The Centers for Disease Control and Prevention (CDC) in the United States on July 28 asked Americans who had been vaccinated against the coronavirus to start wearing masks in public indoor spaces again. The announcement follows a dramatic rise in the number of Delta variant cases of COVID-19 in parts of the country and reverses an earlier position by the health body that said vaccinated people did not need to wear masks indoors. The U-turn has naturally sparked fears of another wave of the virus hitting the US and shuttering business.
Over the past few weeks, virus lockdown fears coupled with inflation worries have battered the stock market, dampening hopes of a quick recovery from the 2020 lockdowns. On July 19, the Dow Jones Industrial Average tumbled 725 points, representing a percentage decrease of over 2%, and the weekly relative strength indicator of the S&P 500 also dropped by about 0.47%. Investors are thus taking the necessary precautions and offloading shares of cyclical stocks to invest in firms that can weather the coming storm.
Some of the best bear market stocks on the market presently include Apple Inc. (NASDAQ: AAPL), Berkshire Hathaway Inc. (NYSE: BRK-A), and Union Pacific Corporation (NYSE: UNP), among others. These are discussed in detail below. Airlines, cruise operators, and energy firms are beating the brunt of this activity. Coupled with the Chinese government crackdown against dual-listed firms, some of which do roaring business in the US, there is little doubt that the some parts of the stock market is now officially in the bear market after a record bull run over the past few months.
The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and May 29th 2021 our monthly newsletter’s stock picks returned 206.8%, vs. 91.0% for the SPY. Our stock picks outperformed the market by more than 115 percentage points. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Bear Market Stocks to Buy Now
12. AutoNation, Inc. (NYSE: AN)
Number of Hedge Fund Holders: 24
AutoNation, Inc. (NYSE: AN) is a Florida-based firm that retails automotives. It is ranked twelfth on our list of 12 best bear market stocks to buy now. The company's shares have returned 136% to investors over the past twelve months. On July 27, the firm announced a senior notes offering worth $850 million. In earnings results for the second quarter, posted on July 19, the firm beat market expectations on revenue and earnings per share.
On July 20, investment advisory Truist raised the price target on AutoNation, Inc. (NYSE: AN) stock to $110 from $100 but kept a Hold rating on the stock, underlining the earnings beat of the firm and noting the favorable supply-demand dynamics heading into 2022.
Out of the hedge funds being tracked by Insider Monkey, Ricky Sandler's Eminence Capital is the leading shareholder of AutoNation, Inc. (NYSE: AN) with 1.5 million shares worth more than $139.7 million.
11. Lockheed Martin Corporation (NYSE: LMT)
Number of Hedge Fund Holders: 50
Lockheed Martin Corporation (NYSE: LMT) stock has returned 5.4% to investors in the past six months. It is placed eleventh on our list of 12 best bear market stocks to buy now. The firm operates from Maryland and markets security and aerospace services. In earnings results for the second quarter, posted on July 26, the firm reported earnings per share of $7.13, beating market predictions by $0.61. The revenue over the period was more than $17 billion, up 5% year-on-year and beating estimates by $100 million.
On May 12, investment advisory Wells Fargo initiated coverage on Lockheed Martin Corporation (NYSE: LMT) stock with an Equal Weight rating and a price target of $384. Matthew Akers, an analyst at the firm, issued the ratings update.
Out of the hedge funds being tracked by Insider Monkey, New York-based firm Arrowstreet Capital is a leading shareholder in Lockheed Martin Corporation (NYSE: LMT) with 1.5 million shares worth more than $590 million.
In its Q4 2020 investor letter, RiverPark Advisors, LLC, an asset management firm, highlighted a few stocks and Lockheed Martin Corporation (NYSE: LMT) was one of them. Here is what the fund said:
“Despite better-than-expected third quarter results, LMT shares were weak for the quarter as defense spending is expected to be flat for the coming year. With a record $150 billion backlog and almost 30% of its revenue coming from building F-35 aircraft with deliveries forecast to reach 180 per year in 4-5 years (3Q’s revenue upside was from the F-35), we believe LMT should grow at a higher rate than overall defense budget growth and Street expectations over the next several years. Further, strategic acquisitions (LMT acquired AJRD for $4 billion in late December), debt pay down, a 3% dividend yield, and continued share buybacks from $6 billion per year of free cash flow should lead to even greater shareholder returns.”
10. Costco Wholesale Corporation (NASDAQ: COST)
Number of Hedge Fund Holders: 56
Costco Wholesale Corporation (NASDAQ: COST) is a firm that owns and operates membership-only retail stores around the world. It is based in Washington. The stock has returned more than 32% to investors over the course of the past twelve months. The company has a market cap of over $189 billion and posted more than $166 billion in revenue last year. Apart from being one of the largest retail outlets in the world, the firm also boasts a large retail sale of meat products like beef and rotisserie chicken. On July 23, investment advisory Stifel maintained a Buy rating on Costco Wholesale Corporation (NASDAQ: COST) stock and raised the price target to $440 from $420, noting that it expected the retailer to raise membership fees by at least 8% in the next twelve months. At the end of the first quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $4 billion in Costco Wholesale Corporation (NASDAQ: COST), down from 61 in the preceding quarter worth $3.6 billion. In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and Costco Wholesale Corporation (NASDAQ: COST) was one of them. Here is what the fund said:
“We saw these dynamics at play in the Fund. Some of the worst-performing stocks this quarter were among our best performers in Q1 2020. Another example was the market’s reaction to Costco Wholesale (1.5% weight in the Fund) during the quarter. From December 31, 2020 to March 8th, Costco shares declined 17% and dropped below their pre-pandemic high. The common rationale offered by sell-side analysts was that Costco would face difficult one-year “comps” (i.e. same-store sales, which compare sales from stores open for at least a year). Because so many consumers rushed to Costco ahead of shelter-in-place and subsequent quarantines, it will be harder for Costco to meaningfully beat those results when compared year-over-year. That may indeed be true, but we struggle to understand how Costco could be “less valuable” than it was a year earlier when it concurrently increased its membership base by over 7%, or 3.9 million members. With membership renewal rates around 90%, the vast majority of the new customers Costco brought in last year will be around for years to come.
Analysts also complained about Costco raising its already industry-leading minimum wage to $16/hour, with an average “effective” pay of $23-$24/hour when you include overtime and bonuses. Costco paying its employees “too much” has been a common gripe of Wall Street analysts for at least two decades. While the extra pay does indeed impact short-term profit margins, it also serves to make Costco more durable, as its flywheel (i.e. a virtuous value cycle) starts with happy employees. A 20-year chart of Costco stock price is evidence that this strategy works and we’re confident that it will continue to work.”
9. The Coca-Cola Company (NYSE: KO)
Number of Hedge Fund Holders: 61
The Coca-Cola Company (NYSE: KO) is a Georgia-based beverage company. It is ranked ninth on our list of 12 best bear market stocks to buy now. The company’s shares have returned 18% to investors over the past year. The firm posted earnings for the second quarter on July 21, reporting earnings per share of $0.68, beating market estimates by $0.12. The revenue over the period was $10 billion, up 42% compared to the revenue over the same period last year and beating estimates by $800 million.
On July 26, investment advisory Truist reiterated a Buy rating on The Coca-Cola Company (NYSE: KO) stock and raised the price target to $65 from $60, citing the solidity the firm offered as the Delta variant of COVID-19 threatened more lockdowns.
Out of 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 $21 billion.
8. AT&T Inc. (NYSE: T)
Number of Hedge Fund Holders: 63
AT&T Inc. (NYSE: T) is placed eighth on our list of 12 best bear market stocks to buy now. The stock has returned 0.91% to investors over the past week. The company markets telecommunication, technology, and media services. It is headquartered in Texas. On July 22, the firm reported earnings for the second quarter, posting earnings per share of $0.89, beating market estimates by $0.09. The revenue over the period was $44 billion, up 7% year-on-year and beating market predictions by $1.2 billion.
On July 26, investment advisory Deutsche Bank maintained a Buy rating on AT&T Inc. (NYSE: T) stock and raised the price target to $37 from $34, appreciating the strong quarterly results posted by the telecom company earlier.
At the end of the first quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $3.7 billion in AT&T Inc. (NYSE: T), up from 58 in the previous quarter worth $1 billion.
Just like Apple Inc. (NASDAQ: AAPL), Berkshire Hathaway Inc. (NYSE: BRK-A), and Union Pacific Corporation (NYSE: UNP), AT&T Inc. (NYSE: T) is one of the best bear market stocks to buy now.
In its Q1 2021 investor letter, Nelson Capital Management, an asset management firm, highlighted a few stocks and AT&T Inc. (NYSE: T) was one of them. Here is what the fund said:
"Nelson Capital stayed busy in the first quarter, making several adjustments within our core portfolio. In the communication services sector, we sold AT&T (tkr: T). Over the years, AT&T has made several poor acquisitions, especially in the content realm, leaving the company saddled with debt and unable to change directions.”
7. The Procter & Gamble Company (NYSE: PG)
Number of Hedge Fund Holders: 70
The Procter & Gamble Company (NYSE: PG) is an Ohio-based firm that makes and sells consumer packaged goods. It is ranked seventh on our list of 12 best bear market stocks to buy now. The company’s shares have returned 10% to investors over the past year. On July 13, the firm declared a quarterly dividend of $0.8698 per share, in line with previous. The forward yield was 2.54%. In the previous quarter, the firm had beat market estimates on earnings per share and revenue.
On June 23, investment advisory UBS initiated coverage of The Procter & Gamble Company (NYSE: PG) stock with a Neutral rating and a price target of $138, underlining it had a cautious near-term outlook on the firm amid inflation worries.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Cedar Rock Capital is a leading shareholder in The Procter & Gamble Company (NYSE: PG) with 8.7 million shares worth more than $1.1 billion.
Alongside Apple Inc. (NASDAQ: AAPL), Berkshire Hathaway Inc. (NYSE: BRK-A), and Union Pacific Corporation (NYSE: UNP), The Procter & Gamble Company (NYSE: PG) is one of the best bear market stocks to buy now.
6. Bristol-Myers Squibb Company (NYSE: BMY)
Number of hedge fund holders: 81
Bristol-Myers Squibb Company (NYSE: BMY) is ranked sixth on our list of 12 best bear market stocks to buy now. The company’s shares have offered investors returns exceeding 13% over the course of the past twelve months. The firm makes and sells biopharmaceutical products and is headquartered in New York. On May 25, the firm announced that it had entered into a partnership with Xencor to provide the latter with non-exclusive access to the Xtend Fc technology.
On July 27, investment advisory Mizuho maintained a Buy rating on Bristol-Myers Squibb Company (NYSE: BMY) stock with a price target of $86, noting the potential offered by a new deal the company had signed with BridgeBio.
At the end of the first quarter of 2021, 81 hedge funds in the database of Insider Monkey held stakes worth $5 billion in Bristol-Myers Squibb Company (NYSE: BMY), down from 131 in the preceding quarter worth $6 billion.
Apple Inc. (NASDAQ: AAPL), Berkshire Hathaway Inc. (NYSE: BRK-A), and Union Pacific Corporation (NYSE: UNP) are some of the best bear market stocks to buy now, just like Bristol-Myers Squibb Company (NYSE: BMY).
In its Q4 2020 investor letter, Wedgewood Partners, an asset management firm, highlighted a few stocks and Bristol-Myers Squibb Company (NYSE: BMY) was one of them. Here is what the fund said:
“Bristol-Myers Squibb recently reported accelerating sales as much of the medical services industry returned to work. The Company continues to expect double-digit earnings growth over the next few years, driven by existing drugs, in addition to a broad pipeline of new drugs and indications. While the market remains fixated on a couple of patent expirations that could occur over the next several years, we think this is well-known at this point, yet the market still undervalues a couple of key acquisitions the Company has made in the past few years, particularly Celgene, which was acquired for a song.”
5. Johnson & Johnson (NYSE: JNJ)
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE: JNJ) stock has offered investors returns exceeding 17% over the course of the past year. It is placed fifth on our list of 12 best bear market stocks to buy now. The firm markets healthcare services and is based in New Jersey. On July 21, a day after beating market estimates on earnings per share and revenue for the second quarter, the company announced that it was expecting around $2.5 billion from the sale of the single-shot COVID-19 vaccine that it had developed.
On July 2, investment advisory Cantor Fitzgerald reiterated an Overweight rating on Johnson & Johnson (NYSE: JNJ) stock with a price target of $200, noting the positive new developments for the single-shot COVID-19 vaccine marketed by the firm.
At the end of the first quarter of 2021, 81 hedge funds in the database of Insider Monkey held stakes worth $6.9 billion in Johnson & Johnson (NYSE: JNJ), the same as in the previous quarter worth $5.8 billion.
4. Union Pacific Corporation (NYSE: UNP)
Number of Hedge Fund Holders: 75
Union Pacific Corporation (NYSE: UNP) is a Nebraska-based railroad firm. It is ranked fourth on our list of 12 best bear market stocks to buy now. The company’s shares have returned 25% to investors over the past year. In earnings results for the second quarter, posted on July 22, the firm reported earnings per share of $2.72, beating market estimates by $0.17. The revenue over the period was more than $5.5 billion, up close toi 30% from the revenue over the same period last year and beating estimates by $110 million.
On July 6, investment advisory Loop Capital upgraded Union Pacific Corporation (NYSE: UNP) stock to Buy from Hold with a price target of $269. Rick Paterson, an analyst at the firm, issued the ratings update.
At the end of the first quarter of 2021, 75 hedge funds in the database of Insider Monkey held stakes worth $4.6 billion in Union Pacific Corporation (NYSE: UNP), up from 68 in the preceding quarter worth $3.5 billion.
In its Q1 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Union Pacific Corporation (NYSE: UNP) was one of them. Here is what the fund said:
“There was a slight change in Vltava Fund’s portfolio in the first quarter. We sold shares of Union Pacific. It was one of three stocks we bought a year ago at the market bottom. Although from a P/E viewpoint this was one of our most expensive purchases ever, the shares worked out quite well, and, when they were more than 90% higher at the beginning of this year, we decided to take profit and put the money into stocks with more attractive valuations.”
3. T-Mobile US, Inc. (NASDAQ: TMUS)
Number of Hedge Fund Holders: 98
T-Mobile US, Inc. (NASDAQ: TMUS) is a Washington-based mobile telecommunications firm. It is ranked third on our list of 12 best bear market stocks to buy now. The company’s shares have returned 38% to investors over the past year. In earnings results for the first quarter, posted on May 4, the firm reported earnings per share of $0.74, beating market predictions by $0.18. The revenue over the period was close to $20 billion, up 78% compared to the revenue over the same period last year and beating estimates by $880 million.
On July 19, investment advisory KeyBanc reiterated an Overweight rating on T-Mobile US, Inc. (NASDAQ: TMUS) stock and raised the price target to $160 from $155, highlighting that the firm was positioned to grow and take share in the wireless market.
Out of the hedge funds being tracked by Insider Monkey, Greenwich-based investment firm Viking Global is a leading shareholder in T-Mobile US, Inc. (NASDAQ: TMUS) with 10.2 million shares worth more than $1.2 billion.
2. Berkshire Hathaway Inc. (NYSE: BRK-A)
Number of Hedge Fund Holders: 111
Berkshire Hathaway Inc. (NYSE: BRK-A) stock has offered investors returns exceeding 45% over the course of the past year. It is placed second on our list of 12 best bear market stocks to buy now. The company is headquartered in Nebraska and has interests in several businesses, acting as a holding firm for all of them. The holding firm has a market cap of over $637 billion and posted more than $245 billion in revenue last year. The firm is headed by legendary value investor Warren Buffett,
In earnings results for the first quarter, posted on May 1, Berkshire Hathaway Inc. (NYSE: BRK-A) reported earnings per share of $5.09 and a revenue of more than $64 billion. Most of the investment portfolio of the holding company is concentrated in just four entities.
At the end of the first quarter of 2021, 111 hedge funds in the database of Insider Monkey held stakes worth $19 billion in Berkshire Hathaway Inc. (NYSE: BRK-A), up from 110 in the preceding quarter worth $20 billion.
In its Q1 2021 investor letter, Vltava Fund, an asset management firm, highlighted a few stocks and Berkshire Hathaway Inc. (NYSE: BRK-A) was one of them. Here is what the fund said:
“Despite the considerable rise in stock markets over the past year, there are still many attractive opportunities. Human nature also is playing a bit into our hands. Investor crowds often chase popular stocks, hot IPOs, or mysterious SPACs and completely leave aside stocks they consider boring and not sexy enough. A typical example of this category is our long-term largest position in Berkshire Hathaway. Since we bought it for the first time, its price has nearly quadrupled and yet it remains just as undervalued today as it was at that time. Considering the current rate at which it is buying back its own shares and the amount of cash that Berkshire Hathaway has, my greatest wish as a shareholder is for the company’s share price to remain as low as possible for as long as possible.”
1. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 127
Apple Inc. (NASDAQ: AAPL) is ranked first on our list of 12 best bear market stocks to buy now. The company’s shares have offered investors returns exceeding 57% over the course of the past twelve months. The company is based in California and has interests in a variety of tech-related business, including the production and sale of electronics. On July 27, the firm posted earnings for the third quarter, reporting earnings per share of $1.30, beating estimates by $0.29. The revenue over the period was more than $81 billion, up 36% year-on-year.
On July 26, investment advisory Baird maintained an Outperform rating on Apple Inc. (NASDAQ: AAPL) stock with a price target of $160, noting that the firm had room to grow as 5G service expanded across the globe.
At the end of the first quarter of 2021, 127 hedge funds in the database of Insider Monkey held stakes worth $130 billion in Apple Inc. (NASDAQ: AAPL), down from 146 in the preceding quarter worth $142 billion.
In its Q1 2021 investor letter, Distillate Capital, an asset management firm, highlighted a few stocks and Apple Inc. (NASDAQ: AAPL) was one of them. Here is what the fund said:
“Apple is an even more notable situation and one that highlights our free cash valuation methodology and bears further discussion given its Q3 ‘20 sale from our strategy. For an extended period, Apple was extraordinarily inexpensive on a free cash flow basis and was the largest position in our strategy, exceeding 5% of the portfolio.”
