We recently published a list of 15 Best Large-Cap Value Stocks to Buy as the Recession Hits. In this article, we are going to take a look at where Target Corporation (NYSE:TGT) stands against other best large-cap value stocks to buy as the recession hits.
Goldman Sachs highlighted that equities around the world traded in and out of a bear market — which is often defined as a 20% decline from the recent peak. According to Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, the history of bear markets can provide some clues regarding the duration and severity of such downturns. U.S. stocks ended significantly higher after Trump announced his decision to put a 90-day pause on the additional country-specific portion of the reciprocal tariffs. That being said, Oppenheimer believes that a sustained rebound isn’t yet in place. As per the strategist, the valuations are required to adjust further before equities can shift into the “hope” phase of the next cycle.
With the Q1 2025 earnings season underway, Morningstar informs that investors can expect more focus than usual on what companies want to say regarding their outlooks, while the uncertainty surrounding tariffs means offering weaker, less confident, or even no guidance. Tariffs can impact the corporate bottom lines in several ways, both directly and indirectly. Notably, the increased import costs put more pressure on the margins. While some firms can decide to alleviate the pressure by increasing the prices for customers, others can choose to absorb them, says the firm. Morningstar, while quoting FactSet’s consensus estimates, mentioned that analysts expect 6.8% earnings growth in Q1 for companies in the S&P 500 benchmark index. For the full year, analysts anticipate an 11.2% growth.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Forward guidance is what generally moves the financial markets. If the firm warns that there can be a possibility to see smaller profits, the stock tends to fall. This might happen across the market, but there is a silver lining. As per Morningstar chief research and investment officer Dan Kemp, it is important to note that most of the value lies in the future. Therefore, the impact on the company’s real value is expected to be muted. According to him, widening of the gap between stock prices and future real values can be a very fertile soil for the market investors.
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Christian Mueller-Glissmann, head of asset allocation research within portfolio strategy for Goldman Sachs Research, says that investors need to think about diversifying regionally and across styles. To be specific, this consists of low-volatility stocks, i.e., equities from more defensive sectors, that fluctuate less than the broader market.
To list the 15 Best Large-Cap Value Stocks to Buy as the Recession Hits, we considered companies from the industries which are expected to be resilient in a recessionary environment, such as utilities, healthcare, and consumer. Next, we chose the stocks that trade at a forward P/E of less than ~20.0x. Finally, the stocks are arranged in ascending order of the hedge fund sentiments, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Target Corporation (TGT) the Best Large-Cap Value Stock to Buy as the Recession Hits?
A woman purchasing groceries at a Target store, with a cart full of products.
Number of Hedge Fund Holders: 56
Forward P/E as of April 15: ~10.1x
Target Corporation (NYSE:TGT) operates as a general merchandise retailer. Fitch Ratings has highlighted the company’s strong US market position, well-recognized brand name, and good cash flow generation. Target Corporation (NYSE:TGT)’s operational success exhibits the strength of its market positioning and longer-term execution. Furthermore, its growth in discretionary categories, partly fueled by national brand collaborations and private brand introductions, aids the uniqueness of the company’s dual offering of discounted but differentiated merchandise, says the firm. Fitch Ratings also opines that Target Corporation (NYSE:TGT)’s healthy asset base and omnichannel focus can enable it to benefit from customer preference for cross-channel shopping.
Furthermore, Target Corporation (NYSE:TGT)’s digital initiatives can offer valuable data insights, allowing it to personalize offerings, improve overall operational efficiency, and optimize inventory management. With the retail landscape becoming digital-centric, the company’s emphasis places it well for long-term growth and competitiveness. Also, by optimizing the product mix and leveraging private label brands, the company can enhance its gross margins.
Target Corporation (NYSE:TGT) highlighted that a multi-year initiative is expected to build momentum in product categories with growth potential. The company’s signature same-day services were the fastest-growing mode of shopping in 2024 due to healthy growth from Same-Day Delivery powered by Target Circle 360. It focuses on accelerating these services’ growth in 2025.
Overall, TGT ranks 11th on our list of best large-cap value stocks to buy as the recession hits. While we acknowledge the potential of TGT as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than TGT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
