wages were rising far more quickly than would be consistent with the 2% target for inflation set by the central bank.
Restaurants, bars, and manufacturers are all looking for more workers, pointing to the internal resilience of the economy in the US despite recession headwinds globally, an argument that has also been highlighted by US President Biden to boost investor confidence recently. Investors who want to take advantage of the present situation can pick up the shares of companies like The Walt Disney Company (NYSE:DIS), Walmart Inc. (NYSE:WMT), and Marriott International, Inc. (NASDAQ:MAR) at discounted prices and reap the benefits of the recovery later.
Our Methodology
The stocks that tend to rise and fall with the fortunes of the economy were selected for the list. The business fundamentals and analyst ratings of these firms are also discussed to provide further context. Hedge fund sentiment was included as a classifier as well. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to quantify the hedge fund sentiment around each stock.
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Stocks that Rebound After Recessions
10. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 23
Restaurant Brands International Inc. (NYSE:QSR) owns and runs quick service restaurants. Some of the famous brands it runs include Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs. The company has been building a dividend history in the past few years, increasing the payout consistently for the last six years. On May 3, the firm declared a quarterly dividend of $0.54 per share, in line with previous. The forward yield was 3.79%. The dividend is payable to shareholders by early July.
On May 5, Credit Suisse analyst Lauren Silberman maintained an Outperform rating on Restaurant Brands International Inc. (NYSE:QSR) stock and lowered the price target to $68 from $73, underlining that the long-term growth plans of the firm would encourage investors to get more constructive on the stock in the coming months despite mixed first quarter results.
At the end of the first quarter of 2022, 23 hedge funds in the database of Insider Monkey held stakes worth $1.75 billion in Restaurant Brands International Inc. (NYSE:QSR), compared to 24 in the preceding quarter worth $1.78 billion.
Just like The Walt Disney Company (NYSE:DIS), Walmart Inc. (NYSE:WMT), and Marriott International, Inc. (NASDAQ:MAR), Restaurant Brands International Inc. (NYSE:QSR) is one of the stocks on the radar of elite investors.
In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Restaurant Brands International Inc. (NYSE:QSR) was one of them. Here is what the fund said:
“Restaurant Brands International Inc. (NYSE:QSR) is a high-quality business with significant long-term growth potential trading at a highly discounted valuation.
Comparable sales have recovered or are well on their way to recovery.
Tim Hortons Canada improved to a mid-single-digit decline during Q3 relative to 2019.
Burger King U.S. under new leadership and poised to make a recovery.
Burger King International and the Popeyes brand continue to grow well with strong same-store sales growth relative to 2019 levels. As underlying sales trends recover, QSR’s share price should more accurately reflect our view of its business fundamentals.
Management continuing to make investments for future growth.” (Click here to read full text)
9. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Holders: 38
AutoZone, Inc. (NYSE:AZO) markets automotive replacement parts and accessories. The company posted earnings for the third fiscal quarter on May 24, reporting earnings per share of $29.03, beating market estimates by $3.16. The revenue over the period was $3.8 billion, up 6% compared to the revenue over the same period last year and beating analysts’ expectations by $160 million. In the first three months of 2022, the domestic same store sales increased 2.6% for the company compared to the previous quarter.
On May 13, Citi analyst Steven Zaccone maintained a Buy rating on AutoZone, Inc. (NYSE:AZO) stock and raised the price target to $2,250 from $2,210, noting that there were growing recession risks at retail firms.
Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Arrowstreet Capital is a leading shareholder in AutoZone, Inc. (NYSE:AZO), with 148,531 shares worth more than $303 million.
In its Q4 2021 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and AutoZone, Inc. (NYSE:AZO) was one of them. Here is what the fund said:
“The Fund’s investments in auto-related businesses were consistent top performers in 2021. Shortages of new vehicles have driven buyers into the used car market. AutoZone, Inc. (NYSE:AZO) has won new customers who need to maintain vehicles they now plan to own longer (and federal stimulus checks have given car owners some extra cash to spend on car maintenance).”
8. Tapestry, Inc. (NYSE:TPR)
Number of Hedge Fund Holders: 39
Tapestry, Inc. (NYSE:TPR) markets luxury accessories and branded lifestyle products. Despite a high inflation environment, the firm has a growing top line forecast as it brings in new customers through digital advertising spend. It has also increased share buyback targets recently and boasts a high forward yield and improving efficiency. These are likely to help the firm make cash flow more sustainable in the future. The stock has dropped by about 30% in the past few months but is well-positioned to gain as the markets recover from recession fears.
On May 16, Barclays analyst Adrienne Yih maintained an Overweight rating on Tapestry, Inc. (NYSE:TPR) stock and lowered the price target to $39 from $53, highlighting that “transitory headwinds in China were largely expected and should subside into fiscal 2023”.
At the end of the first quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $605 million in Tapestry, Inc. (NYSE:TPR), compared to 48 in the preceding quarter worth $827 million.
In its Q3 2021 investor letter, Ariel Investments highlighted a few stocks and Tapestry, Inc. (NYSE:TPR) was one of them. Here is what the fund said:
“Luxury accessory and lifestyle brand, Tapestry, Inc. (NYSE:TPR) was the top contributor to performance over the trailing one-year period. Revenue improvement across all three brands with a notable increase in consumer demand, particularly for the Coach business, triple-digit growth in e-commerce, and better than expected pricing, drove margins higher. Looking ahead, we expect Tapestry’s supply chain and SKU rationalization initiatives to continue to deliver margin expansion. Together, with early signs of improved receptivity for the Kate Spade brand, we believe a significant value creation opportunity lies ahead.”
7. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 45
Southwest Airlines Co. (NYSE:LUV) is a passenger airline firm. On May 11, the company announced that it would be spending $2 billion in the coming years to improve the passenger traveling experience. The improvements include faster internet service, power outlets at every seat on new planes, larger overhead bins for carry-on bags, as well as more entertainment and refreshment options. A new fare category is also being introduced that will slot in between the cheapest and mid-tier fare categories.
On May 2, Citi analyst Stephen Trent maintained a Neutral rating on Southwest Airlines Co. (NYSE:LUV) stock and raised the price target to $53 from $48, noting that the firm was well-positioned for “sustained profitability over the rest of the year”.
At the end of the first quarter of 2022, 45 hedge funds in the database of Insider Monkey held stakes worth $1 billion in Southwest Airlines Co. (NYSE:LUV), compared to 38 in the previous quarter worth $682 million.
6. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is a Michigan-based automobile manufacturer. On May 9, the company announced that it will begin the production of the E-Transit Custom vehicle at a plant in Turkey by 2023. The carmaker claims that the new electric vehicle will help businesses make the switch to electrified vehicles. The company also hopes to set new benchmarks with the one-ton van segment in Europe through the vehicle. The firm plans to reach zero emissions for all Ford vehicle sales in Europe by 2035.
On May 20, Tigress Financial analyst Ivan Feinseth maintained a Buy rating on Ford Motor Company (NYSE:F) stock and raised the price target to $22 from $20, noting that strong demand for combustion engines and SUVs would drive near-term revenue for the firm.
At the end of the first quarter of 2022, 46 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Ford Motor Company (NYSE:F), compared to 53 in the preceding quarter worth $1.7 billion.
Along with The Walt Disney Company (NYSE:DIS), Walmart Inc. (NYSE:WMT), and Marriott International, Inc. (NASDAQ:MAR), Ford Motor Company (NYSE:F) is one of the stocks that elite hedge funds are monitoring.
Click to continue reading and see 5 Stocks that Rebound After Recessions.
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Disclosure. None. 10 Stocks that Rebound After Recessions is originally published on Insider Monkey.
