In this article, we discuss 10 stocks that Reddit’s WallStreetBets is buying to survive the upcoming recession. If you want to read about some more stocks that Reddit’s WallStreetBets is buying to survive upcoming recession, click Reddit’s WallStreetBets is Buying These 5 Stocks To Survive Upcoming Recession.
Even though major banks and market experts have predicted that a recession will hit the United States economy in 2023 or 2024, there are some bears who forecast that the economic downturn could begin as early as late 2022. One of these bears is Michael Burry, the legendary investor who famously predicted the market crash of 2008 months before it happened. Burry recently took to social networking platform Twitter to claim that the American economy was propped up on consumer savings and could slip into a crisis as soon as these savings dry up.
Burry said that the personal savings to gross domestic product ratio could hit the all-time low, set in 2005, of 1.5 between September and December this year. Burry has previously blamed “dwindling savings, ballooning credit-card debts, and reduced savings rate” as some of the reasons why economic growth and corporate profits could slow down. Burry is not alone. Lloyd Blankfein, the chief of investment bank Goldman Sachs, has also said that the US is at a “very, very high risk” of a recession in the coming months.
An economic team at Goldman Sachs, led by Jan Hatzius, has reduced the GDP growth in the US this year to 2.4% from 2.6%, and has said that even though the economy will slow down, a recession “might” be avoided. Nevertheless, investors on Reddit forum WallStreetBets have already started preparing for the worst, pulling their money from risky firms and investing in companies with strong fundamentals like NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and Verizon Communications Inc. (NYSE:VZ).
Our Methodology
These were picked based on the hype around these firms on Reddit forum WallStreetBets. The companies best placed to navigate an economic downturn given their historical performance during recessions were preferred for the list. An extensive database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the popularity of each stock among hedge funds.
Reddit’s WallStreetBets is Buying These Stocks To Survive Upcoming Recession
10. Church & Dwight Co., Inc. (NYSE:CHD)
Number of Hedge Fund Holders: 33
Church & Dwight Co., Inc. (NYSE:CHD) makes and sells household and personal care products. In late April, the firm posted earnings for the first quarter of 2021, reporting earnings per share of $0.83, beating market estimates by $0.06. The revenue over the period was $1.3 billion, up about 5% year-on-year and beating estimates by $10 million. Consumer staples are expected to perform better than other sectors during a recession, since people keep buying essential items even during an economic slowdown.
On March 29, Goldman Sachs analyst Jason English maintained a Neutral rating on Church & Dwight Co., Inc. (NYSE:CHD) stock and lowered the price target to $101 from $105, noting that “inflation will likely be higher and more prolonged through 2022 than previously anticipated”.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Fundsmith LLP is a leading shareholder in Church & Dwight Co., Inc. (NYSE:CHD), with 8.4 million shares worth more than $838 million.
Just like NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and Verizon Communications Inc. (NYSE:VZ), Church & Dwight Co., Inc. (NYSE:CHD) is one of the stocks that retail investors are flocking to as recessions fears climb.
9. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 50
Target Corporation (NYSE:TGT) is a general merchandise retailer. The stock is one of the top picks of retail investors during a recession as it offers the solidity of reliable dividend payouts, even during a crisis situation. The company has consistently paid a growing dividend to shareholders for the past 54 years. The sector median in this regard is just one year, attesting to the financial health of the Target business. On March 10, the firm declared a quarterly dividend of $0.90 per share, in line with previous. The forward yield was 1.67%.
On May 23, Credit Suisse analyst Robert Moskow maintained an Outperform rating on Target Corporation (NYSE:TGT) stock and lowered the price target to $180 from $286, noting that inventory-related margin headwinds will abate for the firm in the coming months.
Among the hedge funds being tracked by Insider Monkey, Boston-based Arrowstreet Capital is a leading shareholder in Target Corporation (NYSE:TGT), with 2.5 million shares worth more than $30 million.
In its Q2 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and Target Corporation (NYSE:TGT) was one of them. Here is what the fund said:
“We added Target Corporation (NYSE:TGT) to our consumer staples sector. Target Corporation (NYSE:TGT) offers a broad array of products in owned and known brand items at affordable prices. Its omni-channel fulfilment centers allow customers to receive their items via in-store pickup, curbside pickup, same-day shipping and regular shipping while simultaneously reducing operating costs. With a significantly lower valuation than peers and a unique operating strategy, Target Corporation (NYSE:TGT) is an attractive holding.”
8. Dollar General Corporation (NYSE:DG)
Number of Hedge Fund Holders: 53
Dollar General Corporation (NYSE:DG) operates as a discount retailer. As consumer spending slows down due to soaring inflation, more and more people are expected to rein in their spending habits. This would lead to a broad switch towards discount retailers like Dollar General, which have historically performed well during recessions. The company also has an impressive dividend history with six years of consistent growth in the payouts. The firm recently beat market estimates on earnings per share and revenue for the first quarter of 2022.
On May 27, Truist analyst Scot Ciccarelli maintained a Hold rating on Dollar General Corporation (NYSE:DG) stock and raised the price target to $227 from $178, noting that the firm had delivered “solid” earnings despite inflationary pressures.
At the end of the first quarter of 2022, 53 hedge funds in the database of Insider Monkey held stakes worth $2.25 billion in Dollar General Corporation (NYSE:DG), compared to 44 in the preceding quarter worth $2.20 billion.
In its Q3 2021 investor letter, LRT Capital Management, an asset management firm, highlighted a few stocks and Dollar General Corporation (NYSE:DG) was one of them. Here is what the fund said:
“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 Corporation (NYSE:DG), so today, we wanted to tell you a bit about this great company.
Company Overview
Dollar General Corporation (NYSE:DG) 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 Corporation (NYSE:DG) 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.” (Click here to see full text)
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 64
The Coca-Cola Company (NYSE:KO) is a multinational beverage company based in Georgia. The firm is expected to weather a bear market better than others as it has pricing power and has also traditionally registered an increase in sales during economic slowdowns. The company is also putting a renewed focus on innovation to keep growth afloat, recently announcing that it will be discontinuing the Honest Tea brand in order to focus on other ready-to-drink tea offerings and shift to a two-brand tea lineup.
On April 26, HSBC analyst Carlos Laboy maintained a Buy rating on The Coca-Cola Company (NYSE:KO) stock and increased the price target to $72 from $68, appreciating the long-term outlook of the firm as it transforms digitally.
Among the hedge funds being tracked by Insider Monkey, Nebraska-based firm Berkshire Hathaway is a leading shareholder in The Coca-Cola Company (NYSE:KO), with 400 million shares worth more than $24.7 billion.
6. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 65
Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer. Declining profits and increasing costs have pressured the home sector in the past few months. These trends have benefited Lowe’s since it is one of the largest and cheapest home improvement retailers in the US. The firm has an impressive dividend history as well, stretching back over five decades. On May 27, the firm declared a quarterly dividend of $1.05 per share, an increase of 31% from the previous payout of $0.80 per share.
On May 19, Jefferies analyst Jonathan Matuszewski maintained a Buy rating on Lowe’s Companies, Inc. (NYSE:LOW) stock and lowered the price target to $238 from $290, noting that the sales and margin guidance was achievable.
At the end of the first quarter of 2022, 65 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in Lowe’s Companies, Inc. (NYSE:LOW), compared to 72 in the preceding quarter worth $6.8 billion.
In addition to NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), and Verizon Communications Inc. (NYSE:VZ), Lowe’s Companies, Inc. (NYSE:LOW) is one of the stocks that retail investors are buying as interest rates rise.
In its Q4 2021 investor letter, Pershing Square Capital Management, an asset management firm, highlighted a few stocks and Lowe’s Companies, Inc. (NYSE:LOW) was one of them. Here is what the fund said:
“Lowe’s Companies, Inc. (NYSE:LOW) is a high-quality business with significant long-term earnings growth potential
Supportive macroeconomic backdrop
-Aging housing stock, lack of new inventory, robust home equity values, and unprecedented pro project backlog
-COVID-19 causing millennials to enter the housing market
Positioned to grow EPS largely independent of market conditions
-Idiosyncratic revenue opportunities driving share gains
-Self-help initiatives catalyzing operating margin expansion
-Buybacks representing ~8% of current market capitalization planned for 2022
Multi-year business transformation with substantial earnings upside
-Margin target of 13% has substantial upside; Home Depot at ~15.3% and increasing
-Potential to generate high-teens EPS growth over the next several years.
Lowe’s Companies, Inc. (NYSE:LOW) continues to trade at a significantly discounted P/E multiple relative to Home Depot despite materially higher prospective EPS growth. LOW’s share price including dividends increased 63% in 2021 and has decreased 10% year-to-date in 2022.”
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Disclosure. None. Reddit’s WallStreetBets is Buying These 10 Stocks To Survive Upcoming Recession is originally published on Insider Monkey.
