In an interview with CNBC, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon warned of an upcoming recession. According to Dimon, high inflation, rising interest rates, and the European crisis might cause the U.S. market to enter a recession within the next six to nine months. Whether we enter a recession or not, investors can shield their portfolio against the downside risk with defensive stocks like Costco (NASDAQ:COST) and Kraft Heinz (NASDAQ:KHC).
These companies make and sell things of basic necessity and witness steady demand irrespective of the market cycles. Though they are not entirely immune to a recessionary situation, these companies will likely perform relatively better than the broader market and hedge your portfolio against a downturn. Let’s dig deeper.
Costco (COST)
Despite high inflation and macro weakness, Costco continues to deliver solid sales growth in 2022. Its value offerings continue to drive traffic. Meanwhile, its stable margins and earnings growth indicate that this warehouse retailer has successfully managed inflation and other headwinds better than most companies.
Its adjusted comparable sales, or comps, increased by 10.6% in Fiscal 2022. Further, the momentum has been sustained in Fiscal 2023, with September comps registering 8.6% growth.
Its pricing strategy could continue to attract value-conscious customers, which will support its growth. Meanwhile, a solid membership renewable rate and fee will support its revenue and earnings.
Is Costco Stock a Buy, Sell, or Hold?
Costco stock has a Strong Buy consensus rating on TipRanks based on 17 Buy and four Hold recommendations. Further, COST’s average price target of $558.75 implies 19.8% upside potential.
TipRanks’ data shows that hedge funds bought 1.2M COST stock last quarter. However, insiders sold Costco stock worth $2.4M. Overall, COST stock scores a ‘Perfect 10’ on TipRanks.
Kraft Heinz (KHC)
Kraft Heinz has demonstrated resiliency against near-term headwinds. The company has managed inflation well with its ability to increase prices. For instance, KHC’s organic sales grew 10.1% in the first half of the current fiscal year, driven by higher pricing.
Though divestitures and currency headwinds remain a short-term drag, KHC is well-positioned to deliver steady growth in the long term. It reaffirmed its long-term outlook and expects to deliver organic growth of 2-3%. Further, Kraft Heinz projects a 4-6% annual increase in adjusted EBITDA, while adjusted EPS is forecasted to increase by 6-8%.
What is the Forecast for Kraft Heinz Stock?
Kraft Heinz stock has a Moderate Buy consensus rating on TipRanks based on five Buys, six Holds, and one Sell recommendation. Further, KHC’s average price target of $42.04 implies 23.4% upside potential.
TipRanks’ data shows that hedge funds bought 4.1M KHC stock last quarter. However, insiders sold Kraft Heinz stock worth $1.3M. KHC stock has a Neutral Smart Score of seven out of 10 on TipRanks.
