In this article, we discuss 10 stocks to buy before the next recession. If you want our detailed analysis of the stock market outlook, go directly to 10 Stocks to Buy Before the Next Recession.
5. O’Reilly Automotive, Inc. (NASDAQ:ORLY)
Number of Hedge Fund Holders: 50
O’Reilly Automotive, Inc. (NASDAQ:ORLY) is a Missouri-based company that designs auto parts, automotive supplies, and equipment for industrial applications, B2B sales, and do-it-yourself clientele. The stock traded higher after O’Reilly Automotive, Inc. (NASDAQ:ORLY)’s solid earnings for Q4 and 2022 guidance were received positively by investors.
O’Reilly Automotive, Inc. (NASDAQ:ORLY) is one of the stocks to buy before the next recession, since the company is expanding its business and customer base given consistent sales and strong profitability. O’Reilly Automotive, Inc. (NASDAQ:ORLY) withstood the pandemic-driven market turbulence, and as people try to fix their vehicles and not spend additional money on mechanics and workshops during a recession, O’Reilly Automotive, Inc. (NASDAQ:ORLY) will benefit as it gets a majority of its revenue from DIY sales.
On February 11, RBC Capital analyst Steven Shemesh elevated the price target on O’Reilly Automotive, Inc. (NASDAQ:ORLY) to $815 from $755 and kept an Outperform rating on the stock. The analyst cited “strong” Q4 results and an overall flourishing sector as reasons for the upgrade. He also noted that O’Reilly Automotive, Inc. (NASDAQ:ORLY)’s comps grew 14.5% during the fourth quarter of 2021.
Akre Capital Management held the leading position in O’Reilly Automotive, Inc. (NASDAQ:ORLY) as of December 2021, with 1.5 million shares worth $1.11 million. Overall, the number of long positions in O’Reilly Automotive, Inc. (NASDAQ:ORLY) held by the smart money grew to 50 in Q4 from 44 in the prior quarter.
4. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 57
McDonald’s Corporation (NYSE:MCD), a popular American multinational fast food corporation, is one of the top stocks to acquire before recession hits. In addition to more customers preferring cheap food offered by McDonald’s Corporation (NYSE:MCD) during a recessionary period, the company has a fortress balance sheet which will allow it a healthy cushion to weather the economic slowdown. This is indicated by the company’s consistently growing dividend distributions for 45 years in a row.
It is also interesting to note that McDonald’s Corporation (NYSE:MCD) is known for owning the properties where its outlets are located, which means that McDonald’s Corporation (NYSE:MCD) also collects rent from its franchises all over the world, in addition to directly selling to customers via the outlets operated by the company itself. McDonald’s Corporation (NYSE:MCD) capitalizes on a slow real estate market during recessions, and purchases more outlets at lower prices, making it an ideal stock to purchase in the upcoming market environment.
On March 15, Oppenheimer analyst Brian Bittner lowered the price target on McDonald’s Corporation (NYSE:MCD) to $280 from $290 and kept an Outperform rating on the shares. McDonald’s Corporation (NYSE:MCD) stock is down 9% since Russia invaded Ukraine and the analyst suggests investors treat the pullback as a buying opportunity. His analysis suggests that the impact of the Ukraine war is now completely factored in McDonald’s Corporation (NYSE:MCD)’s stock.
Renaissance Technologies is the leading shareholder of McDonald’s Corporation (NYSE:MCD) as of December 2021, with 1.75 million shares worth $470.4 million. Overall, 57 hedge funds were bullish on the stock in the fourth quarter of 2021.
3. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 63
Walmart Inc. (NYSE:WMT) is an American retail operator that runs an extensive network of hypermarkets, discount department stores, and grocery stores across the United States. Walmart Inc. (NYSE:WMT) expects sales to increase approximately 3% in FY23, and plans to authorize share repurchases of at least $10 billion in FY23, which is an ambitious target.
Walmart Inc. (NYSE:WMT) is a mature stock that can handle recession well, since the company experiences higher sales volume during mass unemployment, when people shift to cheaper alternatives for grocery and necessities. In addition to that, the demand for consumer staples tends to remain strong despite recession, and the current supply chain disruptions owing to the war also induce mass panic buying among customers, benefiting Walmart Inc. (NYSE:WMT) directly.
On February 22, Morgan Stanley analyst Simeon Gutman lowered the price target on Walmart Inc. (NYSE:WMT) to $165 from $170 and kept an Overweight rating on the shares. The analyst told investors that Walmart Inc. (NYSE:WMT)’s Q1 guidance stated that total EBIT might decline to low teens on a year-over-year basis and the Q1 baseline regarding the divested UK and Japan businesses was also confusing.
A total of 63 hedge funds were bullish on the stock in the fourth quarter, with GQG Partners as the leading shareholder of Walmart Inc. (NYSE:WMT), owning 10.4 million shares worth $1.50 billion.
2. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 64
Abbott Laboratories (NYSE:ABT) is an American multinational company that manufactures and sells medical devices, diagnostics, branded generic medicines, and nutritional products.
Abbott Laboratories (NYSE:ABT) is likely to survive the expected recession since demand for medical devices by hospitals and patients is somewhat inelastic. Similarly, medicines cannot be foregone entirely, although people might switch to low cost biosimilars. Overall, the Abbott Laboratories (NYSE:ABT) is positioned for stable earnings, as exhibited by its consistently increasing dividend payments for 50 years back-to-back.
BofA analyst Travis Steed on March 1 reinstated coverage of Abbott Laboratories (NYSE:ABT) with a Buy rating and a $140 price target as part of a broader research note on medical technology. According to the analyst, Abbott Laboratories (NYSE:ABT) delivers a sustainable organic growth profile, a top-notch product pipeline, a healthy balance sheet supported by COVID testing profits, and a diversified business that is positioned to perform well in many different market conditions.
Ken Fisher’s Fisher Asset Management endorses Abbott Laboratories (NYSE:ABT). Being the company’s leading shareholder, Ken Fisher’s fund elevated its stake by 5% in the fourth quarter to 8.7 million shares worth $1.2 billion. Overall, 64 hedge funds were bullish on Abbott Laboratories (NYSE:ABT) at the end of December 2021.
Here is what Richie Capital Group has to say about Abbott Laboratories (NYSE:ABT) in its Q4 2021 investor letter:
“Abbott Labs (ABT – up 20.08%) – Abbott Labs continues to benefit from resurging demand for Covid testing kits. The company is planning to increase their monthly production of BinaxNOW athome rapid tests to 100M a month, a 43% increase from current levels.”
1. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 108
Berkshire Hathaway Inc. (NYSE:BRK-B) is an American multinational conglomerate chaired by legendary investor Warren Buffett. Berkshire Hathaway Inc. (NYSE:BRK-B) deals in diversified investments, property and casualty insurance, real estate, consumer products, and the aerospace sector, among a range of other business lines.
On March 15, Ritholtz CEO Josh Brown said that he is a long-term investor of Berkshire Hathaway Inc. (NYSE:BRK-B), since the company is an “absolute tank”, outperforming 28 out of 30 Dow Jones Average Industrial components. According to Brown, Berkshire Hathaway Inc. (NYSE:BRK-B) looks better than most S&P 500 constituents in the current market, as insurance premiums are mostly recession-proof and act as effective inflation hedges. The company has a fortress balance sheet to see it through a recession comfortably, Brown noted.
Among the hedge funds tracked by Insider Monkey, 108 funds were bullish on Berkshire Hathaway Inc. (NYSE:BRK-B) in Q4 2021, up from 106 funds in the preceding quarter. Bill & Melinda Gates Foundation Trust is the leading shareholder of the company, with 33.6 million shares worth over $10 billion.
You can also take a look at 10 LNG Stocks to Watch Amid Ukraine Crisis and 10 Growth Stocks Under $50 for 2022.
