In this article, we will discuss the 15 Best Large-Cap Value Stocks to Buy as the Recession Hits.
Goldman Sachs highlighted that equities around the world traded in and out of a bear market — which is often defined as a 20% decline from the recent peak. According to Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, the history of bear markets can provide some clues regarding the duration and severity of such downturns. U.S. stocks ended significantly higher after Trump announced his decision to put a 90-day pause on the additional country-specific portion of the reciprocal tariffs. That being said, Oppenheimer believes that a sustained rebound isn’t yet in place. As per the strategist, the valuations are required to adjust further before equities can shift into the “hope” phase of the next cycle.
What to Expect from Current Earnings Season?
With the Q1 2025 earnings season underway, Morningstar informs that investors can expect more focus than usual on what companies want to say regarding their outlooks, while the uncertainty surrounding tariffs means offering weaker, less confident, or even no guidance. Tariffs can impact the corporate bottom lines in several ways, both directly and indirectly. Notably, the increased import costs put more pressure on the margins. While some firms can decide to alleviate the pressure by increasing the prices for customers, others can choose to absorb them, says the firm. Morningstar, while quoting FactSet’s consensus estimates, mentioned that analysts expect 6.8% earnings growth in Q1 for companies in the S&P 500 benchmark index. For the full year, analysts anticipate an 11.2% growth.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Amidst Tensions, What’s the Silver Lining?
Forward guidance is what generally moves the financial markets. If the firm warns that there can be a possibility to see smaller profits, the stock tends to fall. This might happen across the market, but there is a silver lining. As per Morningstar chief research and investment officer Dan Kemp, it is important to note that most of the value lies in the future. Therefore, the impact on the company’s real value is expected to be muted. According to him, widening of the gap between stock prices and future real values can be a very fertile soil for the market investors.
Christian Mueller-Glissmann, head of asset allocation research within portfolio strategy for Goldman Sachs Research, says that investors need to think about diversifying regionally and across styles. To be specific, this consists of low-volatility stocks, i.e., equities from more defensive sectors, that fluctuate less than the broader market.
Amidst these thoughts, let us now have a look at the 15 Best Large-Cap Value Stocks to Buy as the Recession Hits
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Our Methodology
To list the 15 Best Large-Cap Value Stocks to Buy as the Recession Hits, we considered companies from the industries which are expected to be resilient in a recessionary environment, such as utilities, healthcare, and consumer. Next, we chose the stocks that trade at a forward P/E of less than ~20.0x. Finally, the stocks are arranged in ascending order of the hedge fund sentiments, 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).
15 Best Large-Cap Value Stocks to Buy as the Recession Hits
15. Dominion Energy, Inc. (NYSE:D)
Number of Hedge Fund Holders: 39
Forward P/E as of April 15: ~15.7x
Dominion Energy, Inc. (NYSE:D) offers regulated electricity and natural gas services. Morgan Stanley analyst David Arcaro upped the company’s price objective to $63 from $60, keeping an “Equal Weight” rating. The firm updated price targets for North American Regulated and Diversified Utilities/IPPs, says the analyst. Key points from the annual Energy & Power Conference consist of strong demand from data centers, renewables defense with safe harboring, among others. Dominion Energy, Inc. (NYSE:D) provided updates for the Coastal Virginia Offshore Wind (CVOW) project. The 2.6 GW, fully permitted project remains ~50% complete and is on track for on-time completion at 2026 end.
CVOW is expected to create $2 billion of economic activity. Dominion Energy, Inc. (NYSE:D) believes that the project is an affordable source of electricity for Dominion Energy Virginia customers, with robust cost-sharing mechanisms protecting customers and shareholders. Dominion Energy, Inc. (NYSE:D) narrowed its existing 2025 operating earnings guidance range to $3.28 – $3.52 per share, which includes estimated RNG 45Z income, preserving the midpoint of $3.40 per share. Overall, the company’s investments in renewable energy, together with strategic positioning in the broader data center market, are expected to fuel long-term growth. The expansion of data centers, driven by the rise of AI, continues to fuel electricity demand growth.
14. American Electric Power Company, Inc. (NASDAQ:AEP)
Number of Hedge Fund Holders: 47
Forward P/E as of April 15: ~18.0x
American Electric Power Company, Inc. (NASDAQ:AEP) is an electric public utility holding company. It is engaged in the generation, transmission, and distribution of electricity for sale to retail and wholesale customers. BMO Capital remains optimistic about the company’s stock as the firm sees its equity raise positively because it removes the equity/credit overhang on the stock. On March 24, American Electric Power Company, Inc. (NASDAQ:AEP) announced pricing of the registered underwritten offering of 19,607,844 shares of common stock at a price to the public of $102.00 per share.
The focus on decarbonizing the generation fleet remains in line with the overall industry trends and regulatory pressures to reduce carbon emissions. The transition to clean energy can create numerous investment prospects in renewable generation, energy storage, and grid modernization. American Electric Power Company, Inc. (NASDAQ:AEP)’s large service territory offers numerous opportunities to allocate capital in such areas. In 2024, the company saw significant load growth in its commercial class, mainly because of economic development in Indiana, Ohio, and Texas. American Electric Power Company, Inc. (NASDAQ:AEP) expects an 8% – 9% annual total retail load growth from 2025-2027 and targets to serve over 20 gigawatts of new load by the decade’s end. The company’s $54 billion, 5-year capital plan supports the opportunity.
13. General Mills, Inc. (NYSE:GIS)
Number of Hedge Fund Holders: 49
Forward P/E as of April 15: ~13.7x
General Mills, Inc. (NYSE:GIS) is engaged in manufacturing and marketing branded consumer foods. Analyst Peter Galbo from Bank of America Securities reiterated a “Buy” rating on the company’s stock. This rating is backed by a combination of factors, including its strategic investment plans and future growth potential. As per the analyst, General Mills, Inc. (NYSE:GIS) can achieve significant savings with the help of holistic margin management and additional cost-saving measures. This will be reinvested in the pricing strategies. Therefore, General Mills, Inc. (NYSE:GIS) remains positioned for positive medium-term growth prospects throughout critical geographies and categories, says Galbo.
With the help of continued research, development, and marketing, Morningstar expects the company’s portfolio of strong brands to maintain an intangible edge. This investment supports products that sell well, fueling traffic that entrenches General Mills, Inc. (NYSE:GIS)’s relationships with retailers, says the firm. The company is focused on improving its sales growth in fiscal 2026 by stepping up the investment in innovation, brand communication, and value for consumers. General Mills, Inc. (NYSE:GIS) plans to finance that investment with another year of industry-leading HMM productivity, together with anticipated new cost-saving initiatives focused on further boosting its efficiency and driving growth.
12. Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 51
Forward P/E as of April 15: ~14.04x
Constellation Brands, Inc. (NYSE:STZ) is engaged in producing, importing, marketing, and selling beer, wine, and spirits. Andrew Strelzik from BMO Capital maintained a “Buy” rating on the company’s stock with a price objective of $215.00. The rating is backed by factors demonstrating its strategic positioning and future growth potential. Constellation Brands, Inc. (NYSE:STZ)’s strategic divestiture of mainstream wine brands is regarded as a positive move, which concentrates its portfolio in the premium segment, enhancing growth over time, says the analyst.
On April 9, Constellation Brands, Inc. (NYSE:STZ) announced that it had signed an agreement with The Wine Group to divest primarily mainstream wine brands and related vineyards and facilities from the wine portfolio. Furthermore, the analyst believes that a slower growth in Beer sales is because of broader socioeconomic factors rather than a decline in brand strength. This suggests a potential for growth acceleration as and when the broader consumer environment stabilizes. Moving forward, premium positioning and robust brand equity can enable it to sustain its outperformance. With consumers moving towards premium offerings, Constellation Brands, Inc. (NYSE:STZ)’s portfolio remains well-placed to capture market share and mitigate the category weakness.
Coho Partners, an investment management company, published its Q2 2024 investor letter. Here is what the fund said:
“We also eliminated Conagra (CAG) in favor of a better risk/return for Constellation Brands, Inc. (NYSE:STZ). We are encouraged by the Constellation Board’s decision to eliminate the dual voting share class and reprioritize capital allocation away from acquisitions and towards returns to shareholders. With capital spending expected to decline and leverage near the company’s target, more cash flow should be available for shareholders. STZ is now focused on the higher growth and the higher margin premium beer category, which they dominate with Corona Extra, Modelo Especial and Pacifico. Additionally, the Wine and Spirits business, which has been disappointing is no longer a meaningful part of STZ’s business as it now accounts for less than 10% of overall earnings. We expect STZ to deliver low double-digit growth in both earnings and dividends for many years to come, which is consistent with the Board’s recent approval of a 13.5% dividend hike.”
11. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 56
Forward P/E as of April 15: ~10.1x
Target Corporation (NYSE:TGT) operates as a general merchandise retailer. Fitch Ratings has highlighted the company’s strong US market position, well-recognized brand name, and good cash flow generation. Target Corporation (NYSE:TGT)’s operational success exhibits the strength of its market positioning and longer-term execution. Furthermore, its growth in discretionary categories, partly fueled by national brand collaborations and private brand introductions, aids the uniqueness of the company’s dual offering of discounted but differentiated merchandise, says the firm. Fitch Ratings also opines that Target Corporation (NYSE:TGT)’s healthy asset base and omnichannel focus can enable it to benefit from customer preference for cross-channel shopping.
Furthermore, Target Corporation (NYSE:TGT)’s digital initiatives can offer valuable data insights, allowing it to personalize offerings, improve overall operational efficiency, and optimize inventory management. With the retail landscape becoming digital-centric, the company’s emphasis places it well for long-term growth and competitiveness. Also, by optimizing the product mix and leveraging private label brands, the company can enhance its gross margins.
Target Corporation (NYSE:TGT) highlighted that a multi-year initiative is expected to build momentum in product categories with growth potential. The company’s signature same-day services were the fastest-growing mode of shopping in 2024 due to healthy growth from Same-Day Delivery powered by Target Circle 360. It focuses on accelerating these services’ growth in 2025.
10. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 60
Forward P/E as of April 15: ~14.4x
The Kroger Co. (NYSE:KR) operates as a food and drug retailer. Guggenheim maintained a “Buy” rating on the company’s stock and raised the price objective to $73 from $71. The firm’s analysis demonstrates that the company’s accelerating operating momentum, resulting from the ESI network re-entry, the growth of Media business, and the expansion of KR Delivery, is expected to support the stock. On February 5, Kroger Health, the healthcare division of The Kroger Co. (NYSE:KR) and its Family of Pharmacies, announced a new agreement with Express Scripts, the pharmacy benefit services business of Evernorth. Notably, the new agreement offers access to prescription medications and health services at the Kroger Family of Pharmacies for Express Scripts customers.
Elsewhere, analyst Robert Ohmes from Bank of America Securities reiterated a “Buy” rating on the company’s stock. The analyst’s rating is backed by a combination of factors demonstrating the company’s healthy financial performance and strategic positioning. Notably, The Kroger Co. (NYSE:KR)’s Q4 2024 adjusted EPS exceeded expectations. The analyst has a favourable outlook for the company’s future earnings, aligning with The Kroger Co. (NYSE:KR)’s guidance. The expected growth in alternative profit streams, like Retail Media, and the continued emphasis on digital sales and cost savings aid the long-term margin potential, says Ohmes. In Q4 2024, the company posted an adjusted EPS of $1.14.
9. Duke Energy Corporation (NYSE:DUK)
Number of Hedge Fund Holders: 62
Forward P/E as of April 15: ~19.1x
Duke Energy Corporation (NYSE:DUK) operates as an energy company. Jefferies analyst Julien Dumoulin-Smith upped the company’s price objective to $133.00 from the prior target of $132.00 while reiterating a “Buy” rating. Notably, the adjustment demonstrates a favorable outlook on Duke Energy Corporation (NYSE:DUK)’s potential to act as a stable investment amidst market uncertainties, including tariffs and other macroeconomic challenges. The analyst believes that the company’s stock remains less impacted by the global tariff issues as compared to other companies. Overall, the firm’s analysis hints at the company’s capacity to provide investors with a mix of growth and stability, which makes it a compelling investment option.
Duke Energy Corporation (NYSE:DUK)’s focus on clean energy and sustainability can deliver several benefits. The transition towards clean energy aligns the company with growing consumer and investor preferences for sustainable businesses. This can improve its reputation, potentially bringing in environmentally-conscious customers and investors. It can also develop new business opportunities. Duke Energy Corporation (NYSE:DUK)’s higher full-year 2024 adjusted results were mainly aided by growth from rate increases and riders, improved weather, and higher sales volumes. Notably, the company posted an adjusted EPS of $5.90 as compared to $5.56 in FY 2023.
8. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 64
Forward P/E as of April 15: ~14.06x
Dollar Tree, Inc. (NASDAQ:DLTR) operates retail discount stores. Citi analyst Paul Lejeuz upped the company’s stock from “Neutral” to “Buy,” increasing the price objective from $76.00 to $103.00. This adjustment comes after the analyst expects favourable outcomes for the company amidst rising tariffs. The analyst opines that the current high-tariff environment can work in Dollar Tree, Inc. (NASDAQ:DLTR)’s favor. The company has the opportunity to adjust the price points, says Lejeuz. The analyst further added that its robust position as a value retailer places it apart as a likely winner in the environment in which prices are expected to rise.
Dollar Tree, Inc. (NASDAQ:DLTR)’s capability to navigate the tariff-induced cost increases while, at the same time, maintaining consumer appeal remains at the core of the favourable outlook. Elsewhere, Bernstein adjusted the price target on the company’s stock to $78, noting the potential positive impact of the Family Dollar sale on Dollar Tree, Inc. (NASDAQ:DLTR)’s EPS. Notably, the company has reached an agreement under which Brigade Capital Management, LP and Macellum Capital Management, LLC will partner to acquire its Family Dollar business segment. The company will continue to grow and optimize its Dollar Tree business in a bid to maximize value for Dollar Tree associates, customers, and shareholders with an increased emphasis on compelling initiatives, such as expanded assortment, significant planned new store openings, and transactions fueling the growth strategy.
7. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 69
Forward P/E as of April 15: ~17.2x
PepsiCo, Inc. (NASDAQ:PEP) is engaged in the manufacturing, marketing, distribution, and selling of various beverages and convenient foods. UBS analyst Peter Grom remains optimistic about the company’s stock after PepsiCo, Inc. (NASDAQ:PEP) announced the definitive agreement to acquire poppi, a fast-growing prebiotic soda brand. The company has been evolving its food and beverage portfolio over several years. Consumers continue to seek convenient and great-tasting options that align with their lifestyles and cater to the growing interest in health and wellness. Notably, poppi’s consumer-first approach, cultural cache, and nutritional profile have resulted in a loyal fan base and driven strong growth.
PepsiCo, Inc. (NASDAQ:PEP)’s robust performance in international markets offers a strong opportunity to mitigate the challenges witnessed in the domestic operations. Its international business has demonstrated growth inflection and margins above the corporate average, exhibiting healthy potential for expansion and increased profitability. Also, PepsiCo, Inc. (NASDAQ:PEP)’s emphasis on productivity initiatives and cost savings offers numerous opportunities for improving profitability and operational efficiency. Through implementing more efficient processes and leveraging economies of scale, PepsiCo, Inc. (NASDAQ:PEP) can reduce the cost base, resulting in more competitive pricing. The improved operational efficiency can enhance the company’s agility in responding to market changes and consumer trends.
6. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 85
Forward P/E as of April 15: ~14.62x
AbbVie Inc. (NYSE:ABBV) is a research-based biopharmaceutical company, that is engaged in the research and development, manufacture, commercialization, and sale of medicines and therapies. Erste Group upped the company’s stock from “Hold” to “Buy,” noting its strong sales growth forecast and promising pipeline of new products. AbbVie Inc. (NYSE:ABBV) has reaffirmed expectations for a high single-digit compound annual revenue growth rate through 2029 and raised the 2027 combined sales outlook for Skyrizi and Rinvoq to over $31 billion. The company’s financial position seems to be strengthening, and its strategic emphasis on expanding the product portfolio can contribute to sustained growth and profitability.
AbbVie Inc. (NYSE:ABBV)’s strong pipeline, strengthened by strategic acquisitions, places it well for long-term success. The successful development and commercialization of pipeline assets can diversify its revenue streams and fuel significant value creation. The company has updated its outlook for aesthetics to deliver a high single-digit compound annual revenue growth rate from 2025 through 2029. The company has announced that it completed the acquisition of Aliada Therapeutics. The transaction cements AbbVie Inc. (NYSE:ABBV)’s neuroscience pipeline and R&D capabilities with the addition of a potential best-in-class disease-modifying therapy for Alzheimer’s disease (AD), ALIA-1758, and novel blood-brain barrier (BBB)-crossing technology.
Polaris Capital Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“U.S. biopharma/biotech companies topped the health care sector, with the majority of holdings posting returns in excess of 10%. AbbVie Inc. (NYSE:ABBV) showed positive top-line growth from its immunosuppressive drugs, Skyrizi and Rinvoq. Abbvie’s management continues to work through the loss of exclusivity from Humira, switching patients to Skyrizi or Rinvoq rather than Humira biosimilars.”
5. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 91
Forward P/E as of April 15: ~8.7x
Merck & Co., Inc. (NYSE:MRK) operates as a healthcare company. Nico Chen, an analyst from. DBS, maintained a “Buy” rating on the company’s stock, and the associated price target was $100.00. The analyst’s rating is backed by factors demonstrating its robust market position and growth potential. As per the analyst, a significant driver of the positive outlook is KEYTRUDA, Merck & Co., Inc. (NYSE:MRK)’s blockbuster drug, which has supported it in establishing the company as a leader in oncology. KEYTRUDA sales increased 18% YoY to $29.5 billion in FY 2024. However, excluding the impact of foreign exchange, the sales went up by 22%. The analyst believes that KEYTRUDA continues to expand the company’s presence in global markets.
Elsewhere, the Goldman Sachs analyst team started coverage on the company’s stock with a “Buy” rating. As per the firm’s assessment, the market has been implying an overly pessimistic terminal growth rate for Merck & Co., Inc. (NYSE:MRK). It is not recognizing the value of the company’s pipeline and is undervaluing its Animal Health business. The Animal Health division happens to be on a growth trajectory.
GreensKeeper Asset Management, an investment management company, released the third quarter investor letter. Here is what the fund said:
“Merck & Co., Inc. (NYSE:MRK) was our second-largest detractor this quarter, declining -8.3%. MRK’s leading HPV vaccine, GARDASIL 9, faced challenges internationally due to inventory buildup within its Chinese distributor, which is expected to reduce shipments for the remainder of 2024. Despite this short-term impact, the long-term outlook for GARDASIL 9 remains promising. Meanwhile, the company’s $27 billion Keytruda cancer juggernaut continues to grow at a healthy clip, powering earnings growth.”
4. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 92
Forward P/E as of April 15: ~7.6x
Pfizer Inc. (NYSE:PFE) is engaged in discovering, developing, manufacturing, marketing, distributing, and selling biopharmaceutical products. Morgan Stanley reaffirmed an “Equalweight” rating on the company’s stock with a price objective of $31.00. The company has announced its decision to discontinue the development of danuglipron (PF-06882961), an oral glucagon-like peptide-1 (GLP-1) receptor agonist, which was being investigated for chronic weight management. Notably, cardiovascular and metabolic diseases, which include obesity, are critical areas of unmet medical need. Therefore, Pfizer Inc. (NYSE:PFE) plans to continue to apply its global capabilities to advance a pipeline of investigational treatments that have the potential to fill critical gaps in patient care, which includes continued development of the oral GIPR antagonist candidate and other earlier obesity programs.
Elsewhere, Morningstar believes that Pfizer Inc. (NYSE:PFE)’s foundation is solid, considering its robust cash flows generated via a basket of diverse drugs. Its large size results in numerous competitive advantages in developing new drugs. This unmatched quality, together with a broad portfolio of patent-protected drugs, has helped Pfizer Inc. (NYSE:PFE) in building a wide economic moat, says Morningstar. In oncology, the company’s acquisition of Seagen bolstered its pipeline and portfolio. With Seagen’s proprietary Antibody-Drug Conjugate (ADC) technology, along with the scale and strength of Pfizer Inc. (NYSE:PFE)’s capabilities and expertise, the latter remains well-placed to change the cancer treatment paradigm.
3. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 100
Forward P/E as of April 15: ~18.9x
Thermo Fisher Scientific Inc. (NYSE:TMO) is engaged in providing life sciences solutions, analytical instruments, specialty diagnostics, laboratory products, and biopharma services. Leerink Partners analyst Puneet Souda maintained the bullish stance on the company’s stock, providing a “Buy” rating. The analyst’s rating stems from a combination of factors surrounding Thermo Fisher Scientific Inc. (NYSE:TMO)’s strategic acquisition of Solventum’s Purification and Filtration business. The analyst opines that the acquisition is expected to enhance Thermo Fisher Scientific Inc. (NYSE:TMO)’s position in the bioprocessing sector, mainly in filtration.
Solventum’s Purification and Filtration business, as part of Thermo Fisher Scientific Inc. (NYSE: TMO), is anticipated to result in mid-to-high single-digit organic growth, and the application of the PPI Business System will allow robust margin expansion and healthy synergy realization. Elsewhere, Michael Ryskin from Bank of America Securities reiterated a “Buy” rating on Thermo Fisher Scientific Inc. (NYSE:TMO)’s stock with a price objective of $680.00. Notably, Solventum’s Purification and Filtration business is highly complementary to Thermo Fisher Scientific Inc. (NYSE:TMO)’s bioproduction business.
Polen Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Thermo Fisher Scientific Inc. (NYSE:TMO) appears to continue to move past COVID-related headwinds that hampered growth in recent years. While the backdrop around big pharma budget cuts and a weaker biotech funding environment have weighed on the stock over the past year, Q4 underperformance seems more related to concerns over increased regulatory scrutiny under the new administration, given RFK Jr.’s appointment as the Trump administration’s head of U.S. Health and Human Services, and his vocal pronouncements against pharmaceutical industry drug pricing. In tough times, pharma and biotech companies lean on suppliers that can deliver the best value. We believe Thermo has a vast offering of products and services bundled at prices that competitors have a hard time matching, allowing them to take significant market share. We maintain our long-term conviction in Thermo as among the most durable compounders in the world, with the ability to drive consistent growth through good and bad macro environments.”
2. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 120
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. BofA remains optimistic about the company’s growth prospects as the firm’s analyst believes that the base business of baseload generation and competitive retail remains well-placed to benefit from tightening markets, increasing demand as well as retail growth, irrespective of the data center deals. Vistra Corp. (NYSE:VST) has been growing its fleet of zero-carbon resources, advancing the interests via cost-effective, strategic investments.
During Q4 2024, it advanced its efforts in solar, energy storage, and nuclear by executing the renewable development pipeline and by growing its ownership interest in nuclear by closing on an agreement to acquire the 15% minority interest in its Vistra Vision subsidiary. This makes Vistra Corp. (NYSE:VST) the sole owner of its highly valuable, carbon-free assets. Vistra Corp. (NYSE:VST)’s transition towards renewable energy and the expansion into AI-driven data center services continue to fuel its growth prospects. This remains in line with the utilities sector’s focus on technological advancement and clean energy.
ClearBridge Investments, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Volatility also created entry points to motivate our first purchase in the utility sector, Vistra Corp. (NYSE:VST), as well as reduce our underweight to the consumer discretionary sector with the addition of CAVA Group. Vistra is the largest competitive power generator in the U.S. with a 41 GW fleet of power plants diversified by geography and fuel sources. Long-term fundamentals of the deregulated power markets remain constructive with Vistra well positioned to benefit from continued tightening in its primary PJM (Pennsylvania, New Jersey, Maryland Interconnection) and ERCOT (Texas) markets. Pending regulatory clarity could also pave the way for additional power purchase agreements with hyperscalers and act as a positive catalyst for independent power producer stocks. These agreements, in combination with federal subsidies for nuclear plants, have the potential to improve visibility and lower earnings variability across the industry.”
1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH) operates as a healthcare company. Truist upped the price objective on the company’s stock to $660 from $610, keeping a “Buy” rating as part of the broader research note previewing Q1 results in Healthcare Services. As per the firm, the sector seems to be relatively well-placed in a fluid environment considering the scaled, largely domestic, attractive FCF generating and defensive nature of the group. UnitedHealth Group Incorporated (NYSE:UNH)’s diversified portfolio, which spans health insurance, pharmacy benefits management, and healthcare services, places it well for continued growth. Furthermore, the synergies between the segments enable cross-selling opportunities and integrated care delivery models.
Elsewhere, AM Best, a leading ratings agency, highlighted that UnitedHealth Group Incorporated (NYSE:UNH)’s operating earnings benefit from a large scale, offering cost advantages for medical expenditures and administrative expenses. As per the firm, the company’s strategic focus is on value-based care and reimbursement models to align provider and payor, which supports managing medical cost trends and improving outcomes for members. UnitedHealth Group Incorporated (NYSE:UNH)’s large membership base results in significant economies of scale. Also, the integration of UnitedHealth Group Incorporated (NYSE:UNH) with its affiliate, Optum, provides the former with a competitive advantage by providing access to advanced capabilities for cost management, pharmacy and innovative technology, care delivery, and strong data analytics.
Baron Funds, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Shares of UnitedHealth Group Incorporated (NYSE:UNH), the largest health care company by revenue, were volatile in the quarter. Quarterly medical cost trends ran higher than expected, the high end of quarterly guidance was cut, and the preliminary 2025 outlook missed consensus. The Republican November election sweep drove shares up, as Republicans have historically been more supportive of managed care, which bodes especially well for Medicare Advantage, the industry’s main growth engine. In December, UnitedHealth’s CEO was shot and killed, and the subsequent outpouring of public anger over the managed care industry’s history of claims denials sparked concern about the industry’s ability to control health care spend. The specter of pharmacy benefit manager (PBM) legislation was an additional pressure along with multiple press pieces questioning managed care practices and profit drivers. Longer term, we believe managed care will remain embedded in the U.S. health care system and UnitedHealth, as the largest, best managed, and most disciplined and forward-thinking company in the industry, will continue to grow.”
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