In this article, we discuss 5 best hard landing stocks to buy now. If you want to see more stocks in this list, click 10 Best Hard Landing Stocks to Buy Now.
5. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 55
Philip Morris International Inc. (NYSE:PM) is a New York-based tobacco company that manufactures and sells cigarettes and smoke-free products. The recent FDA ruling against Juul is a positive indicator for Philip Morris International Inc. (NYSE:PM), which may have the chance to push IQOS growth with Juul removed from the market. Philip Morris International Inc. (NYSE:PM) has received approval for the IQOS HNB device and its e-cigarette, VEEV.
On April 24, BofA analyst Lisa Lewandowski raised the price target on Philip Morris International Inc. (NYSE:PM) to $117 from $107 and maintained a Buy rating on the shares. Despite headwinds in 2022, the analyst expects Philip Morris International Inc. (NYSE:PM) to shift its attention to different potential markets in order to survive the temporary cost pressures of moving production away from Russia. The analyst also observed that Philip Morris International Inc. (NYSE:PM)’s underlying business is strong and offers upside potential. She also likes the attractive yield, the transition to a smoke-free future, and the company’s focus on higher margin products.
According to Insider Monkey’s Q1 data, 55 hedge funds were bullish on Philip Morris International Inc. (NYSE:PM), up from 47 funds in the previous quarter. Rajiv Jain’s GQG Partners is the largest shareholder of the company, with approximately 30 million shares worth $2.8 billion.
Broyhill Asset Management mentioned Philip Morris International Inc. (NYSE:PM) in its Q2 2021 investor letter. Here is what the firm had to say:
“Philip Morris (PM) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 23%. We shared our thoughts on these regulations during the quarter, which are available here.
‘PM Valuation. PM is up ~ 15% YTD and would have the most to gain under a nicotine cap. A cap would likely accelerate conversion to iQOS, which is 100% incremental for PM (PM also has zero exposure to combustible cigarettes in the U.S. and licenses its IQOS product for MO to distribute domestically). As such, the decline in PM was much more muted, with the stock hitting new 52 week highs a day after the Biden headline, driven by yesterday’s earnings release. It didn’t take long for investors to shift their attention back to fundamentals and the fundamentals here are best in class. In short, results beat estimates across the board (a recurring theme here), and management raised guidance for the full year (another recurring theme). IQOS continued to deliver impressive growth, recording continued market share gains on the heels of continued user acquisition growth, up 1.5M to 19.1M total users. Importantly, IQOS now represents nearly 30% of PM net revenues (management expects “smoke-free” products to represent more than half of their business by 2025, which should make the ESG folks happy), which is driving top-line growth and margin expansion. Hard to believe that they have created a product with higher margins than combustible cigarettes!! We expect PM operating margins to increase by 100bps – 200bps annually as IQOS continues to gain share. The stock trades at ~ 15x today or 2/3 of the market’s multiple for a business likely to generate $35B in cash flow – or 25% of the market cap – in just the next three years. Over the last decade, shares have traded at an average multiple of 18x and within a range of ~ 14x – 22x (+/-1 standard deviation). The stock yields 5.1% at the current price, and we expect management to resume share purchases in the back half of this year.’”
4. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 58
McDonald’s Corporation (NYSE:MCD) is one of the best hard landing stocks to consider. During a recession, people gravitate towards cheap value meals provided by companies like McDonald’s Corporation (NYSE:MCD), giving the stock a boost even amid hard economic conditions. In June, surveys with franchisees by investment advisory BTIG indicated strength in sales despite the macro headwinds.
On June 29, Atlantic Equities analyst Edward Lewis upgraded McDonald’s Corporation (NYSE:MCD) to Overweight from Neutral with a price target of $278, up from $245. The quick service restaurant model has been resilient during economic headwinds and McDonald’s Corporation (NYSE:MCD) operates a solid business with massive experience in managing through such challenging times, the analyst observed. The positive changes McDonald’s Corporation (NYSE:MCD) has been making as it transitions into primarily a franchise business are “adding to the company’s appeal”, the analyst told investors.
According to Insider Monkey’s Q1 database, 58 hedge funds reported owning stakes in McDonald’s Corporation (NYSE:MCD), up from 57 funds in the prior quarter. Ray Dalio’s Bridgewater Associates held a prominent position in the company, with 2.30 million shares worth $571 million.
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 60
Walmart Inc. (NYSE:WMT) is an American retailer that operates supercenters, supermarkets, hypermarkets, cash and carry stores, discount stores, membership-only warehouse clubs, and ecommerce websites. Walmart Inc. (NYSE:WMT) is one of the best defensive plays in a hard landing scenario, as demand for daily household merchandise never subsides despite a cut back in consumer spending. On June 27, Goldman Sachs analyst Kate McShane reiterated a Conviction Buy rating but lowered the price target on Walmart Inc. (NYSE:WMT) to $138 from $160. The analyst slashed fiscal 2022 earnings estimates by 2% on a reduced margin outlook.
According to Insider Monkey’s database, 60 hedge funds were bullish on Walmart Inc. (NYSE:WMT) at the end of Q1 2022, compared to 63 funds in the preceding quarter. D E Shaw is a prominent position holder in the company, with 5.6 million shares worth $783 million.
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 61
Costco Wholesale Corporation (NASDAQ:COST) is an American retailer that offers branded and private-label products in multiple merchandise categories. Demand for groceries and household products does not wane despite economic pressures, which makes Costco Wholesale Corporation (NASDAQ:COST) one of the safest hard landing stocks to buy.
On June 9, Atlantic Equities analyst Daniela Nedialkova said Costco Wholesale Corporation (NASDAQ:COST) delivers “strong comp momentum”, which should be sufficient to negate gross margin headwinds. According to the analyst, Costco Wholesale Corporation (NASDAQ:COST)’s “unique” business model, the steadiness of its membership revenue, and the higher-income customer base makes it more robust in the face of inflationary challenges. The analyst expects the retail sector to remain highly volatile in the short-term and would use any pullback in Costco Wholesale Corporation (NASDAQ:COST) stock as a chance to strengthen positions. She reiterated an Overweight rating on the shares with a $615 price target.
Among the hedge funds tracked by Insider Monkey, 61 funds were bullish on Costco Wholesale Corporation (NASDAQ:COST) at the end of Q1 2022, up from 57 funds in the preceding quarter. Fisher Asset Management is the largest shareholder of the company, with 4.2 million shares worth $2.4 billion.
Here is what ClearBridge Investments Sustainability Leaders Strategy has to say about Costco Wholesale Corporation (NASDAQ:COST) in its Q4 2021 investor letter:
“Portfolio gains were led by a diverse group of contributors. Also in consumer discretionary, Costco, which operates a chain of membership-only big-box retail stores, continues to impress as it takes to share and becomes more relevant for the consumer even as the world opens up.”
1. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is an American healthcare company that operates via Pharmaceutical and MedTech segments. 2022 marks the 60th annual dividend increase by Johnson & Johnson (NYSE:JNJ), making it a reliable dividend stock. Johnson & Johnson (NYSE:JNJ) has a history of outperformance amid previous economic crises, which makes it an ideal stock to consider for a hard landing. Daiwa initiated coverage of Johnson & Johnson (NYSE:JNJ) on June 22 with an Outperform rating and a $180 price target.
On April 19, Johnson & Johnson (NYSE:JNJ) declared a $1.13 per share quarterly dividend, a 6.6% increase from its prior dividend of $1.06. The dividend was distributed to shareholders on June 7. The stock delivers a dividend yield of 2.54% as of July 5.
Among the hedge funds tracked by Insider Monkey, 83 funds were bullish on Johnson & Johnson (NYSE:JNJ) at the end of Q1 2022, with combined stakes worth $7.40 billion. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the largest shareholder of the company, with 6.65 million shares worth about $1.18 billion.
You can also take a look at Jim Cramer Recommends These 10 Stocks For Recession and Investors Are Watching These 10 Biotech Stocks.
