11 Best Consumer Cyclical Stocks To Buy Now

Published on October 5, 2023 at 3:14 pm by Fatima Farooq in Hedge Funds, News

In this article, we will be taking a look at the 11 best consumer cyclical stocks to buy now. To skip our detailed analysis, you can go directly to see the 5 Best Consumer Cyclical Stocks To Buy Now.

What Are Consumer Cyclical Stocks?

Consumer cyclical stocks include stocks relying on the business cycle and economic conditions, that is, their profitability and performance in a given financial year is highly dependent on market conditions throughout that year. These stocks are primarily found in sectors providing non-essential, even luxury, goods to consumers, such as the automotive sector, the travel and leisure sector, the entertainment sector, and the retail sector, among others. Since these stocks are heavily dependent on market conditions, a lot of investors might wish to avoid them because of their unpredictability. However, any investment portfolio requires a good balance of different categories of stocks, and for some investors, consumer cyclical stocks, with their volatility, can actually help achieve long-term wealth.

The current state of the US market is heavily volatile and unpredictable, especially for consumer cyclical stocks in the automotive sector. This is primarily because of the United Auto Workers (UAW) strikes occurring nationwide. However, major automakers such as General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) that are impacted heavily by the strikes are continuing to hold on. On October 5, CNBC’s Jim Cramer made some comments on Ford Motor Company’s (NYSE:F) current approach to handling the UAW strikes. Here’s what he said:

“Ford is trying to prove that that they really aren’t the same as the others. GM fired a huge number of United Auto Workers in the last, I don’t know, in the last decade, but Ford didn’t. And Ford’s actually moved a lot of UAW workers from temporary to full, which is the only way to get them within the contract that they’re operating under: more money. So, I know that Ford felt a little upset that Biden joined the picket line, but at the same time Ford is seeing some movement by Fain.”

According to Cramer’s analysis, Ford Motor Company (NYSE:F) may be looking to shift a part of its production to Mexico while the strikes continue. He sees this move coming about in the next couple of weeks.

At the same time, Paul Jacobson, the CFO at General Motors Company (NYSE:GM) also joined CNBC’s “Halftime Report” on October 4 to discuss the company’s announcement of a new line of credit worth $6 billion to help it cope with the financial effects of the UAW strikes, the cost of which had reached about $200 million at that time, according to CNBC. Such developments show that even in the face of adversity, reliable companies in the consumer cyclical space are continuing to hold on and ensure that they retain their profitability for the sake of their own revenues and the profits of their shareholders.

How Are Other Areas Of The Market Performing?

This cursory view of the automotive sector can make one wonder how cyclical stocks in other areas of the market are faring. CNBC’s “Squawk Box” delved into the state of the retail sector on October 5, which can help investors see how other areas are performing. Here’s what CNBC’s Courtney Reagan had to say about the status of holiday toy sales in the retail sector:

“While total toy sales are expected to fall year-over-year, there’s something consumers find a way to buy – it’s toys for Christmas. Good news for parents, or Santa, we should say, toy inventory is solid, so shortages aren’t expected, and toy prices are down about 2.9% over last year.”

All in all, you can’t really say that consumer cyclical stocks like the ones mentioned above, and even others like NIKE, Inc. (NYSE:NKE) and The Home Depot, Inc. (NYSE:HD), have it easy this year. However, efforts are being made to keep consumer sales up so these companies retain their profits. As such, we have compiled a list of some of the best cyclical stocks to buy now, particularly those that can be considered the best cyclical stocks in 2023.

Source:Pixabay

Our Methodology

We used a stock screener to find consumer cyclical stocks and first selected 30 stocks for our list below. We then shortlisted 11 stocks by using Insider Monkey’s hedge fund data for the second quarter. The stocks are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest number.

Best Consumer Cyclical Stocks To Buy Now

11. Lowe’s Companies, Inc. (NYSE:LOW)

Number of Hedge Fund Holders: 64

Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retail company based in Mooresville, North Carolina. The company offers products for construction, maintenance, repair, remodeling, and decorating. It also offers appliances, seasonal and outdoor living, lawn and garden, lumber, and hardware products.

A Buy rating was maintained on shares of Lowe’s Companies, Inc. (NYSE:LOW) on October 5 by Scot Ciccarelli, an analyst at Truist Securities. The analyst also placed a price target of $235 on the stock.

There were 64 hedge funds long Lowe’s Companies, Inc. (NYSE:LOW) in the second quarter. Their total stake value in the company was $3.7 billion.

Here’s what Pershing Square Holdings said about Lowe’s Companies, Inc. (NYSE:LOW) in its first half of 2023 investor letter:

Lowe’s Companies, Inc. (NYSE:LOW) is a high-quality business with significant long-term earnings growth potential operated by a superb management team that has been successfully executing a multi-faceted business transformation. In recent quarters, industrywide sales have retrenched slightly, driven by record lumber deflation, moderation in DIY discretionary demand (particularly with big-ticket items), a mix-shift from large to smaller Pro-specific projects, and a general trend of consumers reallocating budgets from goods to services. Sales remain elevated relative to 2019 baseline levels driven by a combination of price and mix, while units have largely normalized. Against this backdrop, Lowe’s headline same-store-sales growth has been modestly negative, offset by material margin expansion and the benefits of Lowe’s best-in-class share buyback program positioning the company to generate roughly flat earnings growth in 2023.

Lowe’s remains well positioned to manage through uncertainty. Nearly two-thirds of Lowe’s revenue comes from non-deferrable repair and maintenance activity, which is comparatively insulated from the macroeconomic environment. Lowe’s continues to make progress on various business initiatives that should aid the company’s ability to improve share and grow revenue even in challenging macro environments. Select initiatives for 2023 include the continued rollout of Lowe’s market-based delivery model (now >60% complete, a critical component of Lowe’s business transformation objectives), a new 300-store rural localization merchandising program, and enhancements to Lowe’s MVP Pro Rewards program…” (Click here to read the full text)

Like General Motors Company (NYSE:GM), NIKE, Inc. (NYSE:NKE), and The Home Depot, Inc. (NYSE:HD), Lowe’s Companies, Inc. (NYSE:LOW) is a stellar consumer cyclical stock that is popular among hedge funds today.

10. Pinduoduo Inc. (NASDAQ:PDD)

Number of Hedge Fund Holders: 67

Holding 8.2 million shares in the company, Hillhouse Capital Management was the largest shareholder in Pinduoduo Inc. (NASDAQ:PDD) at the end of the second quarter.

Pinduoduo Inc. (NASDAQ:PDD) is a broad-line retail company that owns and operates a portfolio of businesses. It operates Pinduoduo, an e-commerce platform, and Temu, an online marketplace. The company is based in Dublin, Ireland, and offers agricultural produce, apparel, shoes, and other products through its businesses.

On August 30, Fawne Jiang, an analyst at Benchmark, maintained a Buy rating on shares of Pinduoduo Inc. (NASDAQ:PDD). The analyst also raised the firm’s price target on the stock from $125 to $140.

We saw 67 hedge funds long Pinduoduo Inc. (NASDAQ:PDD) in the second quarter, with a total stake value of $2.6 billion.

9. McDonald’s Corporation (NYSE:MCD)

Number of Hedge Fund Holders: 68

Jake Bartlett, an analyst at Truist Securities, maintains a Buy rating on shares of McDonald’s Corporation (NYSE:MCD) as of September 20. The analyst also placed a price target of $335 on the stock.

McDonald’s Corporation (NYSE:MCD) is a multinational fast food chain. The company operates and franchises McDonald’s restaurants in the US and internationally. Its restaurants offer hamburgers and cheeseburgers, sandwiches, nuggets, fries, and more. It is based in Chicago, Illinois.

A total of 68 hedge funds were long McDonald’s Corporation (NYSE:MCD) in the second quarter. Their total stake value in the company was $4.3 billion.

Citadel Investment Group was the largest shareholder in McDonald’s Corporation (NYSE:MCD) at the end of the second quarter, holding 2.6 million shares in the company.

Like General Motors Company (NYSE:GM), NIKE, Inc. (NYSE:NKE), and The Home Depot, Inc. (NYSE:HD), McDonald’s Corporation (NYSE:MCD) is a consumer cyclical stock elite hedge funds are buying today.

8. The Home Depot, Inc. (NYSE:HD)

Number of Hedge Fund Holders: 68

The Home Depot, Inc. (NYSE:HD) was spotted in the 13F holdings of 68 hedge funds at the end of the second quarter, with a total stake value of $2.2 billion.

The Home Depot, Inc. (NYSE:HD) is another home improvement retail company on our list. It sells building materials, home improvement products, lawn and garden products, and decoration products, among more. The company is based in Atlanta, Georgia.

As of October 5, Scot Ciccarelli, an analyst at Truist Securities, holds a Buy rating on shares of The Home Depot, Inc. (NYSE:HD). The analyst also placed a price target of $341 on the stock.

7. NIKE, Inc. (NYSE:NKE)

Number of Hedge Fund Holders: 70

NIKE, Inc. (NYSE:NKE) is a footwear company that is based in Beaverton, Oregon. The company designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services across the globe. Its brands include Converse, Chuck Taylor, All Star, One Star, and Chevron.

In total, 70 hedge funds were long NIKE, Inc. (NYSE:NKE) at the end of the second quarter. Their total stake value in the company was $2.4 billion.

An Outperform rating was maintained on shares of NIKE, Inc. (NYSE:NKE) on September 29 by Simeon Siegel, an analyst at BMO Capital. The analyst also placed a price target of $110 on the stock.

Fundsmith LLP was the most prominent shareholder in NIKE, Inc. (NYSE:NKE) at the end of the second quarter, holding 6.7 million shares in the company.

ClearBridge Investments mentioned NIKE, Inc. (NYSE:NKE) in its second-quarter 2023 investor letter:

“Athletic footwear and apparel company NIKE, Inc. (NYSE:NKE), also a beneficiary of pandemic pull-forward demand, lagged primarily around fears about consumer resilience and potential pressure on Nike’s business in a macroeconomic slowdown.”

6. General Motors Company (NYSE:GM)

Number of Hedge Fund Holders: 72

Patrick Hummel, an analyst at UBS, upgraded shares of General Motors Company (NYSE:GM) from Neutral to Buy on September 13. The analyst also raised his price target on the stock from $41 to $44.

General Motors Company (NYSE:GM) was seen in the portfolios of 72 hedge funds in the second quarter. Their total stake value in the company was $2.5 billion.

Based in Detroit, Michigan, General Motors Company (NYSE:GM) is an automobile manufacturing company. The company designs, builds, and sells trucks, crossovers, cars, and automobile parts. It also provides software-enabled services and subscriptions across the globe.

Patient Capital Management said the following about General Motors Company (NYSE:GM) in its second-quarter 2023 investor letter:

“We like other names mostly ignored by the market for similar reasons. Names like Expedia (EXPE), General Motors Company (NYSE:GM), and Delta Air Lines. These companies have strong returns on capital (14%+), good competitive positions, cheap valuations (all double-digit free cash flow yields), and are returning capital to shareholders. We trust the managements to take advantage of their depressed stock prices and create long-term shareholder value.”

Click to continue reading and see the 5 Best Consumer Cyclical Stocks To Buy Now.

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Published on October 30, 2024 at by Inan Dogan, PhD

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Published on November 16, 2024 at by Insider Monkey Staff

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