In this article, we discuss the 10 stocks to buy when everyone is selling. If you want to read about some more stocks to buy when everyone is selling, go directly to 5 Stocks to Buy When Everyone is Selling.
On May 20, the benchmark S&P 500 Index fell 20% from a recent high in January. The index is the broadest measure of the overall health of the market and a 20% fall indicated that the stocks had officially entered a bear market. Traditionally, a bear market represents investor pessimism and brings about a sustained market selloff. However, the panic also presents an opportunity to pick up the shares of companies that have long-term growth potential at bargain prices. Smart investors, like Warren Buffett, have historically benefited from bear markets.
At the annual shareholder meeting of Berkshire Hathaway, Buffett touched on some of the bets that his company had made in the past few months as the market slumped. The legendary value investor, who holds over $150 billion in cash for these “situations”, revealed that he had spent nearly $51 billion on equities in the first three months of 2022. As a result, the cash stake of his company was reduced to around $106 billion. Buffett assured investors that the cash stockpile would grow again as Berkshire has stakes in many cash-generating firms.
The stock market activity of Buffett is representative of the mindset of the hedge fund industry in general. Apart from value investors like Buffett, famous growth bulls like Brad Gerstner have also urged investors to buy stocks that could be “worth more in the future” during the sell-off. Some of the stocks that hedge funds think will provide investors with handsome returns in the long-term include Meta Platforms, Inc. (NASDAQ:FB), Mastercard Incorporated (NYSE:MA), and Apple Inc. (NASDAQ:AAPL).
Our Methodology
The companies that are best positioned to gain value in the future but are trading at a discount due to a weak economy and inflation 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 was used to quantify the hedge fund sentiment around each stock.
Stocks to Buy When Everyone is Selling
10. BHP Group (NYSE:BHP)
Number of Hedge Fund Holders: 21
BHP Group (NYSE:BHP) is a diversified metals and mining firm. Mike Henry, the CEO of the company, recently stated at a mining conference that supply chain disruptions in the mining sector due to COVID-19 and the Ukraine invasion could take over two years to resolve. As a result of these disruptions, as well as a slash in the reference benchmark rate for mortgages in China, the prices of base metals have surged in the past few days, benefiting the stock. The firm also has an impressive dividend history stretching back thirteen years.
On April 21, Citi analyst Ephrem Ravi upgraded BHP Group (NYSE:BHP) stock to Buy from Neutral and raised the price target to GBP 3,200 from GBP 2,750, noting that the cash flow generation of the firm was up strongly due to higher iron prices and was “too much to ignore”.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in BHP Group (NYSE:BHP) as of Q1 2022, with 16.9 million shares worth more than $1.3 billion.
Just like Meta Platforms, Inc. (NASDAQ:FB), Mastercard Incorporated (NYSE:MA), and Apple Inc. (NASDAQ:AAPL), BHP Group (NYSE:BHP) is one of the stocks that elite investors are buying as the market selloff continues.
In its Q1 2021 investor letter, Harding Loevner, an asset management firm, highlighted a few stocks and BHP Group (NYSE:BHP) was one of them. Here is what the fund said:
“Our purchase of Australian mining company BHP Group (NYSE:BHP) is an example of a quality company at a moderate valuation that should deliver attractive long-term returns. We believe the market has undervalued its enduring competitive advantage due to its low cost iron and copper mining operations which has allowed the company to deliver consistent profits and cash flows across the inevitable ups and downs of the global metals cycle. While the variability of commodity prices prevents BHP Group (NYSE:BHP) from scoring in the top ranks of measured quality, we are willing to bear some of that uncertainty in return for a more attractive valuation given the company’s strong business fundamentals.”
9. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 66
Bristol-Myers Squibb Company (NYSE:BMY) develops and sells biopharmaceutical products. The healthcare sector is one of the safest bets in times of uncertainty due to the high percentage of insured population in the United States. The firm can expect to earn around $29 billion through the drugs it markets by 2029 since patents in the health sector are issued for ten years or more. The firm is also one of the largest drug firms in the US where an average citizen spends around 8% of the salary on health insurance.
On May 2, Truist analyst Robyn Karnauskas maintained a Buy rating on Bristol-Myers Squibb Company (NYSE:BMY) stock and raised the price target to $81 from $76, noting there was potential upside from expansion opportunities across the drug portfolio of the firm.
At the end of the fourth quarter of 2021, 66 hedge funds in the database of Insider Monkey held stakes worth $3.3 billion in Bristol-Myers Squibb Company (NYSE:BMY), compared to 74 in the previous quarter worth $4.7 billion.
In its Q4 2021 investor letter, Saturna Capital, an asset management firm, highlighted a few stocks and Bristol-Myers Squibb Company (NYSE:BMY) was one of them. Here is what the fund said:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our positions in Bristol-Myers Squibb Company (NYSE:BMY). We believe there are better opportunities than Bristol-Myers Squibb Company (NYSE:BMY) in pharmaceuticals.”
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 70
The Coca-Cola Company (NYSE:KO) makes and sells beverages. The company is one of the most reliable dividend players in the market, with a history of consecutive payouts stretching back close to six decades in a sector where the median in this regard is just two years. In late April, the firm declared a quarterly dividend of $0.44 per share, in line with previous. During the first quarter of 2022, the company grew organic sales by 18% against estimates of 9.5%.
On April 26, Guggenheim analyst Laurent Grandet maintained a Buy rating on The Coca-Cola Company (NYSE:KO) stock and raised the price target to $71 from $68, noting the firm was best placed to benefit from inflation given the pricing power it enjoyed.
Among the hedge funds being tracked by Insider Monkey, Nebraska-based firm Berkshire Hathaway is a leading shareholder in The Coca-Cola Company (NYSE:KO), with 400 million shares worth more than $23 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and The Coca-Cola Company (NYSE:KO) was one of them. Here is what the fund said:
“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 (The Coca-Cola Company (NYSE:KO)). 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.”
7. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) makes and sells healthcare products. The company makes and sells COVID-19 vaccines, putting it in a leading position to benefit from the recent spike in virus cases across the United States. The stock is also trading at around 16% below the record high of $189 it touched almost a month ago. This decline presents an opportunity to buy as the firm posted strong earnings for the first quarter of 2022 recently and has a diversified business that greatly reduces overall risk for the investor in a volatile market.
On April 20, Credit Suisse analyst Matt Miksic kept an Outperform rating on Johnson & Johnson (NYSE:JNJ) stock and raised the price target to $205 from $200, noting the firm had demonstrated “better-than-expected growth across its MedTech businesses” in the first quarter.
At the end of the fourth quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $7.3 billion in Johnson & Johnson (NYSE:JNJ), compared to 88 in the previous quarter worth $6.8 billion.
6. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 95
Thermo Fisher Scientific Inc. (NYSE:TMO) markets analytical instruments, specialty diagnostics, and laboratory products. The firm is emerging as a strong dividend player, registering five consecutive years of growth in this regard. Over the past decade, the company has grown revenues by over 200%, or 13.5% annualized. Operating income during the period has improved as well, totaling 23.2% annualized. The gross profits and free cash flows for the company are growing faster than revenues.
In late April, Thermo Fisher Scientific Inc. (NYSE:TMO) posted earnings for the first quarter of 2022, reporting earnings per share of $7.25, beating estimates by $1.04. The revenue over the period was $11.8 billion, up over 19% year-on-year.
At the end of the fourth quarter of 2021, 95 hedge funds in the database of Insider Monkey held stakes worth $9.4 billion in Thermo Fisher Scientific Inc. (NYSE:TMO), up from 94 in the preceding quarter worth $8.2 billion.
In addition to Meta Platforms, Inc. (NASDAQ:FB), Mastercard Incorporated (NYSE:MA), and Apple Inc. (NASDAQ:AAPL), Thermo Fisher Scientific Inc. (NYSE:TMO) is one of the stocks that smart investors are monitoring in the bear market.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Thermo Fisher Scientific Inc. (NYSE:TMO) was one of them. Here is what the fund said:
“Improving health remains a key impact theme for the portfolio, and over the past year or so we have increased our exposure to the health care sector, through the addition of Thermo Fisher Scientific Inc. (NYSE:TMO), a leading health care tools company, a leading provider of fertility benefit management services to self-insured employers that offers a rare win-win-win for employers, employees, health systems, and doctors, with clear savings and quality improvements.”
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Disclosure. None. 10 Stocks to Buy When Everyone is Selling is originally published on Insider Monkey.
