In this article, we discuss the stock market recession theories and the 10 stocks to sell now according to analysts. If you want to see more stocks in this selection, click Stock Market Recession 2022: 5 Stocks to Sell Now According to Analysts.
While the S&P 500 returned 27% to investors in 2021, the index has declined 15% year-to-date due to higher interest rates, geopolitical tensions, rampant inflation, and multiple other bearish factors. Michael Hartnett, chief investment strategist at the Bank of America, noted on May 9 that based on historical bear and recessionary macro backdrops, the stock market could be in for a turbulent ride for the next few months. If history is any indication, the current bear market will end in October 2022 with the S&P 500 at 3000 points, a further 25% decline from present levels.
The economy contracted in the first quarter of 2022, with growth slowing down and the unemployment rate at 3.6%. Dan Ives, managing director at Wedbush Securities, stated on May 9 that investors do not have a safe haven in the current market, as rates rise, inflation surges, and geopolitical tensions remain at an all-time high. In addition to that, fears of recession loom on the horizon. He also observed that it is a bear market for tech stocks. Oxford Economics is projecting growth to slow to 2%, but others are predicting an imminent recession.
In this uncertain and highly unpredictable market backdrop, it is important to pay close attention to market experts and analysts, and use their recommendations to form a solid investment portfolio. While stocks like The Procter & Gamble Company (NYSE:PG), Target Corporation (NYSE:TGT), and The Coca-Cola Company (NYSE:KO) are historically known to weather market storms, in this article, we discuss the stocks to sell now according to analysts.
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Our Methodology
We selected stocks that were recently downgraded by analysts due to concerns about recession, rising rates, inflationary pressures, and the demand slowdown for the sectors in which the companies operate.
We have mentioned the hedge fund sentiment around the stocks, which was gauged from the database of 900+ elite hedge funds tracked by Insider Monkey in the fourth quarter of 2021.
Stock Market Recession 2022: Stocks to Sell Now According to Analysts
10. The Joint Corp. (NASDAQ:JYNT)
Number of Hedge Fund Holders: 23
The Joint Corp. (NASDAQ:JYNT) is an Arizona-based company providing chiropractic care, with a nationwide network of more than 500 chiropractic clinics. As the economy nears a recession, patients delay or put off elective healthcare procedures, which impacts companies like The Joint Corp. (NASDAQ:JYNT).
The Joint Corp. (NASDAQ:JYNT) reported earnings for Q1 2022 on May 5, posting a loss per share of $0.01, missing estimates by $0.06. Although the revenue grew about 28% year-over-year to $22.44 million, it fell short of analysts’ predictions by $734,790.
Craig-Hallum analyst Jeremy Hamblin on May 6 downgraded The Joint Corp. (NASDAQ:JYNT) to Hold from Buy, slashing the price target to $30 from $90, after disappointing Q1 results that displayed top and bottom line misses, as well as The Joint Corp. (NASDAQ:JYNT) lowering guidance for the year. The analyst believes demand trends have fallen as consumers have cut back on spending, with lesser visits to retail centers. The stock price dropped 49% on May 6 as the Q1 results were published.
Hedge fund sentiment around the stock was mixed. According to Insider Monkey’s Q4 data, The Joint Corp. (NASDAQ:JYNT) was found in the public investment portfolios of 23 hedge funds, with collective stakes worth $90.6 million, compared to 22 funds in the last quarter, holding stakes in the company valued at $121.4 million. Charles Paquelet’s Skylands Capital is the leading shareholder of The Joint Corp. (NASDAQ:JYNT), with 345,065 shares worth $22.6 million.
Unlike The Procter & Gamble Company (NYSE:PG), Target Corporation (NYSE:TGT), and The Coca-Cola Company (NYSE:KO), analysts are downgrading The Joint Corp. (NASDAQ:JYNT) in the current market environment.
Here is what Artko Capital has to say about The Joint Corp. (NASDAQ:JYNT) in its Q2 2021 investor letter:
“Two poignant examples in recent years have been our investments, one is in Joint Chiropractic (JYNT). Both of the investments have worked out fantastically for our partners with 300% plus return for each, however, our experience and our risk process where we take off at least 5% of portfolio gains when a position reaches 15% of the portfolio has limited our potential, as has limiting our vision for potential gains in 100s of percent instead of a 1000+ (as been the case with JYNT). Additionally, following this risk management model has resulted in some minor tax inefficiencies for the partnership. “
9. Vornado Realty Trust (NYSE:VNO)
Number of Hedge Fund Holders: 22
Vornado Realty Trust (NYSE:VNO) is a New York-based real estate investment trust that holds a portfolio of assets consisting of office buildings and street retail shops in Manhattan. With a recession looming on the horizon and increasingly remote work setups, Vornado Realty Trust (NYSE:VNO) is one of the stocks that analysts are dumping.
On May 4, Piper Sandler analyst Alexander Goldfarb downgraded Vornado Realty Trust (NYSE:VNO) to Underweight from Neutral, cutting the price target from $44 to $35. While the company will provide future net operating income of $300 million from the Penn District redevelopment, the negative impact on earnings in 2022 and 2023 from rising interest rates resulted in the downgrade, the analyst told investors in a research note. The stock slipped 1.5% after Alexander Goldfarb issued a downgrade.
Vornado Realty Trust (NYSE:VNO) declared on April 27 a $0.53 per share quarterly dividend, in line with previous. The dividend is payable on May 20, to shareholders of record on May 9. Vornado Realty Trust (NYSE:VNO)’s dividend yield on May 9 came in at 5.98%.
Hedge fund sentiment around Vornado Realty Trust (NYSE:VNO) declined in Q4 2021. According to Insider Monkey’s database, 22 hedge funds were bullish on Vornado Realty Trust (NYSE:VNO) at the end of December 2021, down from 25 funds in the prior quarter. The total stakes owned in Q4 were $161.7 million, compared to $194.7 million in Q3. Ken Griffin’s Citadel Investment Group is the leading shareholder of the company, with 944,443 shares worth $39.5 million.
Here is what Baron Funds has to say about Vornado Realty Trust (NYSE:VNO) in its Q2 2021 investor letter:
“Vornado Realty Trust: Vornado is a REIT that owns a high-quality portfolio of office and street retail assets concentrated in New York City. As economic activity improves and employees return to work, we expect leasing and occupancy trends to improve. At its recent price of $47, we believe the shares are attractively valued at a 40% discount to our estimate of net asset value of $78 per share.”
8. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 142
Visa Inc. (NYSE:V) is a California-based multinational payments technology company that offers card products, transaction platforms, and value-added services to consumers, merchants, financial institutions, and government entities. Visa Inc. (NYSE:V) declared on April 26 a $0.375 per share quarterly dividend. The dividend will be paid on June 1, to shareholders of record on May 13.
Piper Sandler analyst Christopher Donat on April 27 downgraded Visa Inc. (NYSE:V) to Neutral from Overweight with a price target of $239, down from $283. The analyst cited macro headwinds, especially in Europe, for the downgrade. He is increasingly worried that Europe could face a recession in 2023, which would be negative for the payment transactions that generate revenue for Visa Inc. (NYSE:V). The analyst slashed FY 2023 estimates for forecasted economic weakness in Europe and he also has concerns about Asia, non-European cross-border activity, and unfeasible currency movement.
According to Insider Monkey’s Q4 data, 142 hedge funds held stakes in Visa Inc. (NYSE:V) worth $29.2 billion, compared to 143 funds in the last quarter, with collective stakes in the company worth $26.1 billion. Chris Hohn’s TCI Fund Management owned the biggest position in the company, with more than 23 million shares worth $5 billion.
Here is what Wedgewood Partners has to say about Visa Inc. (NYSE:V) in its Q1 2022 investor letter:
“Visa continued to benefit from strong consumer spending as well as a recovery in crossborder payment volumes, more recently driven by the return of travelers. While the emergence of the “Omicron” variant of COVID early in the quarter posed a risk to this travel recovery, it proved short-lived, with most of Europe, North America, and Latin American re-engaging in cross-border travel. Visa continues to extend its network to all comers. By processing over $10 trillion in volume per year, Visa has unparalleled scale and, as a result, can sell this scale to its customers at very attractive economics. For example, “FinTech” businesses will often charge customers upwards of 3-5% to transact, while Visa takes mere basis points on most transactions, despite enabling service levels historically reserved for only the largest financial institutions. After adding to Visa late last year, we are most pleased that Visa is back to one of our top 5 holdings.”
7. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 144
Mastercard Incorporated (NYSE:MA) is an American multinational technology corporation that specializes in transaction processing and financial products and services. Mastercard Incorporated (NYSE:MA) reported above consensus earnings per share and revenue for Q1 2022, at $2.76 and $5.17 billion, respectively.
On April 29, Piper Sandler analyst Christopher Donat downgraded Mastercard Incorporated (NYSE:MA) to Underweight from Neutral, cutting the price target to $357 from $360. The analyst cited European macro challenges for the downgrade, since he is increasingly concerned that Europe could enter a recession in 2023, which would impact the payment transactions that drive revenue for Mastercard Incorporated (NYSE:MA).
Among the hedge funds tracked by Insider Monkey, 144 funds reported long positions in Mastercard Incorporated (NYSE:MA) at the end of December 2021, compared to 146 funds in the last quarter. The total stakes owned in Q4 came in at $17.2 billion, down from $17.6 billion in Q3. Charles Akre’s Akre Capital Management is the leading shareholder of the company, with 5.8 million shares worth $2.10 billion.
Despite market concerns, Mastercard Incorporated (NYSE:MA) remains popular among elite investors, just like The Procter & Gamble Company (NYSE:PG), Target Corporation (NYSE:TGT), and The Coca-Cola Company (NYSE:KO).
Here is what Saturna Capital Amana Funds has to say about Mastercard Incorporated (NYSE:MA) in its Q4 2021 investor letter:
“Given the likelihood of rising inflation and interest rates ahead, we anticipate adjustments to the portfolio to reduce exposure to highly valued stocks dependent on low interest rates to support terminal year valuations, while seeking investments in companies more correlated with a return to economic normalcy. We sold our position in Mastercard. Although Mastercard does not charge or collect interest, its association with credit activities was problematic.”
6. Lowe’s Companies, Inc. (NYSE:LOW)
Number of Hedge Fund Holders: 72
Lowe’s Companies, Inc. (NYSE:LOW) is an American home improvement retailer, offering construction, maintenance, repair, remodeling, and decor products and materials. Traffic for Lowe’s Companies, Inc. (NYSE:LOW) is likely to reduce in a recession, since people are more likely to streamline their expenses and spend only on staples rather than adopt home renovation and improvement projects. The stock has declined over 23% year-to-date.
On May 6, Gordon Haskett analyst Chuck Grom downgraded Lowe’s Companies, Inc. (NYSE:LOW) to Accumulate from Buy, slashing the price target from $255 to $225. While he remains constructive on the long-term growth prospects for companies in the home furnishings and home improvement sectors, the analyst believes underwriting stable-to-accelerating comp trends from the first quarter of 2022 to the end of this year is “too optimistic”. He is thus discounting a greater level of uncertainty with his updated ratings and price targets.
According to Insider Monkey’s fourth quarter database, 72 hedge funds placed long calls on Lowe’s Companies, Inc. (NYSE:LOW), compared to 60 funds in the previous quarter. Bill Ackman’s Pershing Square held the biggest stake in the company, with 10.2 million shares worth $2.6 billion.
Here is what Pershing Square Capital Management has to say about Lowe’s Companies, Inc. (NYSE:LOW) in its Q4 2021 investor letter:
“Lowe’s 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 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.”
Click to continue reading and see Stock Market Recession 2022: 5 Stocks to Sell Now According to Analysts.
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Disclosure: None. Stock Market Recession 2022: 10 Stocks to Sell Now According to Analysts is originally published on Insider Monkey.
