In this article, we discuss 5 cash-rich defensive stocks to buy before recession. If you want to read about some more cash-rich defensive stocks to buy before recession, go directly to 10 Cash-Rich Defensive Stocks to Buy Before Recession.
5. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 109
Free Cash Flow as of August 29: $20.77 billion
Berkshire Hathaway Inc. (NYSE:BRK-B) is a diversified holding company with interests in finance, transport, and utility businesses. On August 8, the company posted earnings for the second quarter of 2022, reporting a revenue of more than $76 billion, up over 10% compared to the revenue over the same period last year. The operating earnings during the quarter stood at around $9.28 billion, up more than 38% compared to the same period last year. The firm has outperformed the S&P 500 this year even as recession fears loom over the market.
Berkshire Hathaway Inc. (NYSE:BRK-B) is seeking to make a bid for full control of energy giant Occidental, reports in the media suggest. Berkshire chief Warren Buffett has acquired a 50% stake in the firm in the past few months.
At the end of the second quarter of 2022, 109 hedge funds in the database of Insider Monkey held stakes worth $17 billion in Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 104 in the preceding quarter worth $19 billion.
In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE:BRK-B) was one of them. Here is what the fund said:
“Diversified holding company Berkshire Hathaway Inc. (NYSE:BRK-B) reported strong earnings during the quarter and benefited from continued share repurchases below intrinsic value. The company also announced significant deployments of excess cash during the quarter, including the acquisition of Alleghany and a large increase in its stake in Occidental Petroleum.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Free Cash Flow as of August 29: $107.58 billion
Apple Inc. (NASDAQ:AAPL) is a diversified technology company. On August 24, a report by Counterpoint Research revealed that the company witnessed 147% year-over-year growth in the premium Chinese smartphones market in the second quarter of 2022, despite a slowing Chinese economy where consumers are cutting back their spending. Reports suggest that the company has raised plans for the December quarter and the second-half of the year to 100 million units, up from a prior 88 million previously.
On August 19, KeyBanc analyst Brandon Nispel maintained an Overweight rating on Apple Inc. (NASDAQ:AAPL) stock and raised the price target to $185 from $177, noting that the firm had taken a strong start to the second half of the year.
At the end of the second quarter of 2022, 128 hedge funds in the database of Insider Monkey held stakes worth $143 billion in Apple Inc. (NASDAQ:AAPL), compared to 131 in the preceding quarter worth $182 billion.
In its Q2 2022 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple Inc. (NASDAQ:AAPL) grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple Inc. (NASDAQ:AAPL) is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 153
Free Cash Flow as of August 29: $65.18 billion
Alphabet Inc. (NASDAQ:GOOG) is a diversified technology company. Even as the US economy slows down and hammers growth stocks, the company is expected to weather this storm better than peers. One of the reasons for this is that the firm recently posted $65 billion in free cash flow over the last year. This will enable the company to continue to sponsor growth initiatives in the coming months even amid recession fears. The online ad market is also expected to recover, giving a further boost to the shares.
On August 3, Tigress Financial analyst Ivan Feinseth maintained a Strong Buy rating on Alphabet Inc. (NASDAQ:GOOG) stock and raised the price target to $186 from $183, noting that the core business of the firm had shown resilience despite a larger market slowdown.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG), with 2.4 million shares worth more than $5.4 billion.
In its Q2 2022 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOG) grew its core search revenues +24% on a +30% year-ago comparison. Despite this stellar top-line performance, shares sold off as the market began to discount fears of a recession. However, the stock has outperformed relative to other holdings as core Google Search has been less affected by disruptions related to Apple’s privacy initiatives. Alphabet’s Cloud segment is generating revenue at a $24 billion run rate but is still running at a loss. We think this business can generate much better margins at some point. In the meantime, the Company has 4% to 5% of shares authorized for repurchase which is an attractive use of capital as the stock trades for about just 18X 2023 consensus estimates.”
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 184
Free Cash Flow as of August 29: $35.83 billion
Meta Platforms, Inc. (NASDAQ:META) is a tech firm that owns and runs social media platforms. The company has spent over $14 billion on stock repurchases so far this year as it seeks to pivot to the metaverse. In the quarter ended June 30, the firm had over $4.45 billion in free cash flow. The firm is exploring a possible debt sale of around $10 billion in order to offer some of the cash pressures on the stock in light of recession concerns.
On August 19, Morgan Stanley analyst Brian Nowak maintained an Overweight rating on Meta Platforms, Inc. (NASDAQ:META) stock and lowered the price target to $225 from $280, noting that execution uncertainty the firm faced was already reflected in the share price.
At the end of the second quarter of 2022, 184 hedge funds in the database of Insider Monkey held stakes worth $18 billion in Meta Platforms, Inc. (NASDAQ:META), compared to 200 in the preceding quarter worth $19 billion.
In its Q4 2021 investor letter, Boyar Value Group, an asset management firm, highlighted a few stocks and Meta Platforms, Inc. (NASDAQ:META) was one of them. Here is what the fund said:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms, Inc. (NASDAQ:META) (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Free Cash Flow as of August 29: $65.15 billion
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based technology firm. The company is expected to be a top defensive pick in the tech sector during a recession due to the strength of enterprise spending, cloud budgets, consumer product demand, and digital advertising. Microsoft Corporation (NASDAQ:MSFT) is also one of the few tech firms that offer a healthy mixture of value and growth to investors. It has paid a dividend to shareholders for close to two decades even as the share price skyrockets.
On July 27, Wedbush analyst Daniel Ives maintained an Outperform rating on Microsoft Corporation (NASDAQ:MSFT) stock and lowered the price target to $320 from $340, noting that the metrics around cloud and commercial bookings looked strong for the firm.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT), with 28 million shares worth more than $7.3 billion.
In its Q1 2022 investor letter, Carillon Tower Advisers, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft Corporation (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
You can also take a peek at 10 Penny Stocks Redditors are Buying in August and 10 Best Nickel Stocks to Buy Now.
