In this article, we will discuss the 15 Best Stocks to Buy During Recession.
As per BlackRock, 2025 started with a bumpy ride for the US stocks. That being said, the asset manager believes that the sentiment has been a critical driver, but fundamentals seem to be healthy. This makes up for an optimistic longer-run outlook. Despite the tariff shocks creating difficult markets, the firm is constructive in its outlook and opines that volatility is an opportunity to capitalize on stock dispersion. Furthermore, Asia continues to exhibit a diversification opportunity for making investments in the AI theme, with equities providing low correlation to US counterparts.
Amidst Worries, There Is a Silver Lining
The trade and tariff uncertainty, which fueled the early-year volatility, advanced at the beginning of Q2 due to the US tariff pronouncements, according to the investment management company. This resulted in a global market meltdown and revived fears related to recession. However, as the quarter progressed, the tariff tensions took a backseat, and there was some optimism visible in the broader US markets. The asset manager believes that, while tariffs remain a critical measure, the potential for market-supporting policies like deregulation and corporate tax cuts provides some room for emergent optimism.
The firm highlighted the importance of an active approach in a bid to capitalize on inefficiencies and to make precise and intentional decisions amidst historic change and transition. While the results of bilateral tariff negotiations remain unpredictable, having a pulse on company dynamics, mainly when the macro picture remains unclear, can act as a differentiator for portfolios.
Policy Measures Likely to Support Moving Forward
The firm opines that corporate strength has supported the US equities’ momentum, and it comes through in earnings and market share. As per the firm, relatively pro-industry policies have stimulated healthy FCF. Several companies throughout different time frames have deployed the cash for future business growth. Even though the policy uncertainty in the current time of transition led to the pause in large investment decisions, the company believes that moves toward deregulation and the reshoring of supply chains once policy gets settled can result in the revival of CapEx spending throughout industries, such as technology and industrials. Despite tariffs dominating, the asset manager expects that deregulation and other policy priorities can regain attention. The high drive for innovation is the long-term secular trend that can support the US equities.
Amidst such trends, let us now look at the 15 Best Stocks to Buy During Recession.
A close-up of a stock broker in an office showing the company’s strength in investment securities.
Our Methodology
To list the 15 Best Stocks to Buy During Recession, we considered the stocks from recession-proof industries such as utilities, consumer defensive, and healthcare. After getting an extensive list of 25-30 stocks, we chose the ones popular among hedge funds. Finally, the stocks were arranged in ascending order of their 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 Stocks to Buy During Recession
15. Sempra (NYSE:SRE)
Number of Hedge Fund Holders: 34
Sempra (NYSE:SRE) operates as an energy infrastructure company. Bank of America Securities analyst Ross Fowler maintained the bullish stance on the company’s stock, giving a “Buy” rating. The analyst’s rating is backed by the company’s strategic decision. On March 31, Sempra (NYSE:SRE) announced that it intends to sell certain energy infrastructure assets in Mexico and a minority stake in Sempra Infrastructure Partners (Sempra Infrastructure). The sales proceeds are expected to be recycled into its 5-year capital campaign, with an emphasis on its U.S. utilities.
As per the analyst, the sale process is anticipated to pivot the company towards a more focused utility growth model, reducing the non-regulated earnings contributions and improving its valuation. Furthermore, despite some challenges, the analyst believes that progress in LNG export marketing efforts is projected to improve its value, justifying the rating. Sempra (NYSE:SRE) operates in markets possessing attractive long-term growth prospects. The industrial and commercial expansion can result in increased energy consumption and infrastructure needs. Also, the transition towards electrification in numerous sectors, such as transportation, can fuel higher demand for Sempra (NYSE:SRE)’s electric utility services.
ClearBridge Investments, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Utilities rose largely on merchant power companies serving the data centers powering AI; the rest of the sector, along with real estate, suffered as rate cut expectations were pushed out. One exception was our holding Sempra (NYSE:SRE) — a well-managed and diversified utility holding company. Sempra possesses large franchises in Texas and California, as well as a large LNG business. Sempra is a leading player in each of its markets and all its segments enjoy robust growth outlooks, which should drive high-single-digit growth for the company overall.”
14. Xcel Energy Inc. (NASDAQ:XEL)
Number of Hedge Fund Holders: 37
Xcel Energy Inc. (NASDAQ:XEL) is engaged in the generation, purchasing, transmission, distribution, and sale of electricity. Ross Fowler, an analyst from Bank of America Securities, maintained a “Buy” rating on the company’s stock, and the associated price target was $77.00. The rating was backed by a combination of factors that demonstrate its growth potential despite some short-term challenges. Xcel Energy Inc. (NASDAQ:XEL) has reaffirmed its annual EPS and growth guidance, demonstrating confidence in its financial outlook, says the analyst. Furthermore, the company’s revenue growth, fueled by favorable rate case outcomes and fuel cost recovery, was mitigated by increased operational costs. However, the company has reaffirmed its 2025 ongoing EPS guidance of $3.75 – $3.85.
Xcel Energy Inc. (NASDAQ:XEL) continues to build new generation, invest in system resilience, and has been leading the energy transition. The company reached a milestone in February, when Minnesota regulators approved a resource plan that includes ~5,000 megawatts of new wind, solar, battery storage, and gas by 2030. The company’s capital plan can significantly boost its long-term growth prospects. This can support infrastructure improvements, grid modernization, and expansion into new technologies or markets. The investments can enhance Xcel Energy Inc. (NASDAQ:XEL)’s operational efficiency, improve service reliability, and potentially result in new revenue streams.
13. Monster Beverage Corporation (NASDAQ:MNST)
Number of Hedge Fund Holders: 52
Monster Beverage Corporation (NASDAQ:MNST) is engaged in the development, marketing, sale, and distribution of energy drink beverages and concentrates. Analyst Filippo Falorni from Citi maintained a “Buy” rating on the company’s stock, keeping the price target at $64.00. The rating is backed by a combination of factors demonstrating its healthy market position and growth potential. The analyst believes that competition in the US energy drink market is not a new challenge for Monster Beverage Corporation (NASDAQ:MNST). The company has managed to maintain a consistent market share, highlighting resilience in the face of new entrants, says Falorni. Additionally, the analyst has highlighted the significant growth opportunities in the international market.
The company’s international business remains a critical growth driver, and continued expansion in global markets offers a strong opportunity for long-term value creation. Moreover, international expansion offers diversification benefits, reducing Monster Beverage Corporation (NASDAQ:MNST)’s dependency on the US market. The geographic diversification is expected to help offset regional economic fluctuations and result in stable overall growth. With Monster Beverage Corporation (NASDAQ:MNST) adapting its products and marketing strategies to local tastes and preferences, it can result in new revenue streams and market segments.
ClearBridge Investments, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:
“Drilling further down, we have been engaging with management teams of portfolio companies with production outside the U.S. to understand supply change fungibility and the ability to pass through costs to end customers. We are specifically monitoring risks to the consumer sector from tariffs because consumers have already borne the burden of several years of cost inflation pressuring wallets and some areas of spending, like dining outside the home, have easy substitutes. That said, beverage holdings Starbucks and Monster Beverage Corporation (NASDAQ:MNST) both held up well during the quarter. Starbucks is undergoing an earnings reset under new CEO Brian Nicoll that is being well received by investors. Monster, meanwhile, benefited from price increases and strength in its international business.”
12. The Southern Company (NYSE:SO)
Number of Hedge Fund Holders: 53
The Southern Company (NYSE:SO) is engaged in the generation, transmission, and distribution of electricity. Barclays upped the company’s price objective to $90 from $83, keeping an “Equal Weight” rating. Notably, the firm has adjusted the utilities and power sector models moving into Q1 earnings in a bid to exhibit the macro positioning as well as updated thoughts on the US utilities tariff outlook. Furthermore, the analyst has highlighted the defensive characteristics of the industry. Elsewhere, Morgan Stanley exhibited optimism on The Southern Company (NYSE:SO)’s stock. Some important takeaways from the firm’s annual energy & power conference include robust demand from data centers, renewables defense with safe harboring, equipment onshoring, among others.
The Southern Company (NYSE:SO)’s strategic position places it as the frontrunner in the trend of data center development. Furthermore, the elevated demand trends for cloud computing, AI as well as other data-intensive technologies continue to fuel significant investments in data center infrastructure throughout the region. Data center operators tend to make long-term power purchase agreements, which provide The Southern Company (NYSE:SO) with predictable cash flows and justify the robust infrastructure investments. The requirement to support data center operations fuels investments in grid reliability as well as capacity, which could be beneficial for all the customers and potentially result in favorable regulatory outcomes.
11. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 55
Mondelez International, Inc. (NASDAQ:MDLZ) is engaged in manufacturing, marketing, and selling snack food and beverage products. Robert Moskow remains optimistic about the company’s stock, backed by factors highlighting its healthy market position. Mondelez International, Inc. (NASDAQ:MDLZ) tends to benefit from the cultural attachment to chocolate in Europe, where consumers might include it in regular grocery shopping, says the analyst. This sort of cultural tendency leads to stronger chocolate consumption elasticity, which aids the company’s pricing strategy. As per the analyst, the strategic pricing power and the cultural factors fuelling chocolate consumption exhibit a positive outlook for the company’s earnings growth.
Mondelez International, Inc. (NASDAQ:MDLZ)’s well-established and beloved brands possess robust consumer loyalty, which can protect it from some of the pricing pressure. The strength of brands enables Mondelez International, Inc. (NASDAQ:MDLZ) to fetch premium pricing, and it can pass on cost increases to consumers with a lower risk of volume loss. Also, the company’s diverse product range throughout numerous snack categories offers several growth avenues. The diversification can mitigate the weaknesses in a single segment and enable it to reap the benefits of changing consumer preferences and trends. Overall, Mondelez International, Inc. (NASDAQ:MDLZ)’s capability to innovate and extend the brands in the new product categories or formats can fuel additional growth.
10. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 66
Abbott Laboratories (NYSE:ABT) is engaged in discovering, developing, manufacturing, and selling health care products. Josh Jennings from TD Cowen reiterated a “Buy” rating on the company’s stock, with a price objective of $145.00. The analyst’s rating is backed by a combination of factors demonstrating Abbott Laboratories (NYSE:ABT)’s healthy financial performance and growth potential. Despite witnessing significant tariff impacts, the company maintained its guidance for 2025, expects strong EPS, operating margins, and organic sales growth, opines Jennings.
Notably, Abbott Laboratories (NYSE:ABT) expects FY 2025 organic sales growth to be in the range of 7.5% – 8.5%, and an adjusted operating margin of between 23.5% – 24.0% of sales. The company expects FY 2025 adjusted diluted EPS of $5.05 – $5.25. According to Jennings, in Q1 2025, Abbott Laboratories (NYSE:ABT)’s Medical Devices segment demonstrated impressive organic growth, mainly in Diabetes Care, in which continuous glucose monitoring sales surged. Notably, in Diabetes Care, sales of continuous glucose monitors sat at $1.7 billion and increased 18.3% on a reported basis and 21.6% on an organic basis. Also, the company’s 2 new manufacturing and R&D investments in Illinois and Texas, totalling $0.5 billion, are expected to go live by 2025 end.
Diamond Hill Capital, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Abbott Laboratories (NYSE:ABT) is a diversified health care company with an extensive portfolio that spans medical devices, pharmaceuticals, nutritionals and diagnostics. With a substantial portion of its revenues generated internationally, emerging markets contribute about 40% of overall sales. We have always liked Abbott’s diverse mix of businesses and its fundamental growth prospects. The management team has consistently demonstrated skill in capital allocation, highlighted by strategic divestitures such as the European generic business in 2014, and significant acquisitions like St. Jude in 2016.”
9. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 79
The Procter & Gamble Company (NYSE:PG) is engaged in the provision of branded consumer packaged goods. TD Cowen analyst Robert Moskow maintained the bullish stance on the company’s stock, giving a “Buy” rating. The analyst has highlighted the company’s resilience in maintaining a premium strategy, which remains effective even as consumer spending shifts in the critical markets such as the US and Europe. This approach enabled The Procter & Gamble Company (NYSE:PG) to withstand market pressures better than some competitors.
Furthermore, the analyst has lauded the management’s commitment to brand growth via innovation and media support, despite a volatile environment dominated by tariff uncertainties. While acknowledging the difficulties due to potential tariff impacts and fluctuating consumer confidence, the analyst is encouraged by The Procter & Gamble Company (NYSE:PG)’s strategic investments and cost management efforts. Such initiatives, together with anticipations of a relatively stable cost of goods sold because of productivity gains and deflation in certain inputs, aid an optimistic outlook. Elsewhere, Evercore ISI is also optimistic about the company’s stock, emphasizing strategic persistence amidst economic pressures. By leveraging its research and development capabilities, The Procter & Gamble Company (NYSE:PG) can capture new market segments and reinvigorate its existing product lines.
8. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 81
The Coca-Cola Company (NYSE:KO) is engaged in manufacturing and selling various non-alcoholic beverages. Morningstar expects its brand portfolio to support pricing power and close retailer relations, along with scale benefits due to a massive global system, to reinforce its competitive position in the broader non-alcoholic beverages segment and fuel excess investment returns. The Coca-Cola Company (NYSE:KO)’s powerful brand portfolio and marketing prowess offer a healthy foundation for long-term future growth.
The company’s robust brand equity enables it to fetch premium pricing and maintain customer loyalty. Furthermore, The Coca-Cola Company (NYSE:KO)’s marketing efficiency, fueled by the scale, allows it to effectively promote new products and enter new markets. This can help drive sales growth and market share gains throughout its diverse beverage portfolio. The Coca-Cola Company (NYSE:KO)’s global scale, together with local-market expertise, uniquely places it to capture the vast opportunities ahead.
The Coca-Cola Company (NYSE:KO), along with its bottling partners, has been exemplifying leadership in revenue growth management (RGM) through providing relevant global and local brands across packages at the right price points to address consumer needs. The returnable glass bottles provide a unique competitive advantage, possessing an expansive footprint throughout over 110 countries and, in 2024, added 1.6 billion unit cases to total company volume performance, delivering a growth rate surpassing the total company volume growth.
7. Constellation Energy Corporation (NASDAQ:CEG)
Number of Hedge Fund Holders: 85
Constellation Energy Corporation (NASDAQ:CEG) produces and sells energy products and services. The company’s stock has been upgraded by Citigroup Research, which highlighted the future opportunities related to nuclear power. Ryan Levine upped the company’s stock to “Buy” from “Neutral.” As per the analyst, Constellation Energy Corporation (NASDAQ:CEG)’s stock provides an attractive risk/reward dynamic amid the market volatility due to Trump’s global trade tariffs. Even during an economic recession, the analyst believes that the company can benefit from its position as the largest producer of carbon-free energy in America.
Citigroup also believes that Constellation Energy Corporation (NASDAQ:CEG) will significantly grow as the demand for clean energy increases alongside AI data centers, which tend to consume significant amounts of power. With the intensifying global efforts to combat climate change, the demand for clean energy sources can significantly increase. Constellation Energy Corporation (NASDAQ:CEG)’s extensive portfolio of nuclear and renewable assets enables it to address the growing demand effectively.
Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Constellation Energy Corporation (NASDAQ:CEG) is the largest producer of clean energy in the U.S., with 32,400 Megawatts of capacity, approximately 67% of which is nuclear generated. Its nuclear, hydro, wind, and solar facilities provide 10% of all clean energy on the U.S. grid and 22% of its clean baseload power. We believe the company stands to benefit from the increasing electrification of the U.S. economy. The rise of electric vehicles, data centers, and reshoring of American manufacturing is driving U.S. electricity load growth for the first time in nearly two decades. During the quarter, shares detracted from performance due to a combination of regulatory challenges and broader industry pressures. The Federal Energy Regulatory Commission (FERC) rejected an interconnection agreement between Talen Energy’s Susquehanna nuclear plant and an Amazon data center, raising concerns about similar deals and regulatory hurdles for the nuclear industry. While this event was outside Constellation’s control, we believe it does not alter the thesis that tight power markets should drive higher pricing for the company. In our view, the FERC rejection also underscores anticipated tightness in mid-Atlantic power markets, reinforcing the long-term value of Constellation’s under-monetized assets.”
6. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 95
Intuitive Surgical, Inc. (NASDAQ:ISRG) develops, produces, and markets a robotic system for assisting minimally invasive surgery. Morgan Stanley opines that the company’s Q1 2025 report and detailed commentary on tariffs exhibit a clearing event for the stock, and the firm sees a healthy entry point to one of the best business models in MedTech. As per the firm, outside of tariffs, Intuitive Surgical, Inc. (NASDAQ:ISRG)’s base business remains in a strong place. Elsewhere, William Blair analyst Brandon Vazquez maintained the bullish stance on the company’s stock. This analyst’s rating was backed by a combination of factors demonstrating the company’s strong performance and growth potential.
As per the analyst, Intuitive Surgical, Inc. (NASDAQ:ISRG)’s Q1 2025 results surpassed expectations thanks to impressive global and international procedure growth rates, which demonstrate strong demand for the company’s offerings. Furthermore, the analyst opines that, despite macroeconomic challenges, Intuitive Surgical, Inc. (NASDAQ:ISRG) has demonstrated resilience. Its strategic initiatives, which include the operating lease strategy, continue to help mitigate the risks, says Vazquez. In Q1 2025, revenue came in at $2.25 billion, reflecting an increase of 19% as compared with $1.89 billion in Q1 2024. The increased revenue was aided by higher growth in da Vinci procedure volume, higher da Vinci system placements, and a rise in the installed base of systems.
Baron Funds, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Apart from cash, stock selection was positive overall due to solid gains from a handful of holdings in health care equipment, biotechnology, life sciences tools & services, and health care services. Stock selection in health care equipment was an 80-plus basis point tailwind to performance owing to modest gains from the Fund’s large positions in global medical device manufacturer Boston Scientific Corporation and robotic surgical system leader Intuitive Surgical, Inc. (NASDAQ:ISRG). Intuitive’s quarterly revenue and earnings surpassed Street expectations due to strong systems placements and procedure growth. The company remains in the early stages of a new product cycle with its new da Vinci 5 system, and we continue to believe the company has a long runway for growth driven by continued adoption and expansion of robotic surgery.”
5. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 102
Philip Morris International Inc. (NYSE:PM) operates as a tobacco company. Barclays analyst Gaurav Jain remains optimistic about the company’s stock as the firm opines that tobacco remains in the early innings of a generational shift towards nicotine investing. The firm expects a breakout year for tobacco stocks. Fitch Ratings revised the outlook on the company to “stable” from “negative” in March 2025, demonstrating Philip Morris International Inc. (NYSE:PM)’s meaningful progress in deleveraging toward its target of 2.0x net debt/ EBITDA by 2026 and cash flow generation recovery in 2024. The firm also noted its leading size in the global tobacco sector and its robust product, brand, and geographical diversification.
As of December 31, 2024, Philip Morris International Inc. (NYSE:PM)’s smoke-free products were available for sale in 95 markets, and it estimates that they were used by 38.6 million adults around the world. Philip Morris International Inc. (NYSE:PM)’s smoke-free business accounted for 42% of its Q1 2025 total net revenues. Andvari Associates, an investment management firm, released its Q1 2025 investor letter. Here is what the fund said:
“Last year, Andvari made its first investments in tobacco companies with the purchase of Philip Morris International Inc. (NYSE:PM) and Altria. At the time of our purchase, Philip Morris and Altria had underperformed the S&P 500 over the prior 5- and 10-year periods. Both traded at low valuations and with high dividend yields. But thanks to following the industry o and on for 10+ years, and thanks to many discussions with long-time shareholders of the companies, Andvari felt the time was right to make the plunge. The timing could not have been much better for us as both companies have so far contributed positively to Andvari’s recent overall performance.
The problem—or the feature, depending on your perspective—with the tobacco industry has been a declining population of cigarette smokers in developed countries. Over the last four or five years, the decline in these smoking populations has accelerated, which in part explains the poor share performance of the tobacco companies between 2017 and 2023. Despite this, the tobacco companies have maintained, or slowly increased, their revenues and profits with regular price increases on cigarettes…” (Click here to read the full text)
4. GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holders: 111
GE Vernova Inc. (NYSE:GEV) is an energy company that is engaged in providing products and services that generate, transfer, orchestrate, convert, and store electricity. Analyst Marc Bianchi from TD Cowen maintained a “Buy” rating on the company’s stock. This rating stems from the company’s strong performance and strategic positioning in the broader power and electrification sectors. As per the analyst, GE Vernova Inc. (NYSE:GEV) has exhibited strong execution, as demonstrated by the significant power orders, mainly in gas turbines, that surpassed expectations.
Notably, in Q1 2025, GE Vernova Inc. (NYSE:GEV)’s orders of $10.2 billion rose 8% organically because of services growth and equipment growth in Power. Given a significant backlog and slot reservations, GE Vernova Inc. (NYSE:GEV) is well-placed to capitalize on future demand, mainly in the US market, where a large portion of its orders are concentrated, says the analyst. In Q1 2025, the company signed 7 gigawatts of gas turbine orders, increasing its Gas Power equipment backlog to 29 gigawatts. The analyst also opines that despite challenges like tariff costs and inflation, the company continues to possess a stable growth trajectory. The company has reaffirmed its 2025 financial guidance. It expects revenue of $36 billion – $37 billion, high-single digits adjusted EBITDA margin, and FCF of $2.0 billion – $2.5 billion.
Artisan Partners, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Notable adds in the quarter included GE Vernova Inc. (NYSE:GEV) and Oracle. GE Vernova is the power, wind and electrification spinoff from the former GE conglomerate. The company benefits from large global market shares across its businesses, high barriers to entry and a substantial installed base that generates multiyear service revenue streams. Now that the company is standing on its own, we believe it is in the early innings of a turnaround story while benefiting from an attractive underlying demand environment. As the world continues to decarbonize, the resulting need for power, wind and electrification equipment is poised to drive attractive growth over the coming years. Our work on AI data center growth and electrification implications strengthened our conviction in GE Vernova in the quarter, particularly its natural gas business, which we believe will need to act as a bridge fuel as technology companies try to balance AI data center growth with decarbonization targets.”
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 116
Walmart Inc. (NYSE:WMT) is engaged in the operation of retail and wholesale stores and clubs, e-commerce websites, and mobile applications. Morningstar believes that the company’s unrivaled scale relative to its brick-and-mortar retail peers enables it to adapt to a dynamic retail landscape. Walmart Inc. (NYSE:WMT) continues to benefit from an enhanced physical footprint and entrenched position in the communities, which places it in close proximity to the vast majority of US consumers. The firm opines that its wide assortment of goods at low prices enabled it to sustain its status as a leading domestic retailer. Elsewhere, Citi analysts remain optimistic about Walmart Inc. (NYSE:WMT)’s stock.
The analysts noted the company’s consistent performance and advantageous position in the broader retail sector, stemming from its extensive investments over the past few years, which continue to deliver benefits. The analysts also highlighted Walmart Inc. (NYSE:WMT)’s omni-channel experience, which remains unmatched, while its supply chain and technology advancements position it well ahead of its competitors. The company’s strong position in the broader food sector, its product assortment, and its reputation for value have been tagged as key factors enabling it to sustain momentum and potentially enhance its market share. Overall, Citi analysts believe that Walmart Inc. (NYSE:WMT)’s strategic advantages and unique offerings make it a strong player in the retail sector.
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. Goldman Sachs initiated coverage of the company’s stock with a “Neutral” rating and a price objective of $134. The firm sees Vistra Corp. (NYSE:VST) as well-placed to benefit from increased power demand. The company remains well-placed to serve customer needs and grow with the overall electrification trends in the broader industry. During Q4 2024, the company advanced its efforts in solar, energy storage, and nuclear by executing the renewable development pipeline. It brought online the first 2 projects, which are part of its Illinois Coal to Solar & Energy Storage Initiative at Baldwin (70 MW) and Coffeen (46 MW), revitalizing retired and to-be-retired coal plant sites.
Next, Vistra Corp. (NYSE:VST) grew its ownership interest in nuclear by closing on an agreement for the acquisition of the entire 15% minority interest in its Vistra Vision subsidiary, making the company the sole owner of its highly valuable, carbon-free assets. This acquisition increased its nuclear ownership by ~970 MW and its solar and energy storage ownership by ~200 MW. Elsewhere, Morningstar believes that the company remains well-placed to benefit from potential electricity demand growth associated with new data centers, manufacturing, and EVs. Moving forward, Vistra Corp. (NYSE:VST)’s growth is expected to be driven by its scale and size, together with its diversified portfolio of energy generation assets.
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. Public Service Enterprise Group Incorporated (NYSE:PEG)
Number of Hedge Fund Holders: 142
Public Service Enterprise Group Incorporated (NYSE:PEG) operates in electric and gas utility and nuclear generation businesses. The company’s businesses include Public Service Electric and Gas Co. (PSE&G), PSEG Power, and PSEG Long Island. Morgan Stanley analyst David Arcaro is optimistic about the company’s stock. The analyst’s views stem from a combination of factors demonstrating a positive growth outlook for the company. Furthermore, the analyst opines that the 2025 EPS guidance remains closely aligned with market expectations, aided by new distribution rates, investment recovery mechanisms, and a higher rate base.
For 2025, Public Service Enterprise Group Incorporated (NYSE:PEG) initiated a non-GAAP operating earnings guidance of $3.94 – $4.06 per share, demonstrating a rise of ~9% at the midpoint above 2024 results. The 2025-2029 capital spending plan of $22.5 billion – $26 billion consists of $21 billion – $24 billion of regulated investment, reflecting a rise of ~$3 billion from its prior five-year plan of $18 billion to $21 billion. This increase was supported by incremental investments for PSE&G to address the increased customer demand, modernize infrastructure, and CEF-EE II programs.
Sound Shore Management, an investment management firm, released its investor letter for Q3 2024. Here is what the fund said:
“In recent letters we have discussed the resurgence of nuclear power as a base load electricity source and the opportunities our team has uncovered in the power generation space. Public Service Enterprise Group Incorporated (NYSE:PEG), better known as PSE&G, is another example and one of our strongest contributors for the three-month period. The company is a “hybrid” regulated utility and unregulated nuclear power generator that we were able to purchase at an attractive price relative to its earning power. PSE&G’s well managed, regulated utilities provide consistent returns that we expect will grow steadily with their rate bases. As well, we believe there is unappreciated value in their nuclear plants which sit in an unregulated subsidiary that can capture the upside potential of increased power prices. Carbon-free and reliable electricity commands a premium in the marketplace, as seen in recently announced 20-year long data center sales contracts by peer companies. Presently, PSE&G is in discussions to do the same. Our projections estimate this provides a 20% or more upside to earnings for PSE&G from here over the next few years.”
While we acknowledge the potential of PEG as an investment, our conviction lies in the belief that some deeply undervalued 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 a deeply undervalued AI stock that is more promising than PEG but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
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