We recently published a list of 11 Best Counter Cyclical Stocks to Buy According to Analysts. In this article, we are going to take a look at where Walmart Inc. (NYSE:WMT) stands against other best counter cyclical stocks to buy according to analysts.
Counter cyclical stocks stand out because they tend to perform well during economic downturns, providing relative stability when markets become volatile. These resilient companies typically operate in more defensive sectors like utilities, consumer staples, and healthcare, offering products and services that consumers need, no matter how tight their wallets become. Furthermore, the truly counter cyclical stocks are the ones that experience accelerations in growth during recessions, due to consumers actively searching for ways to save money – think of discount stores or cheap clothes retailers. What makes the best counter cyclical stocks especially compelling is their stability during downturns: investors seek refuge in these stocks because they tend to maintain (or even increase) their value while other market segments struggle.
Financial theory, as pioneered by Markowitz’ modern portfolio theory (1952), suggests that including counter cyclical stocks in a portfolio can improve the overall risk-adjusted returns by significantly reducing volatility while at the same time not impairing the return profile. Modern literature emphasizes that effective diversification can be achieved by combining financial assets whose returns are inversely correlated to one another; counter-cyclical stocks align well with this principle due to their low or even negative correlation with the broad markets. Empirical studies confirm that portfolios containing counter cyclical stocks tend to exhibit lower volatility and more stable returns during recessionary periods – this is a highly sought after trait by investors. The legendary fund manager Peter Lynch also emphasized the strength of stable companies in recessions; here’s what he said:
“In economic downturns, invest in companies that make essential products; people will still buy toothpaste and food regardless of the economy.”
READ ALSO: 10 Best Low Risk Stocks To Buy in 2025.
We believe that the current market conditions are potentially suitable for investors to start considering adding the best counter cyclical stocks to their portfolios. The biggest problem we see with the current US stock market is that the Trump 2.0 Tariff Turmoil and a plethora of other aggressive shifts in the policy stance of the new administration are undermining consumer confidence in the future. Consumers, while still strong and healthy, exhibit a rapid deterioration in confidence – the Consumer Confidence Index dropped sharply in March to the lowest reading since January 2021. Even the Trump administration itself admits that its trade and DOGE policies might cause some slowdown in the short term but says they should lead to “The Golden Age of America” in the long term.
Furthermore, business surveys show that increasingly more people are expecting fewer jobs in the upcoming months. A sharp deterioration in both metrics has historically coincided with the onsets of several recessions, such as the dot-com bubble burst, the 2008 crisis, and the 2022 bear market. It is of no surprise that many reputable research boutiques, including Yardeni Research and Goldman Sachs, have recently significantly raised their odds that the US economy will enter a recession in 2025 (although the estimated probability remains below 50% on average).
The drivers of a recession could be a potential one-time inflation shock from the tariffs expected for next week, a widespread slowdown in business Capex expectations that may trigger layoffs, as well as a more frugal consumer due to the overall uncertainty and deterioration in purchasing power. Under such conditions, counter-cyclical stocks could witness a significant acceleration in their business, which in turn may translate into superior returns compared to the broad market. We believe that the best counter-cyclical stocks are the ones that have significant potential upside according to analysts, as well as a proven track record of exceptional performance during previous economic cycles.
Our Methodology
We consulted business literature on the characteristics of the best counter cyclical stocks and manually selected 20-30 stocks with a history of performing well during economic downturns, such as the 2008 and 2022 bear markets. Then, we select the top 11 stocks with the largest average upside potential as estimated by analysts and rank them in ascending order. For each stock, we also include the number of hedge funds that own the stock as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A manager standing in a hypermarket, pointing out items available for wholesale.
Walmart Inc. (NYSE:WMT)
Average Upside Potential: 26.73%
Number of Hedge Fund Holders: 116
Walmart Inc. (NYSE:WMT) is a leading multinational retail corporation operating a chain of hypermarkets, discount department stores, and grocery stores across the US and in 23 other countries. The company offers a broad assortment of merchandise and services at everyday low prices, encompassing categories such as apparel, housewares, electronics, and groceries. WMT operates through various formats, including supercenters, discount stores, neighborhood markets, and e-commerce platforms, serving approximately 270 million customers weekly. WMT often attracts more budget-conscious consumers during economic downturns, which makes it one of the best cyclical stocks to consider ahead of potential recessions. The giant retailer also ranked 3rd on our recent list of 10 Best Low Risk Stocks To Buy in 2025.
Walmart Inc. (NYSE:WMT) posted strong fourth quarter results, with sales increasing by 5.2% and adjusted operating income rising by 9.4% on a constant currency basis. The company continued to gain market share across various countries and income groups, driven by higher transaction volumes and unit sales. E-commerce performance also improved significantly, with online sales making up 18% of total revenue – an 1,100 basis point increase since fiscal 2020. WMT’s advertising business expanded by 27% to reach about $4.4 billion, while US Marketplace revenue rose 37%, with nearly 45% of orders fulfilled through Walmart Fulfillment Services. Membership income also saw strong growth, increasing 21% to approximately $3.8 billion.
Walmart Inc. (NYSE:WMT) improved its return on investment by 50 basis points, reaching 15.5%, a level not seen since 2016. Reflecting its solid financial performance, WMT announced a 13% dividend hike, marking the largest increase in more than ten years. Looking ahead to fiscal 2026, management projects consolidated net sales growth of around 3% to 4%, with operating income expected to grow even faster at 3.5% to 5.5%. Consumer demand for faster delivery has driven over 30% of orders to include paid convenience fees. Meanwhile, the company’s digital transformation continues to gain momentum, with US e-commerce losses improving by 80% YoY. Management also reinforced the company’s commitment to value, introducing more than 22,000 product rollbacks in its US stores over the past year.
Overall, WMT ranks 1st on our list of best counter cyclical stocks to buy according to analysts. While we acknowledge the potential of WMT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than WMT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.