In this article, we discuss 5 recession-proof stocks to buy and hold. If you want to see some more stocks that can withstand recession, click 10 Recession-Proof Stocks to Buy and Hold.
5. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 41
The Kroger Co. (NYSE:KR) is an Ohio-based retail chain that operates a network of supercenters and hypermarkets across the United States. Companies like The Kroger Co. (NYSE:KR) can withstand recessionary periods since demand for groceries and household essentials remains largely inelastic.
The Kroger Co. (NYSE:KR) posted its Q4 results on March 3, announcing earnings per share of $0.91, beating consensus estimates by $0.17. Revenue over the period equaled $33.05 billion, up 7.52% year-over-year, outperforming market estimates by roughly $431 million.
Scotiabank analyst Patricia Baker on March 10 raised the price target on The Kroger Co. (NYSE:KR) to $64 from $60 and kept an Outperform rating on the shares. The analyst noted that The Kroger Co. (NYSE:KR) reinforced its commitment to deliver 8%-11% total shareholder returns annually. Additionally, The Kroger Co. (NYSE:KR)’s successful execution on “Restock Kroger” and the business transformation under this initiative should enhance investor confidence, Baker stated in a bullish thesis.
In the fourth quarter of 2021, 41 hedge funds were bullish on The Kroger Co. (NYSE:KR), up from 39 funds in the previous quarter. Berkshire Hathaway owns the biggest stake in The Kroger Co. (NYSE:KR), with 61.4 million shares worth $2.7 billion.
4. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 41
Archer-Daniels-Midland Company (NYSE:ADM) is an American multinational food processing and commodities trading company that supplies corn syrup, livestock feed, ethanol, bioenergy, and other agricultural byproducts to food, beverage, industrial, and animal feed markets around the world. Archer-Daniels-Midland Company (NYSE:ADM) is positioned well to withstand recession since it offers essential products that are price inelastic.
On February 23, Archer-Daniels-Midland Company (NYSE:ADM) priced its first sustainable bond, which will support the company’s ESG goals. The offering closed on February 28, and Archer-Daniels-Midland Company (NYSE:ADM) agreed to issue $750 million in aggregate principal amount of 2.9% notes due 2032.
Barclays analyst Benjamin Theurer raised the price target on Archer-Daniels-Midland Company (NYSE:ADM) on March 4 to $88 from $80 and kept an Overweight rating on the shares. The analyst continues to see upside in Archer-Daniels-Midland Company (NYSE:ADM) shares, noting that the company is strategically positioned to benefit from short-term disruption and displays solid long-term fundamentals.
According to the fourth quarter database of Insider Monkey, 41 hedge funds were long Archer-Daniels-Midland Company (NYSE:ADM), up from 27 funds in the previous quarter. Amid the flurry of hedge fund activity around Archer-Daniels-Midland Company (NYSE:ADM), Ric Dillon’s Diamond Hill Capital was the leading shareholder of the company, with 5.70 million shares worth close to $386 million.
3. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 44
Dollar General Corporation (NYSE:DG) is an American discount retailer with approximately 18,000 variety stores located across the United States. In a recessionary period, many customers shift from branded products to cheap alternatives for household items that Dollar General Corporation (NYSE:DG) supplies, making it a recession-proof security to buy and hold.
On March 17, Dollar General Corporation (NYSE:DG) declared a $0.55 per share quarterly dividend, a 31% increase from its prior dividend of $0.42. The dividend will be distributed on April 19, to shareholders of record on April 5. The stock traded higher in early trading on March 17 despite Q4 earnings falling slightly short of market consensus.
BMO Capital analyst Kelly Bania raised the price target on Dollar General Corporation (NYSE:DG) to $265 from $250 and kept an Outperform rating on the shares on March 18. The company’s Q4 results were “solid” in spite of the “transitory” gross margin pressures, the analyst told investors in a research note. She sees an opportunity for Dollar General Corporation (NYSE:DG) to return to its 10% EPS CAGR from current levels.
Among the hedge funds tracked by Insider Monkey, 44 funds were long Dollar General Corporation (NYSE:DG) in Q4 2021, with collective stakes amounting to $2.20 billion. BlueSpruce Investments, the largest shareholder of the company, disclosed a position worth approximately $637 million at the end of the December quarter.
Here is what LRT Capital Management has to say about Dollar General Corporation (NYSE:DG) in its Q3 2021 investor letter:
“Executive Summary
At LRT Capital Management we are continuously searching the market for great investment opportunities. Our favorite finds are companies with moats and growth opportunities that justify a higher price than what the stock is trading for. One of our holdings (approximately 1.5% of our long exposure) is Dollar General (DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General is a discount retailer with the largest brick-and-mortar presence in the United States by store count. The company’s largest concentration of stores can be found in the southern, southwestern, midwestern, and eastern parts of the United States.10 Dollar General was founded in 1939 by J.L. Turner, who originally named the company “J.L. Turner and Son, Wholesale”. As the name suggests, the company began its life as a wholesaler, but quickly turned to a retailer of general store goods. By the early 1950s, the company had annual sales of $2 million per year,12 which is the equivalent of $22.95 million in 2021 dollars when adjusted for inflation.
The first Dollar General store opened on June 1st, 1955 in Springfield Kentucky. The simple concept was that no item in the store would cost more than one dollar. The company changed its name to Dollar General Corporation in 1968 when Dollar General became publicly traded. At the time of its initial public offering, the business generated more than $40 million in annual sales. The company’s common stock was publicly traded from 1968 until July 2007, when it was taken private by KKR. The company went public again in November 2009, under the ticker DG.
Today, Dollar General is an evolved, and phenomenal business with more room for growth. Annual sales reached a record $33.7 billion in fiscal year 2021 after consecutively growing the top line for many years. The company’s main products are every-day necessities and consumables purchased by lower income consumers on tight budgets…”
2. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 67
The Procter & Gamble Company (NYSE:PG) operates as an American multinational consumer goods corporation, manufacturing and distributing personal health and hygiene products. The Procter & Gamble Company (NYSE:PG) is a mature company that can survive a recession, given the indispensable nature of its product portfolio, large global customer base, and solid balance sheet.
On March 16, Deutsche Bank analyst Steve Powers reduced the price target on The Procter & Gamble Company (NYSE:PG) to $173 from $179 and kept a Buy rating on the shares, stating that the company’s management seemed confident in its ability to outperform despite near-term market volatility and latest headwinds.
Rajiv Jain’s GQG Partners held the biggest stake in The Procter & Gamble Company (NYSE:PG), with 7.5 million shares worth $1.2 billion. According to Insider Monkey’s Q4 database, 67 hedge funds were bullish on the stock, compared to 69 funds in the previous quarter.
1. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 96
UnitedHealth Group Incorporated (NYSE:UNH) is a Minnesota-based multinational insurance and managed healthcare company. Insurance and healthcare stocks have historically remained recession-proof, since people cannot put off important medical procedures and do not usually unsubscribe from their insurance policies.
UnitedHealth Group Incorporated (NYSE:UNH) on February 16 declared a $1.45 per share quarterly dividend. The dividend is payable on March 22, to shareholders of record on March 14. Among the hedge funds tracked by Insider Monkey, 96 funds held long positions in UnitedHealth Group Incorporated (NYSE:UNH), up from 95 funds in the prior quarter.
On January 26, SVB Leerink analyst Whit Mayo raised the price target on UnitedHealth Group Incorporated (NYSE:UNH) to $550 from $480 and kept an Outperform rating on the shares. The analyst noted that the company’s Q4 results were in line with expectations.
Here is what Third Point Management has to say about UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2021 investor letter:
“UnitedHealth is one of the largest healthcare companies in the world and a market leader in both its insurance and healthcare services (Optum) businesses. We initiated our position during the 2020 Presidential election at a time of heightened political and regulatory uncertainty.
We believe under its new CEO, Andrew Witty, UnitedHealth can not only preserve its market dominance and sustain industry-leading growth rates across most of its key segments but also enter new healthcare services markets. Witty is known as a mission-driven CEO who clearly articulates his view that providing high-quality, affordable health care services is a social good. He receives consistently high marks from former colleagues, and we believe that his leadership approach will ballast and even strengthen UNH’s already impressive management and employee ranks. The insurance and services businesses are synergistic and complementary, which entrenches United’s critical role in care financing, access, and management. This dynamic gives us confidence in the durability of United’s market leadership…” (Click here to see the full text)
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