In an unpredictable market landscape, the resilience of grocery stocks often draws investors’ interest, particularly during economic downturns. Recently, we published a comprehensive list titled Recession Resistant Investing: 10 Best Grocery Stocks To Buy Now. Today’s focus narrows in on The Kroger Co. (NYSE:KR) and examines its standing among other robust contenders in the grocery sector for recession-resistant investing.
Amid rising costs impinging on consumer behavior, BofA Securities’ senior consumer analyst, Bryan Spillane, made an appearance on CNBC’s ‘The Exchange’ on April 24. He expressed that consumer staples, including groceries, are currently grappling with unprecedented cost pressures that are increasingly overshadowing revenue risks. Spillane noted that companies are communicating to consumers about price stability, a stark contrast to the situation observed during the COVID-19 pandemic. This has led many to question the sustainability of margins across many corporations.
Spillane further elaborated that companies are facing a dual challenge: rising operational costs due to tariffs and their inability to pass these costs onto consumers. He emphasized that companies must either implement stringent cost-cutting measures or brace for margin pressures. This ongoing situation is likely to lead to financial strains for several players in the consumer staples sector, with implications that may extend into the next earnings reporting quarter.
Market conditions often leave investors wondering if consumer staples can offer a safe haven amid volatility and macroeconomic strains. Spillane suggested that while many consumer staple stocks have withstood recent economic turbulence relatively well, caution is warranted. Stocks lacking negative earnings revisions present a relatively safer investment avenue, although a widespread slowdown in fundamentals could leave these companies vulnerable in the long run.
Our prior discussions highlighted the looming recession risks associated with fluctuating tariffs and general economic uncertainty. Notably, a recent CNBC quarterly CFO Council Survey revealed that a majority of chief financial officers anticipate a recession in the second half of 2025, expressing a generally pessimistic outlook on the U.S. economy. These sentiments underscore the need for strategic investment choices amid potential economic turmoil.
In light of these factors, we turn our attention back to the cream of the crop in grocery stocks deemed recession-resistant. We meticulously scanned through stock screeners, financial reports, and ETFs, compiling a list of 15 major grocery stocks. Ultimately, we selected the top 10 based on hedge fund holders as of Q4 2024, sourced from Insider Monkey’s database. The companies are ranked by the sentiment expressed by hedge funds, which we believe holds predictive value concerning future performance.
Why the emphasis on hedge fund holdings? Research indicates that mirroring the investment strategies of successful hedge funds can yield superior market performance. Our quarterly newsletter strategy, which handpicks 14 small-cap and large-cap stocks, has remarkably returned 275% since May 2014, significantly outpacing the benchmark by 150 percentage points.
Highlighting The Kroger Co. (NYSE:KR) specifically, it stands as a noteworthy player in the grocery sector with an extensive footprint comprising approximately 2,722 supermarkets, 2,257 pharmacies, and 1,665 fuel centers across 35 U.S. states and the District of Columbia. Kroger is also known for its diverse product range, including well-regarded organic offerings under notable brands such as Smart Way and Simple Truth Organic.
On April 3, Guggenheim analyst John Heinbockel raised Kroger’s price target from $71 to $73 while maintaining a “Buy” rating. The analyst highlighted the company’s operating momentum emerging from the ESI network, a maturing media business, and increasing momentum in Kroger Delivery, indicating a promising trajectory for the stock.
Kroger’s financial performance has demonstrated resilience as well. In fiscal Q4 2024, the company reported an impressive 11% growth in digital sales and a 2.4% rise in identical sales, excluding fuel. The operating profit for this quarter was reported at $912 million, with management expressing confidence about their strategic plans aimed at achieving an overall shareholder return of 8% to 11% over the long term.
Positioned fourth among our recommended grocery stocks, Kroger’s potential as an investment is noteworthy, although opinions differ. Some analysts are suggesting that certain AI stocks, particularly one that has shown remarkable growth amidst economic adversities, may offer more attractive returns in the near future compared to traditional grocery investments like Kroger.
With that information in mind, we invite you to read our report on the most promising AI stocks that are trading at enticing valuations, less than five times their earnings, for those interested in diversifying their portfolios beyond the grocery sector.
For further reading, check out our compilations on the 20 Best AI Stocks To Buy Now and the 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article was originally published at Insider Monkey.
