In this article, we will take a detailed look at the best counter cyclical stocks to buy according to analysts.
Counter cyclical stocks stand out because they tend to perform well during economic downturns, providing relative stability when markets become volatile. These resilient companies typically operate in more defensive sectors like utilities, consumer staples, and healthcare, offering products and services that consumers need, no matter how tight their wallets become. Furthermore, the truly counter cyclical stocks are the ones that experience accelerations in growth during recessions, due to consumers actively searching for ways to save money – think of discount stores or cheap clothes retailers. What makes the best counter cyclical stocks especially compelling is their stability during downturns: investors seek refuge in these stocks because they tend to maintain (or even increase) their value while other market segments struggle.
Financial theory, as pioneered by Markowitz’ modern portfolio theory (1952), suggests that including counter cyclical stocks in a portfolio can improve the overall risk-adjusted returns by significantly reducing volatility while at the same time not impairing the return profile. Modern literature emphasizes that effective diversification can be achieved by combining financial assets whose returns are inversely correlated to one another; counter-cyclical stocks align well with this principle due to their low or even negative correlation with the broad markets. Empirical studies confirm that portfolios containing counter cyclical stocks tend to exhibit lower volatility and more stable returns during recessionary periods – this is a highly sought after trait by investors. The legendary fund manager Peter Lynch also emphasized the strength of stable companies in recessions; here’s what he said:
“In economic downturns, invest in companies that make essential products; people will still buy toothpaste and food regardless of the economy.”
READ ALSO: 10 Best Low Risk Stocks To Buy in 2025.
We believe that the current market conditions are potentially suitable for investors to start considering adding the best counter cyclical stocks to their portfolios. The biggest problem we see with the current US stock market is that the Trump 2.0 Tariff Turmoil and a plethora of other aggressive shifts in the policy stance of the new administration are undermining consumer confidence in the future. Consumers, while still strong and healthy, exhibit a rapid deterioration in confidence – the Consumer Confidence Index dropped sharply in March to the lowest reading since January 2021. Even the Trump administration itself admits that its trade and DOGE policies might cause some slowdown in the short term but says they should lead to “The Golden Age of America” in the long term.
Furthermore, business surveys show that increasingly more people are expecting fewer jobs in the upcoming months. A sharp deterioration in both metrics has historically coincided with the onsets of several recessions, such as the dot-com bubble burst, the 2008 crisis, and the 2022 bear market. It is of no surprise that many reputable research boutiques, including Yardeni Research and Goldman Sachs, have recently significantly raised their odds that the US economy will enter a recession in 2025 (although the estimated probability remains below 50% on average).
The drivers of a recession could be a potential one-time inflation shock from the tariffs expected for next week, a widespread slowdown in business Capex expectations that may trigger layoffs, as well as a more frugal consumer due to the overall uncertainty and deterioration in purchasing power. Under such conditions, counter-cyclical stocks could witness a significant acceleration in their business, which in turn may translate into superior returns compared to the broad market. We believe that the best counter-cyclical stocks are the ones that have significant potential upside according to analysts, as well as a proven track record of exceptional performance during previous economic cycles.
Image by Gerd Altmann from Pixabay
Our Methodology
We consulted business literature on the characteristics of the best counter cyclical stocks and manually selected 20-30 stocks with a history of performing well during economic downturns, such as the 2008 and 2022 bear markets. Then, we select the top 11 stocks with the largest average upside potential as estimated by analysts and rank them in ascending order. For each stock, we also include the number of hedge funds that own the stock as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
11. Dollar Tree, Inc. (NASDAQ:DLTR)
Average Upside Potential: 9.42%
Number of Hedge Fund Holders: 64
Dollar Tree, Inc. (NASDAQ:DLTR) is a prominent operator of discount variety stores across the US and Canada, operating under the brands Dollar Tree and Family Dollar. The company offers a diverse range of products, including consumables, household items, and seasonal goods, primarily at fixed price points. During economic downturns, DLTR often experiences increased customer traffic as consumers seek more affordable shopping options.
Dollar Tree, Inc. (NASDAQ:DLTR) announced a significant strategic move with the sale of the Family Dollar business to Brigade-Macellum for over $1 billion, which will enable each banner to focus on its distinct needs and potential. The company delivered solid Q4 performance with Dollar Tree banner achieving a 2% comparable sales growth, driven by both traffic (up 0.7%) and ticket (up 1.3%). The multi-price strategy showed promising results, with 3.0 format stores demonstrating a 220 basis point comp lift compared to other formats, including stronger performance in seasonal merchandise and everyday categories. The company has successfully mitigated over 90% of the impact from the first round of China tariffs, though additional tariffs announced in March could potentially impact costs by approximately $20 million per month before mitigation efforts.
Looking ahead to 2025, Dollar Tree, Inc. (NASDAQ:DLTR) expects comparable store sales growth of 3% to 5%, focusing on expanding multi-price offerings and improving store operations. The company plans to convert approximately 2,000 stores to the 3.0 format and open 300 new stores in 2025, demonstrating continued commitment to growth and operational enhancement. Management emphasized that the separation from Family Dollar will allow DLTR to return to its roots while competing and innovating in new ways, particularly focusing on its signature value, convenience, and discovery shopping experience. DLTR has outperformed the broad market during the 2022 bear market, and is therefore one of the best counter cyclical stocks to consider.
10. Verizon Communications Inc. (NYSE:VZ)
Average Upside Potential: 10.57%
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) is the second largest global telecommunications company and the largest wireless carrier in the United States, serving approximately 146 million subscribers. The company operates through two segments: the Consumer Group, which offers wireless and wireline services to retail customers, and the Business Group, which provides communications solutions to enterprises and government clients. VZ is regarded as a counter cyclical stock because the world continues to rely on its essential communication services and connectivity solutions even during recessions.
Verizon Communications Inc. (NYSE:VZ) delivered strong financial and operational results in 2024, with wireless service revenue growing 3.1% and adjusted EBITDA growing 2.1%, both exceeding the midpoint of guided ranges. The company added nearly 2.5 million postpaid mobility and broadband subscribers while expanding margins, with postpaid phone net adds reaching nearly 900,000 for the year. Broadband performance was particularly strong, with 1.6 million subscriber additions in 2024, including nearly 4.6 million fixed wireless access subscribers, generating over $2.1 billion in revenue.
Looking ahead to 2025, Verizon Communications Inc. (NYSE:VZ) expects wireless service revenue growth between 2% and 2.8%, with the underlying growth nearly double when excluding promotional amortization impacts. The company launched its AI Connect strategy to leverage existing network assets and edge computing capabilities, with a current funnel of over $1 billion in opportunities. Management continues to focus on operational excellence and financial discipline, maintaining its capital allocation priorities of investing in the business, supporting dividend growth, paying down debt, and eventually considering share repurchases. We include VZ on our list of best counter cyclical stocks as it has a strong history of outperforming the US stock market during bear markets, including year-to-date as the US stocks are in correction mode.
9. Flowers Foods, Inc. (NYSE:FLO)
Average Upside Potential: 10.73%
Number of Hedge Fund Holders: 30
Flowers Foods, Inc. (NYSE:FLO) is a leading producer and marketer of packaged bakery products in the United States. The company operates 45 bakeries across 19 states, producing a wide range of fresh breads, buns, rolls, snack cakes, and tortillas. Its portfolio includes well-known brands such as Nature’s Own, Dave’s Killer Bread, Wonder, Tastykake, and Canyon Bakehouse. During periods of economic weakness, demand for FLO’s products tends to remain resilient, as baked goods are considered everyday essentials in household consumption.
Flowers Foods, Inc. (NYSE:FLO) is generating annual revenues around $5 billion with well-known brands. The company operates in a large and stable category worth $32 billion that reaches 98% of households, demonstrating its position as a staple in the American diet. The company has demonstrated strong brand leadership with Nature’s Own being the #1 loaf brand, Dave’s Killer Bread commanding a 75% share in organic bread, and Canyon Bakehouse leading the gluten-free bread segment. The recent acquisition of Simple Mills enhances the company’s exposure to better-for-you and attractive snacking segments while diversifying category exposure and improving growth and margin prospects.
Flowers Foods, Inc. (NYSE:FLO)’s portfolio strategy focuses on shifting a greater percentage of sales to branded products, which has already increased from 59% in 2019 to 68% today following the Simple Mills acquisition. FLO maintains strong cash flow generation and a conservative financial approach, maintaining its investment-grade credit profile while consistently paying dividends for 89 consecutive quarters. Looking ahead, management is focused on executing four strategic priorities: developing their team, focusing on brands, prioritizing margins, and pursuing smart M&A opportunities, all while maintaining a conservative capital structure. With an average potential upside of 10.73% according to analysts, FLO is one of the best counter cyclical stocks.
8. The TJX Companies, Inc. (NYSE:TJX)
Average Upside Potential: 11.07%
Number of Hedge Fund Holders: 74
The TJX Companies, Inc. (NYSE:TJX) is a leading off-price retailer of apparel and home fashions in the United States and globally. Its store brands include T.J. Maxx, Marshalls, HomeGoods, HomeSense, Sierra, and international banners such as T.K. Maxx and Winners. TJX offers a wide range of products, including apparel, footwear, accessories, home basics, accent furniture, and decorative accessories, typically priced 20% to 60% below full-price retailers’ regular prices. TJX often sees acceleration in sales growth during economic slowdowns as consumers seek value-oriented shopping options, leading to increased customer traffic in its stores.
The TJX Companies, Inc. (NYSE:TJX) closed its Q4 on a high note, reporting a 5% increase in comparable store sales, with all divisions showing consistent growth of at least 4%. For the full fiscal year 2025, the company exceeded $56 billion in sales and celebrated a major milestone by opening its 5,000th store. Strong profitability marked the year, including a 4% rise in annual comparable sales, a notable improvement in margins, and a double-digit increase in earnings per share – all of which outpaced prior forecasts. TJX credits its continued success to a few core strengths: its unmatched value proposition, broad customer appeal, and highly adaptable operating model.
Looking ahead, The TJX Companies, Inc. (NYSE:TJX) is positioning itself for further expansion. The company now sees potential for up to 7,000 stores, adding over 1,900 more in current and planned markets. Backed by solid financials, including $6.1 billion in operating cash flow and $5.3 billion in cash reserves, the company is targeting 2% to 3% comparable sales growth and total revenues between $58.1 billion and $58.6 billion for the fiscal 2026. TJX plans to open about 130 net new stores, representing a 3% increase in its store count. Additionally, the Board is expected to approve a 13% dividend hike to $0.425 per share and authorize share repurchases totaling $2 billion to $2.5 billion. TJX has an average upside of 11.07% according to analysts, and is thus one of the best counter cyclical stocks to buy now.
7. PepsiCo, Inc. (NASDAQ:PEP)
Average Upside Potential: 11.18%
Number of Hedge Fund Holders: 69
PepsiCo, Inc. (NASDAQ:PEP) is a global food & beverage company that runs iconic brands such as Pepsi, Lay’s, and Gatorade. The company’s competitive advantage includes a global reach, with operations in more than 200 countries, and a balance between both beverages and convenience foods, which makes it appealing to a large clientele. PEP is considered one of the best counter cyclical stocks as demand for its affordable, everyday consumer products remains steady even during economic downturns.
As of 2024 year-end, PepsiCo, Inc. (NASDAQ:PEP)’s international business remains a significant growth driver, representing nearly $40 billion in annualized revenue and delivering accretive growth to the company. North America experienced some challenges in the latest fiscal year, particularly in the snacks business, which saw a slowdown in 2024 after five years of rapid growth and gaining almost 200 basis points of market share. The company is encouraged by recent trends showing category growth resumption in the last periods of the year, including both volume growth and positive price mix.
Looking forward, PepsiCo, Inc. (NASDAQ:PEP) is implementing strategic initiatives focused on price pack architecture, innovation, and away-from-home opportunities. The company is investing in portion control platforms, permissible offerings, and new channels, particularly in the away-from-home segment, which represents significant growth potential. Management remains confident in delivering their long-term growth target of 4-6% organic sales growth and translating that into high single-digit EPS growth, noting they have exceeded these targets over the past five years.
6. Copart, Inc. (NASDAQ:CPRT)
Average Upside Potential: 11.35%
Number of Hedge Fund Holders: 53
Copart, Inc. (NASDAQ:CPRT) is a global leader in online vehicle auctions and remarketing services, facilitating the sale of used, wholesale, and repairable vehicles. The company operates over 200 locations across 11 countries, including the US, Canada, the UK, Germany, and Brazil. CPRT’s innovative online auction platform connects vehicle sellers (primarily insurance companies, but also dealerships, rental car businesses, and financial institutions) with a diverse buyer base that includes dismantlers, rebuilders, used vehicle dealers, exporters, and the general public. During economic slowdowns, CPRT often sees increased activity as more vehicles are deemed total losses, leading to a higher volume of salvage vehicles entering its auctions.
Copart, Inc. (NASDAQ:CPRT) reported strong performance with global revenue increasing 14% to nearly $1.2 billion and GAAP net income rising 19% to over $387 million. The company experienced 8% growth in global unit sales, with US insurance unit volume increasing about 9% YoY, or approximately 2% when excluding catastrophic units. Total loss frequency hit an all-time high of 23.8% in the fourth quarter in the United States, partly due to storm events, while the full year trend of 22.2% represents an all-time annual high. The company’s Title Express platform has shown significant success, processing well over 1 million titles per year, with no carrier who has started with Copart taking the service back in-house.
Copart, Inc. (NASDAQ:CPRT) maintains a strong financial position with over $5 billion of liquidity, comprising nearly $3.8 billion in cash and over $1.2 billion in revolving credit facility capacity. The company continues to invest in technology, real estate, and people to fuel future growth while expanding services with sellers beyond the insurance industry to include financial institutions, rental car fleets, and corporate fleets. The Blue Car business, which services bank, rental, and fleet customers, demonstrated strong performance with YoY growth of over 27%. The company’s AI-enabled image recognition tools are empowering insurance companies to total cars more accurately and effectively. With a whopping 215% stock price return in the last 5 years, CPRT is among the best counter cyclical stocks.
5. British American Tobacco p.l.c. (NYSE:BTI)
Average Upside Potential: 11.74%
Number of Hedge Fund Holders: 25
British American Tobacco p.l.c. (NYSE:BTI) is one of the world’s largest tobacco companies, running a diverse product portfolio that includes traditional cigarettes, smokeless tobacco, and next-generation vaporizers and heated tobacco. The company owns iconic brands like Dunhill and Lucky Strike and operates globally in more than 180 countries. It leverages its strong distribution network, strict regulatory compliance, and harm-reduction strategies to remain competitive and maintain its market share. Demand for tobacco tends to remain stable regardless of economic conditions.
British American Tobacco p.l.c. (NYSE:BTI) delivered organic constant currency results in line with guidance in the recent quarter, with group revenue growing by 1.3% YoY. Smokeless products now account for 17.5% of group revenue, with 3.6 million new Smokeless consumers added in 2024, reaching a total of 29.1 million consumers. Given the intensifying regulatory pushback against traditional smoking, BTI has made significant progress to remain competitive through alternative smoking products. The company also demonstrated strong financial discipline with operating cash conversion exceeding 100% for the 5th year and financial leverage trending down.
Looking ahead, British American Tobacco p.l.c. (NYSE:BTI) expects to deliver revenue growth of around 1% in 2025. The company faces significant headwinds in Bangladesh and Australia, which are expected to impact 2025 group revenue growth by 1%. Despite these challenges, management remains committed to returning to 3% to 5% revenue and growth by 2026, driven by an improving US financial performance, strong growth from Velo globally, and the launch of new innovations across the New Categories segment. BTI has historically had a low beta and showed significant resilience during previous bear markets, which makes it one of the best counter cyclical stocks to consider.
4. Costco Wholesale Corporation (NASDAQ:COST)
Average Upside Potential: 13.07%
Number of Hedge Fund Holders: 96
Costco Wholesale Corporation (NASDAQ:COST) is a leading global retailer operating membership-only warehouse clubs that offer a wide range of products at competitive prices. Its extensive product categories include groceries, electronics, appliances, apparel, and home goods, with a focus on high-quality national and private-label brands like Kirkland Signature. COST maintains a significant international presence with warehouses in countries such as Canada, Mexico, the United Kingdom, Japan, South Korea, and Australia. The company’s counter cyclical element of the business lies in its ability to attract cost-conscious consumers during economic downturns, as its bulk pricing and value offerings become increasingly appealing.
Costco Wholesale Corporation (NASDAQ:COST) reported strong second quarter results for fiscal 2025, with net income reaching $1.788 billion, or $4.02 per diluted share. This reflects an 8.4% increase when excluding certain tax-related items. Net sales rose 9.1% YoY to $62.53 billion, while comparable sales grew by 6.8%, or 9.1% after adjusting for fuel prices and currency effects. Membership metrics remained solid, with a 93% renewal rate in the US and Canada. Paid household memberships increased 6.8% to 78.4 million, and Executive Memberships saw a 9.1% rise, now making up 47.1% of all paid members and generating 73.8% of worldwide sales.
On the operational side, Costco Wholesale Corporation (NASDAQ:COST) achieved modest margin improvements, with gross margin rising to 10.85% and SG&A costs declining to 9.06%. Non-foods led merchandising growth, especially in categories such as gold, jewelry, gift cards, toys, housewares, and sporting goods. Fresh foods posted high single-digit gains, while food and sundries delivered low to mid-single-digit growth. Looking ahead, management plans to open 28 warehouses in fiscal 2025, with 25 being net new sites after accounting for relocations. Despite potential pressures from foreign exchange and tariffs, the company intends to rely on its global purchasing power and supplier partnerships to help offset cost increases for members. COST is one of the best counter cyclical stocks to buy as it has consistently outperformed the market in all economic cycles in the last 20 years.
3. Sprouts Farmers Market, Inc. (NASDAQ:SFM)
Average Upside Potential: 15.29%
Number of Hedge Fund Holders: 47
Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a specialty grocery retailer offering a wide selection of fresh, natural, and organic products, including produce, vitamins, bulk foods, and prepared meals. With over 430 stores across 24 US states, SFM emphasizes a farmers market-style shopping experience, featuring an open layout with fresh produce at the center. Even in economic downturns, SFM’s focus on affordable healthy living supports steady demand, as many consumers maintain or even increase spending on fresh and natural foods despite broader cutbacks.
Sprouts Farmers Market, Inc. (NASDAQ:SFM) positions itself as a specialty food retailer targeting health enthusiasts and innovation seekers within a $200 billion market segment, deliberately focusing on a specific portion of the $1.5-1.6 trillion food retail market. The company’s differentiation strategy is evident in its product assortment, with only about 15% overlap with conventional grocers and an impressive launch of 7,200 new products last year. The company maintains strong margins through its unique product mix, avoiding commodity-style products and focusing on health-oriented, differentiated items. Digital initiatives include partnerships with Instacart, DoorDash, and Uber Eats, with delivery comprising 80% of their digital business, and the company is currently rolling out its first loyalty program to drive further growth.
Sprouts Farmers Market, Inc. (NASDAQ:SFM)’s private brand strategy has reached 23% of sales, focusing on differentiated products rather than margin enhancement. Customer engagement shows promising trends with current wallet share at 13-14%, presenting significant growth opportunities through increased basket size and frequency. The company’s fresh produce strategy, particularly in organic products, maintains a significant price advantage in the marketplace, with produce representing 20% of sales and over 50% of produce sales being organic. SFM has an average potential upside of 15.29%, according to analysts, is owned by 47 hedge funds, and is, therefore, one of the best counter cyclical stocks to buy in the current market.
2. Ross Stores, Inc. (NASDAQ:ROST)
Average Upside Potential: 20.98%
Number of Hedge Fund Holders: 62
Ross Stores, Inc. (NASDAQ:ROST) operates as an off-price retailer offering discounted apparel and home fashion products. The company runs two primary store brands: Ross Dress for Less, with 1,836 locations across 43 US states, and dd’s DISCOUNTS, which provides a more moderately priced selection. The company’s business model focuses on selling name-brand and designer merchandise at prices 20% to 60% lower than those of traditional department and specialty stores. During economic downturns, ROST’s value-oriented offerings often attract budget-conscious consumers seeking quality products at reduced prices.
Ross Stores, Inc. (NASDAQ:ROST) delivered Q4 sales and earnings results at the high end of expectations, with comparable store sales gaining 3% on top of a 7% gain in the same period last year. For fiscal 2024, earnings per share were $6.32, up from $5.56, while net income rose to $2.1 billion compared to $1.9 billion last year. Total sales for the year increased to $21.1 billion, up from $20.4 billion in the prior year period. However, the company noted that sales trends began softening later in January and into February, attributed to unseasonable weather and heightened volatility in the macroeconomic and geopolitical environment. Despite this volatility, ROST is a notorious outperformer in the broad market during the previous recessions (such as 2008-2009 and 2022), which makes it one of the best counter cyclical stocks to consider.
Looking ahead to fiscal 2025, Ross Stores, Inc. (NASDAQ:ROST) is taking a cautious approach, forecasting same-store sales to be down 1% to up 2%, with EPS projected at $5.95 to $6.55. The company plans to open approximately 90 new locations in 2025, comprised of about 80 Ross and 10 dd’s stores. Despite current challenges, management believes some recent headwinds could be transitory and anticipates that the volatile external environment may result in more opportunities for closeout merchandise, potentially enabling greater values on branded goods in future quarters.
1. Walmart Inc. (NYSE:WMT)
Average Upside Potential: 26.73%
Number of Hedge Fund Holders: 116
Walmart Inc. (NYSE:WMT) is a leading multinational retail corporation operating a chain of hypermarkets, discount department stores, and grocery stores across the US and in 23 other countries. The company offers a broad assortment of merchandise and services at everyday low prices, encompassing categories such as apparel, housewares, electronics, and groceries. WMT operates through various formats, including supercenters, discount stores, neighborhood markets, and e-commerce platforms, serving approximately 270 million customers weekly. WMT often attracts more budget-conscious consumers during economic downturns, which makes it one of the best cyclical stocks to consider ahead of potential recessions. The giant retailer also ranked 3rd on our recent list of 10 Best Low Risk Stocks To Buy in 2025.
Walmart Inc. (NYSE:WMT) posted strong fourth quarter results, with sales increasing by 5.2% and adjusted operating income rising by 9.4% on a constant currency basis. The company continued to gain market share across various countries and income groups, driven by higher transaction volumes and unit sales. E-commerce performance also improved significantly, with online sales making up 18% of total revenue – an 1,100 basis point increase since fiscal 2020. WMT’s advertising business expanded by 27% to reach about $4.4 billion, while US Marketplace revenue rose 37%, with nearly 45% of orders fulfilled through Walmart Fulfillment Services. Membership income also saw strong growth, increasing 21% to approximately $3.8 billion.
Walmart Inc. (NYSE:WMT) improved its return on investment by 50 basis points, reaching 15.5%, a level not seen since 2016. Reflecting its solid financial performance, WMT announced a 13% dividend hike, marking the largest increase in more than ten years. Looking ahead to fiscal 2026, management projects consolidated net sales growth of around 3% to 4%, with operating income expected to grow even faster at 3.5% to 5.5%. Consumer demand for faster delivery has driven over 30% of orders to include paid convenience fees. Meanwhile, the company’s digital transformation continues to gain momentum, with US e-commerce losses improving by 80% YoY. Management also reinforced the company’s commitment to value, introducing more than 22,000 product rollbacks in its US stores over the past year.
Overall, WMT ranks first on our list of the 11 best counter cyclical stocks to buy according to analysts. While we acknowledge the potential of WMT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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