In this article, we will take a detailed look at the Top 10 Stocks to Watch as Investors Brace for Recession.
Despite some optimism in the market after President Donald Trump’s indication of possible talks with China, Wall Street analysts are warning about recession risks due to the impending impact of tariffs and an overall decline in consumer sentiment.
Adam Parker, Trivariate Research CEO, said in a recent interview with CNBC that it’s “hard” to be bullish in this market because the impact of tariffs is yet to be reflected in companies’ earnings.
Parker thinks that in the coming days, earnings reports of many companies will begin to show that we are indeed facing an economic slowdown:
“You know there’s a difference between a growth scare and and then an actual growth slowdown I think in this case it is a growth slowdown I don’t know how much of it is yet and that’s where I think the challenge is but you can’t just say oh it’s an irrational growth scare that everyone has and it’s like an uncertain I think if you have a business with pricing power if you have a business that you know you can be okay. But there’s a lot of economically sensitive businesses we’re going to hear from next week and the week after if you think about how earning season typically unfolds where we may get guidance that isn’t quite as peachy as we’ve seen from you know the original guys in the banks and then some of the higher quality tech companies have reported.”
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
For this article, we picked 10 stocks Wall Street is currently buzzing about. With each company, we have mentioned its hedge fund sentiment. 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).
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10. Powell Industries Inc (NASDAQ:POWL)
Number of Hedge Fund Investors: 26
Jim Cramer in a latest program on CNBC was asked about Powell Industries Inc (NASDAQ:POWL). Cramer said he’s bearish on the stock amid a broader slowdown in the data center industry:
“I know Powell Industries and it was in favor, kind of like an Emerson not that long ago, and suddenly it’s out of favor. If you’re willing to hold on for the next cycle, it’s fine. But I’ve got to tell you, it’s considered to be a data center play, and people think that data centers are slowing down. And that’s the case with Powell Industries too. I’m sorry, I wish I could be more positive. It’s a very inexpensive stock.”
Diamond Hill Capital Long-Short Fund stated the following regarding Powell Industries, Inc. (NASDAQ:POWL) in its first quarter 2024 investor letter:
“As valuations have risen, it has become increasingly challenging to find high-quality companies trading at interesting valuations. Accordingly, we didn’t initiate any new long positions during the quarter. However, we did introduce three new short positions, including Powell Industries, Inc. (NASDAQ:POWL), Royal Caribbean Group and YETI Holdings.
Powell Industries designs, manufactures and services complex electrical systems for several industries. While recent fundamentals have been solid, we believe the valuation has become stretched for what has historically been a highly cyclical business and accordingly initiated a new short position in Q1.”
9. Planet Fitness Inc (NYSE:PLNT)
Number of Hedge Fund Investors: 34
Jim Cramer in a latest program on CNBC gave some remarks about Planet Fitness Inc (NYSE:PLNT). Here is what he said:
“I want to know if that’s a good buy. You know, I do a memo each morning where I do the 10 things that I’m looking at, and it starts with a list of about 25 things. The only positive numbers I saw, only raising price target that I saw today, was Planet Fitness. So I took a look at it. They are doing better than expected. I think you have a winner.”
Vulcan Value Partners stated the following regarding Planet Fitness, Inc. (NYSE:PLNT) in its Q2 2024 investor letter:
“Planet Fitness, Inc. (NYSE:PLNT) pioneered the “high value, low price” (HVLP) gym model and operates over 2,500 gyms globally with 18.7 million members. Their straightforward, no-frills approach offers excellent value, appealing to a diverse and casual fitness demographic. Members enjoy a clean environment, regularly updated equipment, and accessible pricing starting at $10 per month, with their premium “Black Card” membership providing extensive benefits and access to all locations. Planet Fitness captured roughly 90% of U.S. gym membership growth from 2011-2019. The company’s dominant scale coupled with high advertising spend drives powerful growth, and the company plans to double its number of U.S. locations. Planet Fitness demonstrates robust same-store sales growth, high EBIT margins, strong returns on capital, and excellent free cash flow conversion.”
8. NXP Semiconductors NV (NASDAQ:NXPI)
Number of Hedge Fund Investors: 44
Jim Cramer was recently asked about NXP Semiconductors. Here is what he said:
“NXP Semiconductors NV (NASDAQ:NXPI), it’s a semiconductor company. It’s closely connected with autos, which means it’s a semiconductor company that I do not want to own.”
Sound Shore Management stated the following regarding NXP Semiconductors N.V. (NASDAQ:NXPI) in its Q3 2024 investor letter:
“Meanwhile, detractors of note for the quarter were connected by a common theme: signs of a slowing economy. NXP Semiconductors N.V. (NASDAQ:NXPI), a leading chip maker for the auto industry, was lower on uncertain auto demand and package hauler FedEx lagged on muted volume trends. Importantly, both of these companies have ways to increase earnings outside of the business cycle, but are not entirely immune to the recent slowdown. Business cyclicality requires investor patience and a long-term perspective – we have both.”
7. Boeing Co (NYSE:BA)
Number of Hedge Fund Investors: 52
Jim Cramer in a latest program on CNBC said that there are other better ways to gain exposure to the aerospace industry instead of Boeing Co (NYSE:BA).
“I just think that if we don’t respond correctly to help Boeing, instead of just picking them all the time—and the old regime did do some things wrong—then Boeing’s going to be a tough stock to own. But they do have a lot of cash. They don’t have great cash flow. I think it’s okay. I’d rather—I’m picking other ways to play aerospace now because Boeing seems to just have—it’s snake bit. What can I say.”
Sound Shore Management stated the following regarding The Boeing Company (NYSE:BA) in its Q4 2024 investor letter:
“The Boeing Company (NYSE:BA): A detractor for the period was global aerospace leader Boeing. We were able to purchase the stock at a prospective 10% free cash flow yield on a normalized scenario. Over the past couple of years the stock rebounded from operational challenges and had surged on improved free cash generation from increasing order activity, driven by global demand for aircraft. It was one of our best performers in the fourth quarter of 2023 after its November plane deliveries increased. When additional manufacturing issues surfaced in January 2024, we believed it would push restructuring efforts back enough to warrant a review by our team. Reacting quickly, we sold our position at a gain in the first quarter, albeit less than before the news.”
6. Starbucks Corp (NASDAQ:SBUX)
Number of Hedge Fund Investors: 76
Jim Cramer was recently asked about Starbucks Corp (NASDAQ:SBUX). He reiterated his bullish view on the stock despite China-related concerns:
“We bought some for the Charitable Trust at great price, we let it go up, we sold some, we did not sell enough. Sometimes that happens. People think that the Chinese business is going to be written down badly if they try to sell it. I have so much faith in Brian Niccol. I am a buyer of Starbucks at $83.”
ClearBridge Large Cap Growth Strategy stated the following regarding Starbucks Corporation (NASDAQ:SBUX) in its Q1 2025 investor letter:
“Drilling further down, we have been engaging with management teams of portfolio companies with production outside the U.S. to understand supply change fungibility and the ability to pass through costs to end customers. We are specifically monitoring risks to the consumer sector from tariffs because consumers have already borne the burden of several years of cost inflation pressuring wallets and some areas of spending, like dining outside the home, have easy substitutes. That said, beverage holdings Starbucks Corporation (NASDAQ:SBUX) and Monster both held up well during the quarter. Starbucks is undergoing an earnings reset under new CEO Brian Nicoll that is being well received by investors. Monster, meanwhile, benefited from price increases and strength in its international business.”
5. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Investors: 81
Jim Cramer in a latest program on CNBC urged the Trump administration to step in and apply its deregulation principles to Johnson & Johnson’s (NYSE:JNJ) legal scenario.
“Johnson & Johnson, amazing company, reported today, trying to resolve a gigantic number of lawsuits involving talc that may have caused cervical cancer. The company had offered more than $8 billion to settle the cases. Some 83% of the plaintiffs accepted the deal, but a small group of plaintiffs convinced the judge to throw out the settlement. Now J&J is going to fight each case individually in the same old system of jackpot justice we’re so used to. Very bad for a lot of victims, and J&J’s now willing to settle. The administration could easily weigh in and end this plaintiff supremacy issue, an edict banning jackpot justice. Where are the capitalist instincts here?
Recently, a US bankruptcy judge rejected Johnson & Johnson’s (NYSE:JNJ) $10 billion proposal to end tens of thousands of lawsuits alleging that its baby powder and other talc products cause ovarian cancer.
4. Netflix Inc (NASDAQ:NFLX)
Number of Hedge Fund Investors: 121
Malcolm Ethridge, Capital Area Planning Group managing partner, said in a latest program on CNBC that Netflix Inc (NASDAQ:NFLX) has become a defensive play to buy as the company is poised to do well despite a recession risk.
“Netflix is one of those that ironically has become a bit of a defensive play right now in an environment where consumer spending has definitely changed, right? Where consumers aren’t necessarily spending on bigger ticket items and maybe not traveling so much. What they are willing to still continue to pay for is that home entertainment, and probably adding more subscribers in this quarter, in the next couple, as we are concerned about a recession. Netflix is probably going to be one of the bigger winners in that space. And so I think that the report right here just showed the strength of that name, even though you would assume the consumer would be pulling back on subscription services in the entertainment space.”
Harding Loevner Global Developed Markets Equity Strategy stated the following regarding Netflix, Inc. (NASDAQ:NFLX) in its Q4 2024 investor letter:
“During the quarter, we benefited from strong stocks within the Communication Services and Consumer Discretionary sectors. Netflix, Inc. (NASDAQ:NFLX) was our top relative contributor; the company provided a favorable outlook for subscriber growth in 2025 and made progress in two key areas, live TV and advertising. The streaming service broadcast its first sporting events, including two National Football League games on Christmas, and said that the ad-supported plan it launched two years ago amassed 70 million subscribers, more than investors expected.”
3. Apple Inc (NASDAQ:AAPL)
Number of Hedge Fund Investors: 158
Jim Cramer in a latest program on CNBC said that Apple Inc (NASDAQ:AAPL) has created “millions” of services jobs and invested heavily in the US. However, President Donald Trump’s tariffs are impacting the company and the government is not paying attention to the iPhone maker’s contributions:
“Apple’s done so much to create new jobs in this country, but there are not many manufacturing jobs, although they have partnered with other companies to do a lot of manufacturing here. Instead, Apple creates service jobs, especially in software — millions of them. That’s a pillar of our economy. But for whatever reason, nobody in Washington seems to care that much about protecting the all-important service sector. Bizarrely, with this administration, service jobs don’t seem to count. So when Trump comes back in and starts talking tariffs, Apple knows it’s a jam. They commit to doing more than $500 billion worth of investments in this country over the next four years. Could there be a quid pro quo? Does Apple get anything for that 500 billion? Yes. It gets a real expensive country to do business in, with not enough engineers to go around because our country doesn’t produce a lot of them.”
In February, Apple (NASDAQ:AAPL) announced plans to spend and invest more than $500 billion in the US over the next four years.
Apple Inc (NASDAQ:AAPL) is desperately in need of new catalysts. The company’s revenue in China fell 8% in fiscal year 2024, following a 2% decline the previous year. The Chinese market accounts for about 15% of Apple’s total revenue, so this downtrend cannot be ignored.
Investors had hopes from the Wearables, Home, and Accessories segment, but so far, its performance has been weak. Vision Pro faces tough competition from Meta’s $500 Quest and the more affordable Quest 3S, making it hard to justify its $3,500 price tag. The failure of Apple’s HomePod, unable to compete with Amazon’s and Google’s lower-priced offerings, further highlights the challenges in this market.
Apple’s iPhone 16 has not shown promising growth prospects yet, and investors are still in a wait-and-see mode on the AI platform.
2. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 193
Doug Clinton, Intelligent Alpha founder and CEO, explained in a latest program on CNBC why NVIDIA Corp (NASDAQ:NVDA) remains his top AI pick. The analyst said that the demand for the company’s chips will remain strong.
“Nvidia is still our top AI pick. And I know that that is probably at this point exhausting to hear. The stock has not worked this year. It really hasn’t worked the last 6 months. But I think if you look at the bottom line, 21 times forward earnings, I think those earnings are pretty solid. We’ve derisked the China issue now with the H20 ban. And I don’t think that the hyperscalers, no matter what happens in the economy, are going to stop spending on Nvidia chips. So that is still the name that our models are sticking with.”
Answering a question about the potential impact of price declines of chips, the analyst said that the use cases for the AI technology will increase over time:
“This happens always in tech, right? Prices come down and the ability of whether it’s software or hardware improves over time. That’s the story of technology. But I think the other side of the AI bull market is really what is the consumer side, what is the enterprise side for demand for these products. And what we’re seeing over the last 3 months — and I don’t think this is being reflected in stocks at all — is that there is huge demand for these products. And I think it’sre increasing and even accelerating with the 03 model launched last week from Open AI. You have Grok from xAI. You have Gemini’s new model from Google. All three of them have said they have capacity constraints in terms of what they can serve to customers right now. I think the demand will be there to force more chip buying even if prices do come down.”
Alger Spectra Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2025 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality, and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super-computing parallel processing techniques for solving complex computational problems. In our view, Nvidia’s computational power is a critical enabler of AI and therefore essential to AI adoption. During the quarter, shares detracted from performance due to several factors. In January 2025, investor concerns grew regarding the emergence of advanced AI models from China, reportedly developed at lower costs and with reduced computing requirements, raising doubts about Nvidia’s market dominance. Additionally, U.S. President Donald Trump’s announcement of new tariffs targeting industries increased worries about higher operational costs. Despite these headwinds, Nvidia reported robust fiscal fourth-quarter results, highlighted by significant revenue growth driven by its data center segment. On the earnings call, CEO Jensen Huang emphasized the increasing computational requirements of future AI models, noting, “The more computation, the more the model thinks, the smarter the answer,” and adding that future reasoning models could demand substantially more compute resources. We believe Nvidia’s leadership in scaling AI infrastructure—including advancements in inference and reasoning during inference—continues to drive adoption among enterprises and startups, ensuring sustained demand for its high performance chips and software solutions. As older-generation chips are repurposed and new clusters deployed, we see Nvidia as well-positioned to capitalize on rising computational needs across AI applications.”
1. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 235
Jim Cramer in a latest program on CNBC criticized the government over Meta Platforms Inc (NASDAQ:META) legal issues.
“Does the government have nothing else to do except they keep prosecuting Meta for having too much market power? If Meta had so much darn market power, why is TikTok—the Chinese TikTok—kicking their butt, running rings around them? What’s the point of hobbling this one social media that can compete with the Chinese? I don’t get that. Waste of time.”
The FTC is seeking to force Meta Platforms Inc (NASDAQ:META) to restructure or sell Instagram and WhatsApp.
In 2025, Meta sees total operating expenses in a range of $114-$119 billion, with 19-25% y/y growth. Capex is expected to rise 61-74% y/y to $60-$65 billion, compared to just $37.3 billion in FY24. Advertising rose strongly but analysts believe it should be seen in the context of higher political ad spend and holiday quarter perspective. In 2025, the company might not be able to keep reporting double-digit growth in ad pricing amid weaker consumer spending and a cautious macroeconomic backdrop.
In the long term, Meta shares are expected to grow because of AI. How?
Meta Platforms (NASDAQ:META) is driving usage and ads revenue by improving its algorithms and user experience thanks to AI. Meta Platforms (NASDAQ:META)’s advancements in Reels and WhatsApp are helping manage CapEx growth as the company strives to stay competitive in AI. Meta Platforms (NASDAQ:META)’s substantial user base of 3.3 billion provides a data and distribution edge that could capture a significant share of the GenAI market.
Nightview Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:
“Core Opportunity: Meta Platforms, Inc.’s (NASDAQ:META) platforms—Instagram, Facebook, WhatsApp, and Messenger—reach nearly half the world’s population daily, making it one of the most powerful advertising ecosystems globally. With investments in AI and augmented reality (AR), we believe Meta is also creating significant optionality for long-term growth.
Competitive Advantage: Thriving Core Platforms: In Q3, we saw Meta achieve a 23% YoY revenue growth,—a testament to strong user engagement across its ecosystem. The advertising landscape as a whole continues to evolve and we believe Meta’s existing platforms offer a defined advantage in this new world. Existing platforms in the age of AI continue to be the most powerful indicator of future success in our opinion.
AI Leadership: Meta’s AI capabilities and the Llama AI model are driving efficiency and product innovation. In our view, these assets have been under-appreciated by the market while enhancing Meta’s ability to further scale and innovate its leading advertising business…” (Click here to read the full text)
While we acknowledge the potential of Meta Platforms, Inc. (NASDAQ:META) as an investment, our conviction lies in the belief that under the radar 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 META but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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