We recently compiled a list of the 7 Best Consumer Cyclical Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other consumer cyclical stocks.
Cyclical stocks are shares of companies whose performance is heavily dependent on business cycles and economic conditions. These stocks represent industries that produce non-essential, or discretionary, goods and services, such as automobiles, housing, entertainment, travel, and retail.
As the Federal Reserve lowers interest rates, it creates a favorable environment for investing in cyclical stocks. Lower interest rates reduce the cost of borrowing, which encourages both consumers and businesses to take out loans and spend more. This boost in consumer spending is particularly beneficial for companies that sell discretionary goods and services, such as those in the automotive, housing, travel, and retail sectors.
According to the latest report, released by the U.S. Bureau of Economic Analysis (BEA) on September 27, personal income in the US increased by $50.5 billion, or 0.2%, in August. This growth was driven by an increase in compensation, which was partially offset by a decrease in personal income receipts on assets. Disposable personal income (DPI), which is personal income less personal current taxes, also increased by $34.2 billion, or 0.2%. Additionally, personal consumption expenditures (PCE) rose by $47.2 billion, or 0.2%, with a $54.8 billion increase in spending for services and a $7.6 billion decrease in spending for goods.
Large Bank Sees Stabilizing Economy Boosting Cyclical Stocks
On October 14, CNBC reported that Morgan Stanley is optimistic about the stabilizing economy and its potential to boost cyclical stocks. According to equity strategist Michael Wilson, the recent rise in yields following optimistic economic data, including the latest wholesale inflation report, could indicate that the bond market is beginning to part with some of the growth concerns on the hope that the economy is on stable footing. He added that this trend provides greater confidence in cyclical stocks, which are positively correlated to upward moves in the 10-year Treasury yield. Wilson expects both rates and economic data to support cyclical stocks. The bank’s bullish call comes as the S&P 500 rose to a fresh record high, supported by better-than-expected results from a handful of companies that have reported third-quarter results.
Cyclical stocks offer significant opportunities for investors looking to capitalize on economic growth and favorable monetary policy. As the Federal Reserve continues to lower interest rates, the reduced borrowing costs will continue to stimulate consumer and business spending, driving demand for discretionary goods and services. With that in context let’s take a look at the 7 best consumer cyclical stocks to buy according to hedge funds.
An e-commerce platform displaying a wide range of products to customers online.
Our Methodology
To compile our list of the 7 best consumer cyclical stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest consumer cyclical companies. We then narrowed our choices to 7 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Investors: 308
Amazon.com, Inc. (NASDAQ:AMZN) is a global leader in e-commerce and cloud computing, offering a broad array of products and services. The company’s Amazon Web Services (AWS) division dominates the cloud infrastructure market, significantly contributing to the company’s profitability. Amazon.com, Inc. (NASDAQ:AMZN) has a diverse business model, which spans e-commerce, logistics, entertainment (through Prime Video), and artificial intelligence (via Alexa).
A major factor in Amazon.com, Inc.’s (NASDAQ:AMZN) growth is its leadership position in the cloud computing sector. The company’s cloud business is poised for continued growth, fueled by the rising adoption of cloud computing and increasing demand for data storage and analytics. Amazon.com, Inc. (NASDAQ:AMZN) technological innovations, including advancements in artificial intelligence (AI) and robotics, are expected to further enhance its growth and operational efficiency. The company’s AI-driven advertising platform has also bolstered its advertising business, while its robotics initiatives have improved logistics efficiency.
Amazon.com, Inc. (NASDAQ:AMZN) e-commerce operations are set to benefit from the ongoing expansion of online shopping. Moreover, the company’s global expansion is projected to drive further growth, particularly as the company’s penetration in some regions remains relatively low. Amazon.com, Inc.’s (NASDAQ:AMZN) The Prime Big Deal Day event on October 10 also saw a record number of customers sign up for Prime, with members saving over $1 billion across deals.
Amazon.com, Inc.’s (NASDAQ:AMZN) strong growth prospects, improving profitability, and investments in AI make it an attractive investment opportunity. The company’s earnings are expected to rise by nearly 48% this year. Industry analysts have a consensus on the stock’s Buy rating, with an average target price of $218.90, indicating a potential upside of 14.66% from current levels.
Overall, AMZN ranks 1st on our list of the best consumer cyclical stocks to buy according to hedge funds. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.