In this article, we'll look at the 12 best countercyclical stocks to invest in. If you want to skip the introduction to what countercyclical stocks are and how they behave relative to the economy and other macroeconomic indicators, see below. Go ahead and take a look. 5 countercyclical stocks that are ideal for investment.
When we talk about classifying stocks based on their price movements in response to economic events and news, two widely used categories are consumer cyclical and consumer defensive. As the title suggests, cyclical stocks are stocks that follow business cycles. The latter, on the other hand, are also known as countercyclical stocks and are thought of as a buffer against broader stock market declines, which often occur when investors think the economy is in trouble.
This bifurcation of the stock market between cyclical and counter-cyclical stocks is based on its underlying business model. Circulating socks typically exist in high-growth industries such as consumer technology, artificial intelligence, and biotechnology. This means that a company's business model and market are dependent on factors such as consumer purchasing power, inflation, and interest rates. These three major economic indicators fluctuate depending on the economy. When economic performance is strong and authorities take an active approach to managing monetary policy, purchasing power is stable and inflation and interest rates are usually low.
Conversely, poor economic performance makes it difficult for businesses and consumers to splurge on luxury goods and big-ticket items, such as NVIDIA Corporation's (NASDAQ:NVDA) artificial intelligence processors. These processors are thought to cost a whopping $2 million each. So if companies are struggling due to an economic downturn or have difficulty raising funds due to high interest rates, they may be reluctant to buy these chips. As a result, NVIDIA becomes a cyclical stock.
NVIDIA's consumer and enterprise products are typically considered luxury goods, but at the end of the day, few people need GPUs to make a living, which is why stocks like retail giant Walmart (NYSE:WMT) It is a countercyclical stock. To be clear, countercyclicality does not mean that Walmart's stock price will rise if a recession is said to occur in the United States. Rather, it means that in such a scenario, the stock would tend to experience a smaller loss in value compared to the high-growth cyclical stocks identified above.
So why do countercyclical stocks tend to hold their ground when everyone else is looking for cover? Well, the answer is relatively simple. Walmart is a good example to illustrate, but there is an even better example of a countercyclical stock that can be a headache. This stock belongs to none other than the world's largest tobacco company, Stamford, Connecticut-based countercyclical giant Philip Morris International Inc. (NYSE:PM). Philip Morris sells highly addictive cigarettes that combine nicotine with the first type of antidepressant developed called monoamine oxidase inhibitors (MAOIs).
This leaves smokers vulnerable to a never-ending cycle of low dopamine and dopamine deficiency. buy and smoke As a result, the demand for cigarettes is inelastic not only with respect to price but also to the economic status of smokers, and investors are aware of this and buy into these stocks to protect their money during economic downturns. Spend. economic environment.
But just because countercyclical stocks are a portfolio buffer in a difficult economy doesn't mean they won't perform well when the economy is improving. In fact, one countercyclical stock that has performed well this year is Celsius Holdings (NASDAQ:CELH), whose stock price is up 42% since the beginning of the year. Here's what Artisan Partners said about the stock in his Q4 2023 investor letter:
Celsius is an energy drink company that is considered to offer healthier options than its larger competitors. We believe that Celsius' product portfolio has broad appeal, attracting new consumers and more frequent usage opportunities in the energy drink category, and that Celsius will be able to grow sales through market share gains and market expansion. I am. Additionally, the company entered into a sales partnership with PepsiCo in October 2022 in the United States, introducing the product to new distribution locations and improving penetration across existing sales locations. The end result should be improved product availability, increased brand awareness, increased sales volumes, and improved returns to scale.
With these details in mind, let's take a look at hedge funds' favorite countercyclical stocks, or consumer defensive stocks. Notable companies include Procter & Gamble Company (NYSE:PG), Walmart Inc. (NYSE:WMT), and Philip Morris International Inc. (NYSE:PM).
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our methodology
In our list of the best countercyclical stocks, we ranked the 40 most valuable countercyclical stocks in terms of market capitalization based on the number of hedge funds that bought the stock in Q4 2023.
For these top cyclical stocks, we used hedge fund sentiment. The top 10 consensus stocks selected by hedge funds have outperformed the S&P 500 index by more than 140 percentage points over the past 10 years (Please see here for the detail). That's why we pay close attention to this often ignored metric.
12 countercyclical stocks that are best for investment
12. Dollar General Corporation (NYSE:DG)
Number of hedge fund investors in Q4 2023: 47
Dollar General Corporation (NYSE:DG) is the epitome of a countercyclical stock, as consumers generally flock to Dollar General Corporation's (NYSE:DG) doors when their budgets are tight in a tough economy. This is an example. Due to its stable business model, Dollar General Corporation (NYSE:DG) is also a dividend-paying stock, with its most recent dividend being 59 cents.
By the end of Q4 2023, 47 of the 933 hedge funds surveyed by Insider Monkey had invested in Dollar General Corporation (NYSE:DG). Brandon Haley's Holocene Advisors had the largest stake, valued at $257 million.
Like Walmart (NYSE:WMT), Procter & Gamble Company (NYSE:PG), and Philip Morris International (NYSE:PM), Dollar General Corporation (NYSE:DG) is a market counter-economic Top cyclical stocks. Edge Fund Radar.
11. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of hedge fund investors in Q4 2023: 51
Mondelez International, Inc. (NASDAQ:MDLZ) is a food company that sells chocolate, biscuits, and other products. The company has been performing well financially recently, beating analyst EPS estimates in each of the last four quarters.
In terms of stock holdings in the fourth quarter of 2023, 51 of the 933 hedge funds introduced by Insider Monkey were shareholders of the company. Mondelez International, Inc. (NASDAQ: MDLZ)'s largest hedge fund shareholder is Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, with a stake of $237 million.
10. Constellation Brands, Inc. (NYSE:STZ)
Number of hedge fund investors in Q4 2023: 53
Constellation Brands, Inc. (NYSE:STZ) is an alcoholic beverage company headquartered in Victor, New York. The company won a major victory in March 2024 when a court ruled that it did not violate rival AB InBev's copyright laws through its hard seltzer products.
By the end of the last quarter of 2023, 53 of the 933 hedge funds in Insider Monkey's database had purchased or owned shares of Constellation Brands, Inc. (NYSE:STZ). Paul Marshall and Ian Wace's Marshall Wace LLP invested his $340 million, making it the largest investor.
9. Colgate-Palmolive Company (NYSE:CL)
Number of hedge fund investors in Q4 2023: 54
Colgate-Palmolive Company (NYSE:CL) is a well-known American personal care and hygiene products company. The company announced great news for investors by increasing its March 2024 dividend by 2 cents to 50 cents, a change that will take effect from the second quarter.
In the fiscal year ending December 2023, 54 of the 933 hedge funds tracked by Insider Monkey were shareholders of the company. Of these, the largest shareholder in Colgate-Palmolive Company (NYSE:CL) is Jean-Marie Eveyard's First Eagle Investment Management, with $874 million worth of stock.
8. Costco Wholesale Corporation (NASDAQ:COST)
Number of hedge fund investors in Q4 2023: 57
Costco Wholesale Corporation (NASDAQ:COST) is an American grocery retailer with global operations. In April 2024, Costco Wholesale Corporation (NASDAQ:COST) saw an increase in sales of gold and silver in its stores when a research firm outlined the potential for increased sales in this particular area. Mr. Wedbush was impressed by the well-timed advance.
Insider Monkey researched 933 hedge funds' holdings for Q4 2023 stock holdings and found 57 Costco Wholesale Corporation (NASDAQ:COST) investors. Ken Fisher's Fisher Asset Management held the largest stake worth $1.8 billion.
7. Target company (NYSE:TGT)
Number of hedge fund investors in Q4 2023: 58
Target Corporation (NYSE:TGT) is an American diversified retailer headquartered in Minneapolis, Minnesota. Growth plans for 2024 as inflation slows are at the center of Jefferies' April 2024 research note, with the research firm setting a $205 price target on Target Corporation (NYSE:TGT). and reiterated the buy rating.
As of the end of December 2023, 58 of the 933 hedge funds tracked by Insider Monkey had invested in the company. Target Corporation (NYSE: TGT)'s largest shareholder is Rick Dillon's Diamond Hill Capital, due to his $401 million investment.
6. The Coca-Cola Company (NYSE:KO)
Number of hedge fund investors in Q4 2023: 62
The Coca-Cola Company (NYSE:KO) is one of the world's largest carbonated beverage companies. The company is busy making big moves in April 2024, as it plans to partner with Marvel to market its products and launch limited edition designs.
Of the 933 hedge funds surveyed by Insider Monkey, 62 were shareholders of The Coca-Cola Company (NYSE:KO) as of Q4 2023. Warren Buffett's Berkshire Hathaway holds the largest stake, valued at $23.5 billion.You can also check out
See where The Coca-Cola Company (NYSE:KO) ranks on the list in Warren Buffett's Portfolio: 15 Longest Owned Stocks.
The Procter & Gamble Company (NYSE:PG), The Coca-Cola Company (NYSE:KO), Walmart Inc. (NYSE:WMT), and Philip Morris International Inc. (NYSE:PM) are hedge fund counter economics. It is attracting attention as a cyclical stock. Pick.
Click to continue reading and see 5. Countercyclical stocks that are ideal for investment.
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Disclosure. none. 12 countercyclical stocks that are best for investment Originally published on Insider Monkey.
