In this piece, we will take a look at the 15 best cyclical stocks to buy now. For more stocks, head on over to 5 Best Cyclical Stocks to Buy Now.
Investing in the stock market is all about timing. Make the right call at the right time and you’ll see your money grow, but fail to read the winds and there are chances of losing an equal amount as well. This basic principle is behind one of the more important theories in investment which are called portfolio diversification. While retail investors typically just buy stocks on the go, professionals are taught mathematical techniques to balance out their portfolios. These techniques include calculating the covariances and the variances of individual stocks within a portfolio to determine the variance of the entire collection of stocks.
However, what if you didn’t want to go through all this complicated math? After all, if your portfolio has fifty stocks, then you have to calculate the aforementioned metrics for each security and then regularly update the data to keep abreast of the current situation. Well, in that case, you’ll have to trust your gut. The gut is a strong and underrated investment weapon, and if wisely used, can potentially make luck work in your favor. One segment of stocks that is quite important these days especially given the market turmoil, is the cyclical sector.
In simple terms, cyclical stocks are those that see their fortunes rise and fall with the broader economy. As consumers see their incomes rise due to gross domestic product (GDP) growth, they have more money to spend on products and services. So naturally, cyclical companies are those that see their revenue, and the corresponding share price go up when the economy is doing well. On the flip side, should there be a slowdown, as is feared these days, then their revenues drop and the share price goes down as well.
Today’s market conditions merit a closer look at cyclical stocks since the U.S. economy is facing rather historic challenges. The Federal Reserve has been in a valiant fight since last year to control inflation by raising interest rates. However, this decision has proven to have a variety of painful outcomes. Out of these, the most devastating took place earlier this month when SVB Financial Group (NASDAQ:SIVB) collapsed (see biggest bankruptcies in US history). Its collapse was caused by two primary reasons, both of which are interrelated. The bank had invested heavily in long term bonds at a time when the Fed’s return rates were low, and then when the rates went up, these securities lost their value on the market, and SVB incurred massive losses. These left it unable to keep adequate funds and the bank was taken over by regulators instead.
SVB’s collapse is related directly to cyclical stocks. This is due to the fact that the bank’s failure should cause some concern about an aggressive interest rate hiking cycle – a tool that is argued to be crucial in the Fed’s inflation fight. However, high interest rates also slow down growth, and if you’re reading carefully, then as we pointed out above, slowing growth impacts cyclical stocks. This then creates the perfect opportunity to buy, since anything that goes down, comes up as well in the stock market. Of course, a stock purchase decision should be made after careful thought and consultation with licensed professionals.
Unlike other stock market sectors such as energy and basic materials, the cyclical sector consists of a wide variety of firms that cover industries such as electronic commerce firms, car manufacturers, hotels, and distributors. The one common thing across all these categories is that they are sensitive to consumer spending – hence the broader classification as ‘cyclical.’
Today, we’ll look at some of the top cyclical stocks, with the notable picks being Tesla, Inc. (NASDAQ:TSLA), Alibaba Group Holding Limited (NYSE:BABA), and Amazon.com, Inc. (NASDAQ:AMZN).
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Our Methodology
We started off our search by narrowing down the stocks classified as cyclical. Then, the number of hedge funds in Insider Monkey’s database that had invested in them was listed down, and the top fifteen cyclical stocks are listed below. Basically we listed the best cyclical stocks to buy according to hedge funds.
15 Best Cyclical Stocks to Buy Now
15. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Investors In Q4 2022: 49
AutoZone, Inc. (NYSE:AZO) is an American company that is headquartered in Memphis, Tennessee. The firm sells car parts and related products. These include air conditioning components, pipes, bearings, air and fuel filters, along with other products.
By the end of last year’s fourth quarter, 49 of the 943 hedge funds surveyed by Insider Monkey had held a stake in AutoZone, Inc. (NYSE:AZO). The firm’s largest shareholder in our database is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 152,505 shares that are worth $376 million.
Along with Alibaba Group Holding Limited (NYSE:BABA), Tesla, Inc. (NASDAQ:TSLA), and Amazon.com, Inc. (NASDAQ:AMZN), AutoZone, Inc. (NYSE:AZO) is one of the top cyclical stock favorite among hedge funds.
14. Airbnb, Inc. (NASDAQ:ABNB)
Number of Hedge Fund Investors In Q4 2022: 54
Airbnb, Inc. (NASDAQ:ABNB) is a travel services firm that operates an online platform that allows people willing to rent their properties to get in touch with travelers. The company is headquartered in San Francisco, California.
Insider Monkey took a look at 943 hedge funds for their Q4 2022 holdings and found out that 54 had invested in the firm. Jim Simons’ Renaissance Technologies is Airbnb, Inc. (NASDAQ:ABNB)’s largest investor as it owns 8.6 million shares that are worth $735 million.
13. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Investors In Q4 2022: 57
McDonald’s Corporation (NYSE:MCD) is the largest fast food retailer in the world in terms of total global outlets. The firm is headquartered in Chicago, Illinois.
As of December 2022, 57 of the 943 hedge funds surveyed by Insider Monkey had bought McDonald’s Corporation (NYSE:MCD)’s shares. The firm’s largest shareholder is Ray Dalio’s Bridgewater Associates which owns 1.5 million shares that are worth $416 million.
12. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Investors In Q4 2022: 62
The Home Depot, Inc. (NYSE:HD) is an American home improvement retailer that provides a variety of products such as sinks, garden maintenance equipment, doors, flooring, and more.
By the end of last year’s fourth quarter, 62 of the 943 hedge funds surveyed by Insider Monkey had held a stake in the retailer. The Home Depot, Inc. (NYSE:HD)’s largest investor in our database is Ken Fisher’s Fisher Asset Management which owns 8.2 million shares that are worth $2.6 billion.
11. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Investors In Q4 2022: 64
JD.com, Inc. (NASDAQ:JD) is a Chinese online retailer that provides a variety of products on its platforms such as toys, appliances, and groceries. The firm is headquartered in Beijing, China.
64 of the 943 hedge funds part of Insider Monkey’s database had held a stake in JD.com, Inc. (NASDAQ:JD) during Q4 2022. Out of these, the firm’s largest investor is Chase Coleman and Feroze Dewan’s Tiger Global Management LLC which owns 21 million shares that are worth $1.2 billion.
10. Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Investors In Q4 2022: 65
Expedia Group, Inc. (NASDAQ:EXPE) is a technology company that provides a digital platform enabling travel products and service providers to connect with their potential customers. The firm is based in Seattle, Washington.
Insider Monkey took a look at 943 hedge fund portfolios for their fourth quarter of 2922 investments and found out that 65 had owned a stake in the firm. Expedia Group, Inc. (NASDAQ:EXPE)’s largest hedge fund investor is Paul Reeder And Edward Shapiro’s PAR Capital Management which owns 3.5 million shares that are worth $306 million.
9. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Investors In Q4 2022: 68
Lowe’s Companies, Inc. (NYSE:LOW) is another home improvement retailer. The firm is headquartered in Mooresville, North Carolina and it sells products such as kitchen equipment and bathroom furnishings.
As of December 2022, 68 of the 943 hedge funds polled by Insider Monkey had bought Lowe’s Companies, Inc. (NYSE:LOW)’s shares. The firm’s largest investor is Bill Ackman’s Pershing Square which owns ten million shares that are worth $2 billion.
8. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Investors In Q4 2022: 69
The TJX Companies, Inc. (NYSE:TJX) is a clothing retailer that is headquartered in Framingham, Massachusetts. It sells clothing and apparel products as well as carpets, jewelry, and other accessories.
Insider Monkey’s fourth quarter of 2022 survey covering 943 hedge funds revealed that 69 had invested in the retailer. Out of these, Panayotis Takis Sparaggis’s Alkeon Capital Management is The TJX Companies, Inc. (NYSE:TJX)’s largest shareholder since it owns five million shares that are worth $404 million.
7. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Investors In Q4 2022: 71
NIKE, Inc. (NYSE:NKE) is a sporting goods company that sells apparel and footwear. The firm is headquartered in Beaverton, Oregon and it sells a variety of products such as basketballs, soccer balls, shoes, shorts, and jerseys.
71 of the 943 hedge funds polled by Insider Monkey had held a stake in NIKE, Inc. (NYSE:NKE) during Q4 2022. Out of these, Ken Fisher’s Fisher Asset Management is the company’s largest shareholder since it owns nine million shares that are worth $1 billion.
6. MercadoLibre, Inc. (NASDAQ:MELI)
Number of Hedge Fund Investors In Q4 2022: 75
MercadoLibre, Inc. (NASDAQ:MELI) is a Latin American electronic commerce provider that is headquartered in Uruguay.
Insider Monkey dug through 943 hedge fund holdings for last year’s December quarter and found out that 75 had bought the firm’s shares. MercadoLibre, Inc. (NASDAQ:MELI)’s largest hedge fund investor is David Blood and Al Gore’s Generation Investment Management which owns 707,061 shares that are worth $598 million.
Tesla, Inc. (NASDAQ:TSLA), MercadoLibre, Inc. (NASDAQ:MELI), Alibaba Group Holding Limited (NYSE:BABA), and Amazon.com, Inc. (NASDAQ:AMZN) are some hot cyclical stocks.
Click to continue reading and see 5 Best Cyclical Stocks to Buy Now.
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Disclosure: None. 15 Best Cyclical Stocks to Buy Now is originally published on Insider Monkey.