In this article, we discuss 5 consumer stocks that analysts are bearish on as recession begins. If you want to see more stocks on this list, check out Analysts are Bearish on These 10 Consumer Stocks as Recession Begins.
5. Tyson Foods, Inc. (NYSE:TSN)
Number of Hedge Fund Holders: 45
Tyson Foods, Inc. (NYSE:TSN) is an American food company that operates worldwide. The company has four segments – Beef, Pork, Chicken, and Prepared Foods. On July 1, Piper Sandler analyst Michael Lavery lowered the price target on Tyson Foods, Inc. (NYSE:TSN) to $79 from $85 and reaffirmed an Underweight rating on the shares. The analyst said that Tyson Foods, Inc. (NYSE:TSN)’s short-term momentum in chicken will be completely negated by reduced margin forecasts in beef and pork. Greater feed costs have resulted in lower grade cattle, along with a drought and soaring grain costs that could possibly drive further liquidation in the short-term, giving way to supply constraints in 2023, the analyst told investors in a research note.
According to Insider Monkey’s Q1 data, 45 hedge funds were bullish on Tyson Foods, Inc. (NYSE:TSN), up from 36 funds in the preceding quarter. Donald Yacktman’s Yacktman Asset Management is the leading shareholder of the company, with 2.91 million shares worth approximately $261 million.
4. Altria Group, Inc. (NYSE:MO)
Number of Hedge Fund Holders: 47
Altria Group, Inc. (NYSE:MO) is a Virginia-based company that manufactures and sells smokable and oral tobacco products in the United States. On June 29, Barclays analyst Gaurav Jain downgraded Altria Group, Inc. (NYSE:MO) to Underweight from Equal Weight, cutting the price target to $36 from $53. According to the analyst, the company has a traditional tobacco business model with “very little in the way” of next generation products. Hence, the analyst thinks the shares deserve a “much lower multiple” than when he factored in potential for a successful business combination with Juul and a possible “white-knight” bid from Philip Morris International Inc. (NYSE:PM). Given soft cigarette volumes, he believes Altria Group, Inc. (NYSE:MO) could slash its fiscal 2022 earnings outlook. The analyst called Altria Group, Inc. (NYSE:MO) a “melting ice cube”.
According to Insider Monkey’s database, Altria Group, Inc. (NYSE:MO) was part of 47 public hedge fund portfolios at the end of Q1 2022, up from 39 funds in the last quarter. Rajiv Jain’s GQG Partners is the largest shareholder of the company, with 18.30 million shares worth $956.2 million.
Here is what Broyhill Asset Management has to say about Altria Group, Inc. (NYSE:MO) in its Q2 2021 investor letter:
“Altria (MO) shook off the prospects of a ban on menthol and a potential cap on nicotine and gained 20%. We shared our thoughts on these regulations during the quarter, which are available here.
MO Valuation. MO is up ~ 18% YTD (even accounting for the recent sell-off). We expect MO to generate close to $5 in annual FCF per share over the next few years, putting the stock at ~ 10x, which is less than half the market’s multiple today. Over the last decade, shares have traded at an average multiple of 15x and within a range of ~ 10x – 20x (+/-1 standard deviation). The stock yields 7.2% at the current price, close to a 6% premium to treasuries. Historically, shares have traded closer to a 3% premium to the 10Y, which would imply a ~ $75 share price.”
3. Sally Beauty Holdings, Inc. (NYSE:SBH)
Number of Hedge Fund Holders: 17
Sally Beauty Holdings, Inc. (NYSE:SBH) is an American retailer and distributor of professional beauty supplies. The stock has dropped about 35% year to date as of July 5. Raymond James analyst Olivia Tong downgraded Sally Beauty Holdings, Inc. (NYSE:SBH) on June 29 to Underperform from Market Perform without a price target, informing investors that the company has the greatest exposure to the low-income clientele in her beauty, personal care, and household products coverage. She forecasts increased risk of deteriorating sales and earnings as Sally Beauty Holdings, Inc. (NYSE:SBH)’s primary consumers start to hold back on spending to offset the effect of inflation in gas and groceries, the analyst added. On June 16, Morgan Stanley analyst Simeon Gutman also downgraded Sally Beauty Holdings, Inc. (NYSE:SBH) to Underweight from Equal Weight with a price target of $12, down from $19.
Among the hedge funds tracked by Insider Monkey, 17 funds were long Sally Beauty Holdings, Inc. (NYSE:SBH) at the end of Q1 2022, down from 19 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is the largest shareholder of the company, with 3.6 million shares worth $56.50 million.
2. Carnival Corporation & plc (NYSE:CCL)
Number of Hedge Fund Holders: 32
Carnival Corporation & plc (NYSE:CCL) is a Florida-based leisure travel company that operates multiple cruise lines, hotels, lodges, railcars, and motor coaches. As of July 5, the stock has declined about 60% year to date. HSBC analyst Ali Naqvi on July 4 reiterated a Reduce rating on Carnival Corporation & plc (NYSE:CCL) with a $7.70 price target after the company’s Q2 results were published. The quarter suggested optimistic booking momentum, but it is “too early to call an inflection point from here”, the analyst told investors. He said longer-term debt concerns persist, as well as “skepticism around how recession resilient cruising is”.
According to Insider Monkey’s first quarter database, 32 hedge funds were bullish on Carnival Corporation & plc (NYSE:CCL), compared to 33 funds in the preceding quarter. Two Sigma Advisors is a significant position holder in the company, with a stake exceeding $69 million.
Here is what ClearBridge Investments has to say about Carnival Corporation & plc (NYSE:CCL) in its Q1 2021 investor letter:
“Several of our better performers in the first quarter were purchased while their business models were under stress from COVID restrictions or the macro environment the pandemic created. What gave us confidence in purchasing Carnival was the actions the company took to extend out their balance sheets until travel resumed. Both should benefit as a broader vaccination rollout prompts cruise lines to resume operations and consumers to start traveling again and are positioned to deliver better margins and gain pricing power as the economy normalizes due to the cost controls implemented during the downturn.”
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 80
Elon Musk’s Tesla, Inc. (NASDAQ:TSLA) is down about 45% year to date as of July 5. The EV giant is losing market share to competitors. On July 5, JPMorgan analyst Ryan Brinkman lowered the price target on Tesla, Inc. (NASDAQ:TSLA) to $385 from $395 and assigned an Underweight rating to the shares. The analyst slashed Q2 and 2022 earnings estimates after Tesla, Inc. (NASDAQ:TSLA) announced quarterly delivery of 254,695 units, “materially less” than the 310,000 manufactured in Q1 and the 315,000 units the analyst predicted in April. Declining production in Shanghai due to external factors is possibly the leading contributor to the lower deliveries during the quarter, although there may be “company-specific execution issues” at its new factories in Austin and Berlin, the analyst told investors. He reduced his 2022 EPS estimate to $10.80 from $11.50.
In the first quarter of 2022, 80 hedge funds were long Tesla, Inc. (NASDAQ:TSLA), down from 91 funds in the previous quarter. Cathie Wood’s ARK Investment Management is a notable shareholder of the company, with roughly 1.6 million shares worth $1.7 billion.
Here is what GMO LLC has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla (NASDAQ:TSLA). At its Battery Day last year, Tesla projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
You can also take a look at 10 Best Electric Utility Stocks To Invest In and Jim Cramer Recommends These 10 Stocks For Recession.
