In this article, we will explore the top 12 counter cyclical stocks that are worth investing in. Counter cyclical stocks are those that tend to perform well even during economic downturns, making them a good choice for investors looking to protect their portfolios during challenging times.
Consumer cyclical and consumer defensive are two main categories used to divide stocks based on their share price behavior in response to economic events. Consumer cyclical stocks follow economic cycles, while consumer defensive stocks, also known as counter cyclical stocks, act as a buffer against broader stock market downturns.
Cyclical stocks are typically found in high-growth industries such as consumer technology and biotechnology. These stocks are heavily influenced by factors like consumer purchasing power, inflation, and interest rates, which fluctuate with the economy. On the other hand, counter cyclical stocks, like mega retail giant Walmart Inc. and tobacco company Philip Morris International Inc., are less affected by economic downturns due to the nature of their products.
Counter cyclical stocks, such as tobacco companies, tend to hold their ground during tough economic times because the demand for their products remains relatively stable regardless of economic conditions. For example, cigarette smokers are likely to continue purchasing cigarettes even in a recession, making tobacco companies a popular choice for investors seeking stability.
Despite their resilience in economic downturns, counter cyclical stocks can also perform well in a strong economy. Companies like Celsius Holdings, Inc., which offers a healthier energy drink option, have seen significant growth even during prosperous times.
Hedge funds often favor counter cyclical stocks for their stability and potential for growth. Some notable counter cyclical stock picks include The Procter & Gamble Company, Walmart Inc., and Philip Morris International Inc.
To identify the best counter cyclical stocks, we ranked the top 40 most valuable stocks based on market capitalization and the number of hedge funds that had bought their shares during Q4 2023. Hedge fund sentiment is a key indicator, as hedge funds’ top 10 consensus stock picks have outperformed the S&P 500 Index by a significant margin over the last decade.
Some of the top counter cyclical stocks to consider investing in include Dollar General Corporation, Mondelez International, Inc., Constellation Brands, Inc., Colgate-Palmolive Company, Costco Wholesale Corporation, Target Corporation, and The Coca-Cola Company.
Overall, counter cyclical stocks offer investors a way to diversify their portfolios and protect against market volatility. By choosing the right counter cyclical stocks, investors can potentially achieve both stability and growth in their investments.