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In this piece, we will take a look at the twelve best bear market stocks to buy now. For more stocks, head on over to 5 Best Bear Market Stocks to Buy Now.
The ongoing hawkish interest rate hikes by the Federal Reserve and inflationary pressures from high oil prices and the Russian invasion of Ukraine have decimated the stock market and led to a bearish rally that has resulted in major stock indexes bleeding one third of their value year to date just as they had started to recover from the coronavirus pandemic.
Such an environment merits a cautious investment approach and careful stock picking, as it requires the investor to sift out companies with stable cash flows or products that are expected to withstand recessionary pressures. The latter is especially important since interest rate hikes will lead to a recession - and analysts right now only differ about its timing.
Ken Fisher, the founder of the renowned hedge fund Fisher Investments, shared his thoughts and commented that even though the market is wary of consistent interest hikes, it increases the motivation for banks to lend. Mr. Fisher outlined that:
So let me just say that when I was very young before I was an adult, Milton Friedman was saying that the central banks fiddling with interest rates thinking they can predict what that will do to the economy is beyond ridiculous and mostly, it doesn't allow you to impact the economy very directly. When I was young, the deposit base the banks lend off of was overwhelmingly, time deposits cost them money, and the spread between what they took money in at and what they lend it out at was a form of a gross margin, and the bigger that spread, the eager they became to lend the more that it was small i.e. the flattened or inverted yield curve, the less they were. But today 93% of U.S. bank lending base is interest free, free money, so the more the Federal Reserve raises rates, the more it increases the incentive of banks to lend. Which is, again, something I don't see why they don't understand that. But if you look at this period, the more inflation's gone up, the more corporate margins have gone up. Analogous not understood. Share buybacks remain strong, corporate bond spread. . . uh commercial lending through September's up 11% year over year.
With these details in mind, let's take a look at some top bear stocks, with the top three in our list being Walmart Inc. (NYSE:WMT), Bank of America Corporation (NYSE:BAC), and Berkshire Hathaway Inc. (NYSE:BRK-B).
Photo by Chris Liverani on Unsplash
Our Methodology
We studied countless different firms out there to gauge their business models and markets, following which we sifted companies that are not significantly reliant on high incomes or purchasing power for their revenues. We preferred strong defensive plays that also pay dividends and can easily survive through the current economic turmoil. The firms were then analyzed through their recent financial performance and listed through Insider Monkey's Q2 2022 survey of 895 hedge funds.
Best Bear Market Stocks to Buy Now
12. Delek Logistics Partners, LP (NYSE:DKL)
Number of Hedge Fund Holders: N/A
Delek Logistics Partners, LP (NYSE:DKL) is a logistics asset owner and operator that is headquartered in Brentwood, Tennessee, the United States. The firm transports and sells crude oil and derivative products all over America.
Delek Logistics Partners, LP (NYSE:DKL) is one of the most stable companies in its industry, simply due to the nature of its contracts. All of its contracts are long term in nature, and their periods start from five years and go as long as fifteen years. This insulates Delek Logistics Partners, LP (NYSE:DKL) from macroeconomic downturns, such as the one the markets are wary of right now.
Delek Logistics Partners, LP (NYSE:DKL) has also grown its operating and net incomes consistently since 2016. It also pays a 99 cent dividend for a 7.46% yield.
Delek Logistics Partners, LP (NYSE:DKL) joins our list of top bear market stocks, alongside others such as Bank of America Corporation (NYSE:BAC), Walmart Inc. (NYSE:WMT), and Berkshire Hathaway Inc. (NYSE:BRK-B).
11. CVR Partners, LP (NYSE:UAN)
Number of Hedge Fund Holders: 4
CVR Partners, LP (NYSE:UAN) is an American fertilizer company that manufactures and sells nitrogen based fertilizer products. These include urea and ammonium nitrate fertilizers, and the firm is headquartered in Sugar Land, Texas.
CVR Partners, LP (NYSE:UAN) is another company that is relatively insulated from the inflationary impact on consumer purchasing powers since its products are directly tied to food production. This is boosted by the fact that rainfall deficits in Asia have harmed Chinese and Indian rice and food production, and demand at U.S. food banks continues to increase.
Another testament to CVR Partners, LP (NYSE:UAN)'s bear market potential is the fact that its share price has appreciated by a whopping 48% year to date, outperforming all major stock indexes and providing investors relief. To further sweeten the deal, the company also pays a $5.2 dividend for a massive 16.6% yield.
CVR Partners, LP (NYSE:UAN)'s largest investor in our database is Ken Griffin's Citadel Investment Group which owns 43,651 shares that are worth $4.3 million. By Q2 of 2022 end, four out of the 895 hedge funds polled by Insider Monkey had invested in the company.
10. Enterprise Products Partners L.P. (NYSE:EPD)
Number of Hedge Fund Holders: 23
Enterprise Products Partners L.P. (NYSE:EPD) is a midstream products and services provider to crude oil, natural gas, and petrochemical refiners and consumers in the U.S. The firm is headquartered in Houston, Texas.
Enterprise Products Partners L.P. (NYSE:EPD) is slated to heavily benefit from the growth in natural gas demand, particularly in the wake of the Russian invasion of Ukraine that has led to a gas starved Europe looking at alternatives. This has already started to reflect in the firm's balance sheets, with its operating income of $1.7 billion growing by ~$300 million annually. At the same time, Enterprise Products Partners L.P. (NYSE:EPD)'s net income has also grown by $246 million.
Enterprise Products Partners L.P. (NYSE:EPD)'s share price has also appreciated by more than 10% year to date, and the firm pays a 47 cent dividend for a 7.6% yield. 23 out of the 895 hedge funds polled by Insider Monkey for their second quarter of 2022 investments had held a stake in the company.
Out of these, Enterprise Products Partners L.P. (NYSE:EPD)'s largest investor is Bruce Berkowitz's Fairholme (FAIRX) which owns 3.5 million shares that are worth $87 million.
9. Conagra Brands, Inc. (NYSE:CAG)
Number of Hedge Fund Holders: 30
Conagra Brands, Inc. (NYSE:CAG) is a consumer packaged food company that is one of the oldest of its kind as it was set up in 1861 and is headquartered in Chicago, Illinois, the United States.
Conagra Brands, Inc. (NYSE:CAG)'s latest fiscal quarter revealed that business is booming even as stock markets tumble. The firm's revenue grew by 9.5% to $2.9 billion, and it even managed to withstand the stronger U.S. dollar, with currency changes having a mere 0.2% effect on its sales. However, its volumes dropped, as higher prices likely reduced customer purchases.
Conagra Brands, Inc. (NYSE:CAG) also regularly returns investor capital, and in its previous quarter, the firm repurchased $50 million worth of shares. At the same time, it also pays a 33 cent dividend for a 4% yield, and the share price has dropped by a mere 3.5% year to date. Insider Monkey's 895 hedge fund survey for this year's second quarter saw 30 investors in the company.
Conagra Brands, Inc. (NYSE:CAG)'s largest investor is Ken Griffin's Citadel Investment Group which owns 4.4 million shares that are worth $153 million.
8. Raytheon Technologies Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 45
Raytheon Technologies Corporation (NYSE:RTX) is an American defense manufacturer that is well known for its missiles that add the bite to aircraft systems such as the F-16, the F-35, and the F-22 Raptor. Its most well known missile is the Advanced Medium Range Air to Air (AMRAAM) missile, and the firm also manufactures aircraft engines.
Raytheon Technologies Corporation (NYSE:RTX) is one of the strongest firms in the defense sector when analyzed solely through financial metrics such as earnings per share (EPS) growth and price to earnings (P/E) ratios. The firm is expected to grow its EPS by 19.5% next year, the largest in its group, and its P/E ratio is 20% below its five year average forward P/E.
Raytheon Technologies Corporation (NYSE:RTX) has held its ground in this year's market storm, as its shares have depreciated by only 3%. The company also pays a 55 cent dividend for a 2.62% yield. By the end of this year's second quarter, 45 out of the 895 hedge funds polled by Insider Monkey had also bought the company's shares.
Raytheon Technologies Corporation (NYSE:RTX)'s largest investor in our database is Ken Fisher's Fisher Asset Management which owns 8.4 million shares that are worth $808 million.
7. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 55
Lockheed Martin Corporation (NYSE:LMT) is another American defense company that is responsible for designing and manufacturing some of the world's most advanced fighter jets. The crown jewel in its portfolio is the F22 Raptor, which is the only operational fifth generation fighter aircraft in the world, and its F-35 platform is expected to vastly augment the United States Air Force's and allied air force's operational capabilities.
Lockheed Martin Corporation (NYSE:LMT) is well equipped to weather the macroeconomic storm simply due to the fact that it has long term contracts with the U.S. government. The aftermath of the Russian invasion of Ukraine has also spurred a global increase in defense budgets and governments such as the United Kingdom's plan to spend more. For example, the House Armed Services Committee has proposed a $37 billion increase in defense expenditure for the fiscal year 2023.
Lockheed Martin Corporation (NYSE:LMT)'s shares have rallied by 14% year to date, and the company pays a $2.8 dividend for a 2.77% yield. Insider Monkey's 895 hedge fund study for this year's second quarter saw 55 investors in the firm.
Lockheed Martin Corporation (NYSE:LMT)'s largest investor in this database is Rajiv Jain's GQG Partners which owns 2 million shares that are worth $877 million.
Old West Investment Management mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
“As I sat in the theater watching Top Gun: Maverick, it gave me tremendous pride knowing we are shareholders of Lockheed Martin (NYSE:LMT). When the Top Gun: Maverick team was looking to push the envelope and stand true to Maverick’s need for speed, LMT’s Skunk Works was their first call. With Skunk Works expertise in developing the fastest known aircraft along with a passion for defining the future of aerospace, LMT is at the epicenter of our nation’s defense.
Based in Bethesda, Maryland, LMT is an American aerospace arms, defense, information security and technology company. LMT employs 115,000 people worldwide, including 60,000 engineers and scientists. LMT is the world’s largest defense contractor. They manufacture the F-16, F-22 and F-35 fighter jets, Sikorsky Black Hawk helicopters, Skunk Works technology, Javelin, Himars, and Tomahawk missile systems and much more…” (Click here to see the full text)
6. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 60
The Coca-Cola Company (NYSE:KO) is the world's most well known beverage brand that sells carbonated drinks. The company is headquartered in Atlanta, Georgia, the United States.
The Coca-Cola Company (NYSE:KO)'s share price has returned 52% over the past five years and 112% over the past ten years and its revenue has grown at a compounded annual growth rate (CAGR) of 3.5% over the past twelve months. Additionally, by the end of its second fiscal quarter, the demand for The Coca-Cola Company (NYSE:KO)'s beverages grew by 8.4% in the U.S. and 19% internationally.
The Coca-Cola Company (NYSE:KO)'s shares have also held their ground year to date, after dropping by less than 10%. The company pays a 44 cent dividend for a 3.23% yield. Insider Monkey analyzed 895 hedge fund portfolios for their second quarter of 2022 holdings to discover that 60 had held a stake in the company.
Warren Buffett's Berkshire Hathaway is The Coca-Cola Company (NYSE:KO)'s largest investor. It owns 400 million shares that are worth $25 billion.
Along with Berkshire Hathaway Inc. (NYSE:BRK-B), Bank of America Corporation (NYSE:BAC), and Walmart Inc. (NYSE:WMT), The Coca-Cola Company (NYSE:KO) is a strong bear market stock.
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Disclosure: None. 12 Best Bear Market Stocks to Buy Now is originally published on Insider Monkey.
