In this article, we discuss 5 best cyclical stocks for inflation. If you want to read about what cyclical stocks are and how they perform during times of surging inflation, you can go to 10 Best Cyclical Stocks For Inflation.
5. Freeport-McMoRan Inc. (NYSE:FCX)
Number of Hedge Fund Holders: 66
Soaring commodity prices are an indicator of the start of a global economic expansion cycle, hence proving to be a critical point for investors to benefit from cyclical stocks. Freeport-McMoRan Inc. (NYSE:FCX) engages in the mining of mineral properties in North America, South America, and Indonesia. The company explores copper, gold, molybdenum, silver, and other metals, along with oil and gas. On March 24, 2022, Jefferies analyst Christopher LaFemina upped his price target on Freeport-McMoRan Inc. (NYSE:FCX) to $65 from $58 and reiterated a Buy rating on the shares.
This January, Freeport-McMoRan Inc. (NYSE:FCX) released its earnings report for the fiscal fourth quarter of 2021. The company reported earnings per share of $0.96, beating market consensus by $0.02. The company’s revenue for the quarter saw an increase of 37.13% year over year, from $4.50 billion in 2020 to $6.16 billion in 2021. Moreover, the stock has gained 51.46% over the past six months as of March 31, 2022.
Out of the 924 elite hedge funds being tracked by Insider Monkey, 66 held stakes in Freeport-McMoran Inc. (NYSE:FCX) at the close of the fourth quarter of 2021. The total value of these stakes was roughly equal to $3.77 billion. This is compared to 66 positions in the third quarter of 2021 with stakes worth $3.21 billion. The investor sentiment for the stock is positive.
As of the fourth quarter of 2021, Fisher Asset Management is the top stakeholder in the company. The fund’s stakes in Freeport-McMoran Inc. (NYSE:FCX) were estimated to value at $2.03 billion, which represents 1.14% of Fisher Asset Management’s Q4 2021investment portfolio.
4. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 68
The Home Depot, Inc. (NYSE:HD) operates as a home improvement retailer. It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products. The stock offers a forward dividend yield of above 2.0% and is also relatively undervalued, making it stand among the top cyclical stocks for inflation. Moreover, The Home Depot, Inc. (NYSE:HD) has a cyclical business model which enables it to transfer high costs to consumers in the form of price hikes.
This January, Truist analyst Scot Ciccarelli assumed coverage and upgraded The Home Depot, Inc. (NYSE:HD) to Buy from Hold with a price target of $448, up from $420. The analyst sees upside to stock, citing key home improvement growth drivers being supply and demand imbalances in the housing market, behavioral changes due to the pandemic, and aging housing infrastructure. The analyst further told investors that he sees the stock gaining more market share as we progress into 2022 from its size and scale benefits and enhanced supply chain capabilities.
This February, The Home Depot, Inc. (NYSE:HD) released its earnings report for the fiscal fourth quarter of 2021 in which the company beat both EPS and revenue estimates. The company registered an EPS of $3.21, beating expert estimates by $0.03. Moreover, the company reported quarterly revenues of $35.72 billion, up 10.72% year over year, and outperformed market consensus by $873.49 million.
On February 22, 2022, The Home Depot, Inc. (NYSE:HD) announced that its board of directors increase its quarterly dividend by 15% to $1.90 per share, which brings the company’s annual dividend to $7.60 per share. The dividend was payable on March 24 to investors of record on March 10.
By the end of the fourth quarter of 2021, Insider Monkey spotted The Home Depot, Inc. (NYSE:HD) on 68 hedge fund portfolios, which had total stakes of $6.08 billion in the company. This is compared to 58 positions in the preceding quarter with stakes worth $4.38 billion. The hedge fund sentiment for the stock is positive.
Ken Fisher’s Fisher Asset Management is the dominating shareholder in The Home Depot, Inc. (NYSE:HD), as of December 31, 2021, owning over 7 million shares of the stock. According to Insider Monkey’s data, Fisher Asset Management’s stakes in the company stand at $3.2 billion as of the end of last December.
ClearBridge Investments, an investment management firm, published its first-quarter 2022 investor letter in which it mentioned The Home Depot, Inc. (NYSE:HD). Here is what the firm had to say:
“Other actions during the quarter included the sale of consumer name Home Depot (NYSE:HD). The Home Depot move is based on where we are in the consumer and housing cycle as we come out of a period of nesting and dedensification and as government stimulus related to COVID-19 expires. The company has effectively pulled forward demand over the last two years and taken share because of in-stock inventory availability relative to peers. Many of those tailwinds are now turning neutral to negative and our thesis for Home Depot of optimizing the business in terms of merchandising/inventory, omnichannel, PRO/DIY mix, labor and distribution centers has played out. The exit is part of our efforts to reduce consumer discretionary exposure and provide better downside protection if volatility persists.”
3. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
This February, Exxon Mobil Corporation (NYSE:XOM) released earnings for the fiscal fourth quarter of 2021 in which the company beat on both EPS and revenue. The company reported earnings per share of $2.05, outperforming market consensus by $0.11. The company’s revenue grew by 82.56% for the quarter, and came to $84.97 billion, beating revenue estimates by $6.24 billion. As of March 31, 2022, Exxon Mobil Corporation (NYSE:XOM) has gained 35.55% over the past six months. Even though economies are setting decade-long targets on achieving net-zero carbon emissions and going green, crude oil will maintain its stronghold on economies and oil stocks are bound to benefit from price hikes and economic expansions.
Soaring crude oil prices as a consequence of global economic expansion is inviting bullish trends for the energy sector from investors. Exxon Mobil Corporation (NYSE:XOM) is attracting elite hedge funds and analysts alike. On March 9, 2022, Barclays analyst Jeanine Wai raised her price target on Exxon Mobil Corporation (NYSE:XOM) to $98 from $91 and reiterated an Overweight rating on the shares. By the end of the fourth quarter of 2021, 71 hedge funds held stakes in the company worth more than $5.38 billion. This is compared to 64 positions in the previous quarter, with stakes amounting to $4.64 billion. The hedge fund sentiment for the stock is positive.
As of December 31, 2021, GQG Partners is the most prominent shareholder in Exxon Mobil Corporation (NYSE:XOM). The fund’s stakes in the company amounted to $1.98 billion, a 22% increase from the fund’s previous stakes of $1.56 billion. The investment covers 4.91% of GQG Partners’ 13F portfolio.
Saturna Capital mentioned Exxon Mobil Corporation (NYSE:XOM) in its fourth-quarter 2021 investor letter, here’s what the firm had to say:
“Few companies maintain their position at the top for more than a decade or two. One that did was Exxon, which appeared decennially from 1980 through 2010. In 2019 it was ranked 10th, but as of writing has dropped to 39th place.”
2. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 84
Banking stocks are cyclical in nature and tend to soar with interest rate spikes and surging inflation. Bank of America Corporation (NYSE:BAC) provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. This March, Baird analyst David George upgraded Bank of America Corporation (NYSE:BAC) to Neutral from Underperform and reiterated his price target of $42 on the shares.
By the end of the fourth quarter of 2021, 84 hedge funds held stakes in Bank of America Corporation (NYSE:BAC) which were worth more than $47.87 billion. This is compared to 72 identified positions in the preceding quarter, with stakes worth $46.46 billion. Based on these numbers, we can conclude that the hedge fund sentiment for the stock is positive.
On January 29, Bank of America Corporation (NYSE:BAC) announced that its earnings per share for the fiscal fourth quarter of 2021 were $0.82, and it outperformed market consensus by $0.06. The company reported quarterly revenues of $22.06 billion, up 9.14% year over year from $20.21 billion. As of March 31, 2022, Bank of America Corporation (NYSE:BAC) has gained 4.38% over the past twelve months.
As of the end of last December, Berkshire Hathaway is the most prominent shareholder in Bank of America Corporation (NYSE:BAC). According to Insider Monkey’s data, the Warren Buffett-led hedge fund’s stakes in the company were valued at a whopping $44.93 billion, which accounts for 13.57% of Berkshire Hathaway’s 13F portfolio.
Here is Oakmark Funds’ stance on the Bank of America Corporation (NYSE:BAC) in the firm’s third-quarter 2021 investor letter:
“Earlier this year, one of our holdings, Bank of America Corporation (NYSE:BAC), announced that it was raising its minimum hourly wage from $15 to $20 and would increase it to $25 by 2025. The company received great press for placing the well-being of its employees above profits. But was it really either/or? Bank of America’s chief human resources officer spoke to the bigger picture: “A core tenet of responsible growth is our commitment to being a great place to work…that includes providing strong pay and competitive benefits to help them and their families, so that we continue to attract and retain the best talent.” Bank of America understood that engaged, high-caliber employees are more productive, less prone to turnover and, therefore, less expensive in the long run. Increasing the pay for employees wasn’t elevating employees above shareholders; it was the right thing to do for employees and for shareholders.
If an increase to $20 was good, why stop there? Why not $50 per hour? Because the benefits the business receives at $50 don’t justify the expense. The bank would no longer be able to price its products competitively and would lose business. The employees would “win” in the short term, but eventually the lost business would lead to job cuts, meaning both employees and shareholders would lose. The negative effects of stakeholder overreach are no different than when CEOs overreach to inflate short-term profits. Both hurt shareholders and stakeholders.”
1. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 107
Topping our list of best cyclical stocks for inflation is JPMorgan Chase & Co. (NYSE:JPM), the largest bank in the U.S. with a balance sheet of $2.87 trillion as of 2022. The company operates through four segments: Consumer & Community Banking, Corporate & Investment Banking, Commercial Banking, and Asset & Wealth Management. With the fed increasing interest rates, cyclical banking stocks such as JPMorgan Chase & Co. (NYSE:JPM) are lucrative investment options to consider.
This April, JPMorgan Chase & Co. (NYSE:JPM) reported earnings for the fiscal first quarter of 2022 in which it beat revenue estimates by $318.5 million. The company reported earnings per share of $2.63 and generated quarterly revenues of $30.72 billion. On April 14, Piper Sandler analyst Jeffery Harte raised his price target on JPMorgan Chase & Co. (NYSE:JPM) to $170 from $165 and maintained an Overweight rating on the shares.
By the end of the fourth quarter of 2021, 107 hedge funds were long JPMorgan Chase & Co. (NYSE:JPM). The total stakes of these hedge funds amounted to $6.58 billion, up from $5.63 billion in the preceding quarter with 101 positions. The investor sentiment for the stock is positive.
As of December 31, 2021, Fisher Asset Management is the leading stakeholder in JPMorgan Chase & Co. (NYSE:JPM) owning over 7 million shares of the stock. The total stakes of Ken Fisher’s hedge fund in the financial services company stand at $1.17 billion, which covers 0.65% of Fisher Asset Management’s 13F portfolio.
ClearBridge Investments has explained why investors should remain optimistic about their stakes in JPMorgan Chase & Co. (NYSE:JPM) in its fourth-quarter 2021 investor letter:
“Our energy and financials holdings kept pace in the 2021 rally. In financials, JPMorgan benefited from strong economic growth, a rise in Treasury yields, and a benign credit environment.”
You can also take a look at 10 Best Inflation-Proof Stocks and 10 Stocks That are Benefiting From Rising Inflation.
