5 Best Stagflation Stocks To Buy

In this article, we discuss 5 best stagflation stocks to buy now. If you want to see more stocks in this selection, check out Stagflation Definition: 10 Best Stagflation Stocks To Buy. 

5. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 68

Walmart Inc. (NYSE:WMT) is an American general merchandise retailer and it is one of the best defensive stocks to buy for stagflation. On November 17, Credit Suisse analyst Robert Moskow raised the price target on Walmart Inc. (NYSE:WMT) to $160 from $145 and maintained an Outperform rating on the shares. The analyst said that Walmart Inc. (NYSE:WMT) posted a “strong” Q3, with sales up 8.7%, adjusted operating income of $6.1 billion, and earnings per share of $1.50. Management lifted guidance in accordance with Q3 results but maintained a conservative outlook for Q4, the analyst added, pointing out that he believes there is upside to Q4 given Walmart Inc. (NYSE:WMT)’s trend of setting conservative forecasts since the miss in Q1.

According to Insider Monkey’s third quarter database, 68 hedge funds were long Walmart Inc. (NYSE:WMT), compared to 67 funds in the prior quarter. In Q3, the collective stakes held by hedge funds increased to $4 billion from $3.7 billion in Q2 2022. Ken Fisher’s Fisher Asset Management is the leading position holder in the company, with 8.12 million shares worth $1.05 billion. 

In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Walmart Inc. (NYSE:WMT) was one of them. Here is what the fund said:

“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart Inc. (NYSE:WMT) and Costco has been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In September 2020 Walmart raised wages for 165,000 employees, including a number of entry positions to $15 an hour. It followed this in February with a raise for 425,000 workers that moved its average pay above $15 an hour.”

4. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 69

Costco Wholesale Corporation (NASDAQ:COST) operates membership warehouses offering branded and private-label general merchandise products in the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia, Spain, France, Iceland, China, and Taiwan. Costco Wholesale Corporation (NASDAQ:COST) is one of the top stagflation stocks to invest in. 

On November 28, Bank of America said Costco Wholesale Corporation (NASDAQ:COST) had strong customer traffic on Black Friday. BofA analyst Robert Ohmes sees warehouse clubs as well positioned compared to peers this holiday season on the back of their robust value proposition and membership strength. For Costco Wholesale Corporation (NASDAQ:COST), BofA believes a premium valuation is warranted given the solid customer traffic growth and strong membership renewal rates. Even with a murky economic outlook for 2023, membership rates will potentially remain resilient for Costco Wholesale Corporation (NASDAQ:COST), the analyst told investors. 

Deutsche Bank analyst Krisztina Katai on November 29 reiterated a Buy recommendation on Costco Wholesale Corporation (NASDAQ:COST) but trimmed the price target on the shares to $578 from $581. The analyst told investors to stick with the “winners” in retail.

According to Insider Monkey’s third quarter data, Costco Wholesale Corporation (NASDAQ:COST) was part of 69 hedge fund portfolios, compared to 64 in the prior quarter. Ray Dalio’s Bridgewater Associates is the largest stakeholder of the company, with 1.2 million shares valued at $566.5 million. 

Here is what Cooper Investors Global Equities Fund has to say about Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2022 investor letter:

“The US economy continues to run hot – the labor market is extremely tight and a number of executives we spoke to described their challenges in retaining staff and preventing competitors from poaching talent. Industrial companies in particular continue to see record backlogs, with the easing of logistics and supply chain constraints only just starting to have an impact on deliveries and lead times.

In terms of inflationary pressures, the vast majority of our holdings have been able to leverage strong market positions and stakeholder relationships to push pricing through in 2022 such that minimal impact to earnings has occurred. Clearly this is not a lever than can be pulled indefinitely but the more experienced management teams have kept some of their powder dry. Our meeting with management at Costco in Seattle was memorable for several reasons but one was their latent ability to increase member pricing which they have not done in over 5 years (and thus likely to do in 2023)…

…To conclude we’ll return to our meeting with Costco mentioned earlier. The business quality is no secret after decades of incredible execution, but the meeting gave us renewed conviction around Value Latencies in terms of the runway for growth, the focus on enhancing customer value, Costco’s vast buying power (it purchases 30% of the world’s jumbo cashews as one example) and management’s feral focus on the business model and cost discipline.”

3. The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 69

The Procter & Gamble Company (NYSE:PG) provides branded consumer packaged goods worldwide. It operates through five segments – Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. The Procter & Gamble Company (NYSE:PG) is one of the top picks of smart investors for a stagflation portfolio. The company expects to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion of common shares in fiscal 2023.

On November 22, Jefferies analyst Kevin Grundy raised the price target on The Procter & Gamble Company (NYSE:PG) to $164 from $149 and kept a Buy rating on the shares following the company’s “upbeat” investor day meeting. While trade down remains a risk, The Procter & Gamble Company (NYSE:PG) “remains a core holding” and the event pointed out the transformation of the company’s “winning strategy” of four core focus areas including supply, sustainability, digital acumen, and human capital, the analyst told investors.

Among the hedge funds tracked by Insider Monkey, The Procter & Gamble Company (NYSE:PG) was part of 69 public stock portfolios at the end of Q3 2022, compared to 71 in the prior quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a significant stakeholder of the company, with 5.6 million shares worth $712 million.  

2. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 75

Eli Lilly and Company (NYSE:LLY) is an American company that discovers, develops, and markets human pharmaceuticals worldwide. Healthcare stocks are defensive in nature, making them one of the best picks for a stagflation environment. 

Berenberg analyst Kerry Holford on November 22 raised the price target on Eli Lilly and Company (NYSE:LLY) to $375 from $345 and kept a Buy rating on the shares. Despite currency headwinds, Eli Lilly and Company (NYSE:LLY)’s “underlying performance remains strong,” the analyst wrote in a research note. The analyst said initial signs from the Mounjaro diabetes launch are positive and a label expansion to include an obesity indication is now expected before the end of next year.

According to Insider Monkey’s data, 75 hedge funds were long Eli Lilly and Company (NYSE:LLY) at the end of the third quarter of 2022, compared to 70 funds in the prior quarter. Rajiv Jain’s GQG Partners is a notable position holder in the company, with 1.6 million shares worth $515.5 million. 

Here is what ClearBridge Global Growth Strategy has to say about Eli Lilly and Company (NYSE:LLY) in its Q3 2022 investor letter:

“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly (NYSE:LLY) as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”

1. AbbVie Inc. (NYSE:ABBV)

Number of Hedge Fund Holders: 80

AbbVie Inc. (NYSE:ABBV) is an Illinois-based biopharmaceutical company that originated as a spin-off of Abbott Laboratories. On October 28, AbbVie Inc. (NYSE:ABBV) declared a $1.48 per share quarterly dividend, a 5% increase from its prior dividend of $1.41. The dividend is distributable on February 15, 2023 to shareholders of record on January 3. AbbVie Inc. (NYSE:ABBV)’s dividend yield on December 1 came in at 3.67%. 

Credit Suisse analyst Trung Huynh on November 17 initiated coverage of AbbVie Inc. (NYSE:ABBV) with an Outperform rating and a $170 price target, naming it one of his two top ideas a relative basis among the U.S. large-cap biopharma peer group. AbbVie Inc. (NYSE:ABBV)’s 45%, plus or minus 10% erosion, expectation of Humira is “too conservative” and the analyst sees long-term resilience from portfolio leverage as well as incremental growth from the company’s “robust pipeline”.

According to Insider Monkey’s data, 80 hedge funds were long AbbVie Inc. (NYSE:ABBV) at the end of September 2022, compared to 71 funds in the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent stakeholder of the company, with 1.75 million shares worth $235.5 million. 

Here is what Baron Funds specifically said about AbbVie Inc. (NYSE:ABBV) in its Q3 2022 investor letter:

“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”

You can also take a look at 14 Best Beginner Stocks To Invest In and 10 Best Robinhood Stocks To Buy.