In this article, we take a look at 12 safe stocks to buy for the long-term according to hedge funds. You can skip our detailed analysis of safe stocks and go directly to read 5 Safe Stocks to Buy According to Hedge Funds.
Even if there are many indications that the macro environment will remain challenging in 2023, this is not the time to stay on the sidelines. In reality, it's still a good opportunity to establish positions in safe companies to purchase for the long term while fear, uncertainty, and doubt continue to roil the markets.
Although buying risk-free stocks sounds like a great idea, there isn't a stock that is really secure. Even the most stable organizations frequently endure considerable stock price fluctuation, and even the finest companies might encounter unforeseen difficulties. This was evident in the early stages of the COVID-19 epidemic when the stock prices of numerous powerful firms fell sharply. One way to deal with individual stock risk is diversification.
Over the last 12 months, U.S. stocks declined slightly more than 10%. We had a great start to 2023, but the markets seem to be overly optimistic. Long-term interest rates are around 3.5% and consensus estimates for S&P 500 Index hover around $230. This means the market has a forward PE ratio of 18 assuming that the optimistic consensus earnings estimates are accurate.
Long-term investors, however, don't pay attention to the volatile, short-term rise and fall of stock markets. Instead, they invest in shares of dependable businesses with consistent performance over years or even decades. The best long-term investments are equities of expanding companies that offer consistent profits. You must comprehend the measurements that provide reliable proof of trustworthy long-term success to locate them.
Factors include routinely outperforming the S&P 500 and avoiding the significant short-term drops (and gains) that high-flying firms typically go through. These companies often have solid, well-established operations, consistent revenues, and a reliable supply of dividends for shareholders. As the pandemic last year showed, safe equities may provide investors with a route out of a financial catastrophe during a recession. Some of the notable names in the list of safe stocks include Walmart Inc. (NYSE:WMT), Cisco Systems, Inc. (NASDAQ:CSCO), and Oracle Corporation (NYSE:ORCL), among others.
We identified the top 50 holdings of iShares MSCI USA Min Vol Factor ETF (USMV) and ranked them using Insider Monkey's proprietary hedge fund sentiment data. Finally, we eliminated stocks that lost more than 10% over the last 12 months. Here are the 12 safe stocks to buy for the long-term according to hedge funds.
Safe Stocks to Buy for the Long-Term According to Hedge Funds
12. The Procter & Gamble Company (NYSE:PG)
Beta Value: 0.43
Number of Hedge Fund Holders: 69
The Procter & Gamble Company (NYSE:PG) is a multinational company that sells branded consumer packaged products. People need the company’s products regardless of the state of the economy. P&G is the parent company of brands such as Pampers, Downy, Tide, Charmin, Gillette, Old Spice, and Febreze. The company's goods are sold in over 180 countries. Based on the ratings of 13 Wall Street analysts, The Procter & Gamble Company (NYSE:PG) has a ‘Moderate Buy’ average rating.
The Procter & Gamble Company (NYSE:PG) frequently outperformed quarterly projections, notching nine EPS victories over the previous ten quarters. In the last reported quarter, The Procter & Gamble Company (NYSE:PG) registered earnings per share of $1.57, beating the estimates by $0.02, and reported revenue of $20.61 billion, modestly above expectations of $240 million.
Like Walmart Inc. (NYSE:WMT), Cisco Systems, Inc. (NASDAQ:CSCO), and Oracle Corporation (NYSE:ORCL), The Procter & Gamble Company (NYSE:PG) is one of the safe stocks to buy according to hedge funds.
The Procter & Gamble Company (NYSE:PG) was a popular stock among hedge funds in the third quarter of 2022, as 69 funds tracked by Insider Monkey reported owning stakes in the company. The total value of these holdings is around $4.08 billion. With 25,072 shares, Ayrshire Capital Management is the company's notable stakeholder in Q4.
11. PepsiCo, Inc. (NASDAQ:PEP)
Beta Value: 0.60
Number of Hedge Fund Holders: 72
PepsiCo, Inc. (NASDAQ:PEP) is a multinational American food and beverage company with products marketed in over 200 countries. PepsiCo, Inc. (NYSE:PEP) currently has a $241.43 billion market capitalization and delivered a 4.15% return in the past 12 months. For the past 50 years, the company has continuously increased its dividends. It paid a quarterly dividend of $1.15 per share on November 17.
On December 7, Argus analyst John Staszak boosted his price objective on PepsiCo, Inc. (NASDAQ:PEP) to $206 from $195 and retained a ‘Buy’ rating. Despite sluggish demand for many consumer essentials, PepsiCo, Inc. (NASDAQ:PEP) is well-managed, has a great brand portfolio, and continues to create excellent growth; the analyst said to investors in a research note.
As of the close of Q3 2022, 72 hedge funds in Insider Monkey's database reported owning stakes in PepsiCo, Inc. (NASDAQ:PEP), up from 65 in the previous quarter. These stakes are collectively valued at nearly $4.82 billion. Ayrshire Capital Management was the company’s prominent stakeholder in Q4.
“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindycompatible anti-ageing properties. Consider, that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan…." (Click here to see the full text)
10. Eli Lilly and Company (NYSE:LLY)
Beta Value: 0.38
Number of Hedge Fund Holders: 75
Eli Lilly and Company (NYSE:LLY) ranks 10th on our list of the safe stocks to buy for the long-term. LLY conducts research, discovery, manufacture, and marketing of pharmaceutical products to cure illnesses such as diabetes, cancer, and neurological disorders. Its products include Forteo, Adrica, BAQSIMI, Basaglar, and GlucagnIn the following months, the business plans to offer four additional therapies: donanemab for early Alzheimer's disease, mirikizumab for ulcerative colitis, lebrikizumab for atopic dermatitis, and pirtobrutinib, a Bruton's tyrosine kinase (BTK) inhibitor for cancer.
Lilly's shares have been up more than 323% in the past five years. Eli Lilly and Company (NYSE:LLY) has a consensus recommendation of ‘Strong Buy’ from 13 Wall Street analysts, with 11 buy ratings, 2 hold ratings, and 0 sell opinions.
At the end of the third quarter of 2022, 75 hedge funds in Insider Monkey's database reported owning stakes in Eli Lilly and Company (NYSE:LLY), up from 70 in the preceding quarter. The total value of these stakes is roughly $ 5.46 billion. Among these hedge funds, Fisher Asset Management was the company's biggest stakeholder in Q3.
“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly (NYSE:LLY) as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”
9. Pfizer Inc. (NYSE:PFE)
Beta Value: 0.63
Number of Hedge Fund Holders: 77
Pfizer Inc. (NYSE:PFE) is a biopharmaceutical research company. Pfizer's late-stage pipeline includes 27 initiatives, including numerous novel therapeutic medicines. Pfizer has a consensus recommendation of ‘Moderate Buy’ from 11 Wall Street analysts, based on 5 buy ratings, 6 hold ratings, and 0 sell opinions.
Investors who purchase PFE shares also receive a quarterly dividend with a yield of 3.4%. The quarterly dividend paid out by Pfizer Inc. (NYSE:PFE) increased this year by 2.5% to $0.41. The company has consistently raised its dividend over the past 14 years.
Pfizer Inc. (NYSE:PFE) is getting the attention of the smart money, as 77 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the third quarter, up from 70 funds a quarter earlier. AQR Capital Management is Pfizer Inc. (NYSE:PFE)’s largest shareholder, with shares worth $467.59 million.
8. AbbVie Inc. (NYSE:ABBV)
Beta Value: 0.62
Number of Hedge Fund Holders: 80
AbbVie Inc. (NYSE:ABBV) is a biopharmaceutical business that discovers, develops, produces, and commercializes medications to treat chronic and complex illnesses. Its drugs are approved for the treatment of serious medical conditions. The stock is up more than 12% during the past year.
In 2023, 12 drugs produced by AbbVie Inc. (NYSE:ABBV) are expected to generate sales of more than $1 billion, with the blockbuster Humira expected to generate at least $20 billion in sales. In addition, the business boasts a vast array of immunology and cancer treatments, including Rinvoq and Skyrizi, whose combined sales are anticipated to reach $7.5 billion this year and more than $15 billion by 2025.
On January 5, Robyn Karnauskas, a Truist analyst, increased her price objective on AbbVie Inc. (NYSE:ABBV) from $160 to $180 and retained a ‘Buy’ recommendation. The analyst cited growing Botox usage in the aesthetics sector and higher prescription and share growth patterns for Skyrizi and Rinvoq as contributing factors to the target increase.
Fund managers added their holdings to AbbVie Inc. (NYSE:ABBV) in the third quarter. ABBV was in 80 hedge funds' portfolios at the end of the third quarter of 2022. There were 71 hedge funds in our database with ABBV holdings at the end of the previous quarter.
Baron Funds, an investment management company, mentioned AbbVie Inc. (NYSE:ABBV) in its third-quarter 2022 investor letter. Here is what the fund said:
“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”
7. Merck & Co., Inc. (NYSE:MRK)
Beta Value: 0.39
Number of Hedge Fund Holders: 82
Merck & Co., Inc. (NYSE:MRK) ranks 7th on our list of the safe stocks to buy for the long-term. MRK is a biopharmaceutical company that specializes in the development, manufacturing, and marketing of prescription medications, biologic therapies, vaccines, and animal health products. Another stock that has been included in our list of 12 safe stocks to buy for the long term is Merck & Co. (NYSE:MRK). The company's rapid profit growth and solid product pipeline helped drive MRK stock up 37.66% in the previous year.
The forward P/E for Merck & Co., Inc. (NYSE:MRK) shares is currently 14.8, higher than the 14.5 P/E for the Large Cap Pharmaceuticals industry, and the company is more appealing due to its significant dividend yield of 2.64%. On January 4, BofA analyst Geoff Meacham changed Merck & Co., Inc. (NYSE:MRK)'s recommendation from ‘Neutral’ to ‘Buy’ and lifted his price target from $110 to $130. He highlighted hopes for continuing the robust growth patterns observed the previous year and significant advancement in diversifying away from Keytruda.
There were 82 hedge funds in our database that held stakes in Merck & Co., Inc. (NYSE:MRK)’s at the end of the third quarter, compared to 79 funds in the second quarter. Fisher Asset Management is the company’s most significant stakeholder, with 12.04 million shares worth $1.04 billion.
In its Q2 2022 investor letter, Chartwell Investment Partners mentioned Merck & Co., Inc. (NYSE:MRK). Here is what the firm said:
“In the Dividend Equity accounts, the three best performers in Q2 includes Merck (NYSE:MRK, 3.6%), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”
6. Johnson & Johnson (NYSE:JNJ)
Beta Value: 0.57
Number of Hedge Fund Holders: 85
Johnson & Johnson (NYSE:JNJ) is a holding company involved in researching, developing, manufacturing, and selling healthcare goods. The big drug company pays a $4.52 yearly dividend. Shareholders also benefit from a 2.61% dividend yield. This is better than the industry average yield of 2.15%.
At the end of the third quarter of 2022, 85 hedge funds in the database of Insider Monkey held stakes worth $5.47 billion in Johnson & Johnson (NYSE:JNJ), up from 83 in the preceding quarter worth $6.76 billion. Fisher Asset Management is the company’s largest shareholder, with shares worth $967.26 million.
On December 12, Citi analyst Joanne Wuensch restated a ‘Buy’ recommendation on Johnson & Johnson (NYSE:JNJ)'s stock and increased her price target to $205 from $198. Johnson & Johnson is looking for business combinations or acquisitions that can benefit its priority areas of orthopaedics, surgical robotics, eye care, and cardiovascular goods. Johnson & Johnson (NYSE:JNJ) is also in the process of spinning off its consumer healthcare division under the name Kenvue.
Along with Walmart Inc. (NYSE:WMT), Cisco Systems, Inc. (NASDAQ:CSCO), and Oracle Corporation (NYSE:ORCL), Johnson & Johnson (NYSE:JNJ) is one of the safe stocks to buy according to hedge funds.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks, and Johnson & Johnson (NYSE:JNJ) was one of them. Here is what the fund said:
“Johnson & Johnson (NYSE:JNJ) is currently our largest position and a long-standing holding. The majority of the group’s sales come from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands (…read more)
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Disclosure: None. 12 Safe Stocks to Buy for the Long-Term According to Hedge Funds is originally published on Insider Monkey.