Why Grocery Outlet Holding Corp. (GO) is Among the Best Grocery Stocks to Buy for Recession Resistant Investing
On April 24, Bryan Spillane, BofA Securities senior consumer analyst, appeared on CNBC's 'The Exchange' to talk about food stocks and how higher costs are weighing on consumers. He said that the biggest incremental headline right now is that costs are a bigger risk than anticipated going into the recent earnings season. Although there is a lot of focus on revenue risk, costs have taken the lead, and tariff risks are also affecting companies across the consumer staples industry.
Companies are sending marketing messages to consumers saying that they won't be raising prices, which is something consumers didn't see during COVID-19. These trends are raising concerns about margin pressures across corporate America. Addressing these questions, Spillane said these companies no longer have the ability to price. If there are incremental costs, whether from tariffs or other sources, they will either come from additional cost-cutting or result in margin pressure. Margin pressure is materializing in some major companies in the consumer staples sector, and it is likely to persist into the next quarter as well.
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These trends raise the question of whether consumer staples are an area of stability amid current market volatility and macroeconomic concerns. Spillane said that this is a very similar dynamic to what we have seen in the last month or so, which is that the stocks have held in relatively well, even though earnings estimates have come down.
He further said that we have to be very selective from here onwards. Consumer staple companies that do not have negative earnings revision risks are a decent place to hide amid the current market dynamics. However, he warned that the fundamentals are decelerating for the consumer staple companies. These stocks are likely to remain under pressure if market fundamentals continue the way they are.
We discussed the risks of recession looming over the stock market in a recently published article on . Here is an excerpt from the article:
Threats of an impending recession are looming over the stock market due to Trump's tariffs and macroeconomic uncertainty. According to CNBC's quarterly CFO Council Survey for Q1 2025, a majority of chief financial officers are of the opinion that the economy is likely to fall into a recession in H2 2025. The CFOs said that they were generally 'pessimistic' about the overall state of the American economy, and expressed uncertainty about the stock market.
With the risk of an impending recession deepening, let's look at the 10 best grocery stocks to buy now for recession-resistant investing.
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 15 major grocery stocks and chose the top 10 with the highest number of hedge fund holders as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey's database. The list is ordered in ascending order of hedge fund sentiment.
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 275% since May 2014, beating its benchmark by 150 percentage points ().
A grocery store employee stocking shelves with fresh fruits and vegetables.Grocery Outlet Holding Corp. (NASDAQ:GO) is a retailer that sells fresh food products and name-brand consumables through an elaborate network of independently operated stores. Its product offerings include fresh meat and seafood, staples, refrigerated and frozen food, and other items.
On April 16, Jefferies analyst Corey Tarlowe upgraded the rating on Grocery Outlet Holding Corp. (NASDAQ:GO) and set a price target of $18.00. The analyst supported the positive rating with the company's potential for recovery and growth. Grocery Outlet Holding Corp. (NASDAQ:GO) holds a competitive market advantage because of its position as a low-price grocery store. This holds especially true in economic downturns, where the company could outperform its competitors.
The analyst further opined that although the company has experienced challenges with enterprise-wide technology issues in the past, its new management is taking strategic initiatives to resolve these problems and streamline its operations. This presents an opportunity for upside potential. Tarlowe also stated that management's focus on expanding units in existing markets and solid traffic trends are anticipated to support future growth, with expected improvements in EBITDA margins and same-store sales over the coming few years.
Overall, GO ranks 7th on our list of the best grocery stocks to buy now for recession resistant investing. While we acknowledge the potential for GO as an investment, our conviction lies in the belief that some 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 an AI stock that is more promising than GO but 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.
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