In this article, we will take a look at the 10 best beginner stocks to buy in 2023.

“One-and-Done Much More Likely, But Not Fully Baked In Just Yet”

On April 21 Roger Ferguson, former vice chairman of the Federal Reserve, appeared in an interview on CNBC where he talked about inflation, the Fed, and recession risks. Ferguson thinks that we are now in a “one-and-done” situation, which means that he expects the Fed to raise interest rates for the last time at the FOMC meeting in May. However, as inflation is still higher than the 2% target, Ferguson thinks that there may be a June hike as well. Here is what he said:

“I think a one-and-done is most likely, but the uniformity and the fact that inflation is still relatively high, it may leave the possibility for a June hike on the table. I would say, one-and-done much more likely but not fully baked in just yet.”

The market is pricing in Fed cuts in the back half of 2023. Roger Ferguson spoke about a discrepancy between the market’s expectations and the Fed’s expectations regarding interest rates in the latter part of 2023 and said that “the market is more optimistic about Fed cuts than the Fed themselves”. However, economic data will be the determining factor for this as we move into the back half of 2023, noted Ferguson. According to Roger Ferguson, the Fed may keep interest rates elevated for longer than the market is expecting.

Roger Ferguson noted that sectors that are sensitive to interest rates, such as housing, are already experiencing challenges and pressures from rising rates. Ferguson thinks the Fed will keep interest rates higher for longer than the market is expecting because, though the labor market is showing signs of weakening, “it is still not soft”, and there are certain parts of the economy that are still strong which will in turn keep inflation higher than 2%. According to Ferguson, “the Fed wants to really make sure that the disinflationary process is well advanced before it even starts talking about cutting rates”.

Finally, Roger Ferguson talked about the risk of recession. Ferguson does not expect a severe recession, rather, he expects a shallow recession and he sees “some credit tightening in various places” as opposed to a credit crunch. Here are some comments from Roger Ferguson:

“A recession is more likely than not. I still think it’s more likely to be a softer recession, as opposed to a hard one. But, the credit tightening that’s certainly going on and being talked about in the Fed’s Beige Book, does suggest that conditions are a little more fraught, and maybe a slightly harder recession. I’m not yet in the camp that says that we have a real credit crunch, I think we see some credit tightening in various places. Count me still in a sort of soft and shallow recession camp right now, but with the risk to the downside given the changing credit dynamics in the country.”

The next FOMC meeting is nearby and a 89.1% of the market is pricing in a 25 basis point rate hike by the Fed, according to CME Group’s FedWatch Tool. In times like these, investors can feel overwhelmed and confused about what stocks to pick. For risk averse investors, sticking with mature businesses that have stable revenue growth can be an approach to consider. Additionally, finding companies with stable revenue growth that are popular among institutional investors can help retail investors avoid major losses, since hedge fund sentiment is a good indicator of investor confidence in an organization. We have compiled a list of the best beginner stocks to buy in 2023 which include PepsiCo, Inc. (NYSE:PEP), UnitedHealth Group Inc. (NYSE:UNH), and Microsoft Corporation (NASDAQ:MSFT). Let’s now discuss these stocks, among others, in detail below.

Our Methodology

To determine the best beginner stocks to buy now according to hedge funds, we scanned Insider Monkey’s database of roughly 900 elite hedge funds and went through the most popular stocks among hedge funds. We narrowed down our selection to the 10 stocks that were the most widely held by money managers and had a year-over-year revenue growth rate, as well as a 3-year revenue growth rate, between 7% and 15%.  The idea was to find stable companies with strong growth prospects. We have ranked these stocks in ascending order of the number of hedge funds that have stakes in them.

Best Stocks To Invest In 2023 For Beginners

10. The Sherwin-Williams Company (NYSE:SHW)

Revenue Growth (YoY): 11.05%

3-Year Revenue Growth: 7.36%

Number of Hedge Fund Holders: 64

The Sherwin-Williams Company (NYSE:SHW) is one of the best beginner stocks to buy in 2023. As of April 21, the stock has gained 9.93% over the past 6 months and is offering a forward dividend yield of 1.04%. For fiscal 2022, the company grew its revenue by 11.05% year over year. Moreover, the company has a 3-year revenue CAGR of 7.36%.

This April, Mizuho analyst Christopher Parkinson raised his price target on The Sherwin-Williams Company (NYSE:SHW) to $263 from $255 and reiterated a Buy rating on the shares.

The Sherwin-Williams Company (NYSE:SHW) was a part of 64 investors’ portfolios at the end of Q4 2022. These funds held collective positions worth $2.4 billion in the company. As of December 31, Farallon Capital is the top investor in the company and has a stake worth $328.8 million.

ClearBridge Investments made the following comment about The Sherwin-Williams Company (NYSE:SHW) in its Q4 2022 investor letter:

“A third approach to return generation is purchasing idiosyncratic businesses that largely control their own destiny. We saw mixed results from this group in the fourth quarter, with paint and coatings maker The Sherwin-Williams Company (NYSE:SHW) benefiting from significant pricing power that will allow it to grow earnings handsomely with only modest revenue increases. “

Some of the best-in-class companies with stable revenue growth include PepsiCo, Inc. (NYSE:PEP), UnitedHealth Group Inc. (NYSE:UNH), and Microsoft Corporation (NASDAQ:MSFT).

9. Costco Wholesale Corporation (NASDAQ:COST)

Revenue Growth (YoY): 11.50%

3-Year Revenue Growth: 13.97%

Number of Hedge Fund Holders: 66

On March 2, Costco Wholesale Corporation (NASDAQ:COST) posted earnings for the fiscal second quarter of 2022. The company generated a revenue of $55.27 billion and reported an EPS of $3.30, outperforming EPS expectations by $0.10. Costco Wholesale Corporation (NASDAQ:COST) grew its revenue by 11.50% year over year in fiscal 2022, and the company has a 3-year revenue growth rate of 13.97%. The stock is placed ninth on our list of the best beginner stocks to invest in.

On April 6, Deutsche Bank analyst Krisztina Katai revised her price target on Costco Wholesale Corporation (NASDAQ:COST) to $574 from $575 and maintained a Buy rating on the shares.

At the end of the fourth quarter of 2022, 66 hedge funds were bullish on Costco Wholesale Corporation (NASDAQ:COST) and held stakes worth $3.4 billion in the company. Of those, Bridgewater Associates was the leading shareholder and held a position worth $427.9 million.

Here is what Madison Funds had to say about Costco Wholesale Corporation (NASDAQ:COST) in its fourth-quarter 2022 investor letter:

“Costco Wholesale Corporation (NASDAQ:COST) stock fell after November sales results showed a slowing consumer. The slower November sales were followed by a slight first quarter miss with lower-than-expected margins. Costco commented that they are not seeing trade-down but private label penetration has increased modestly. Traffic continues to be positive, and Costco remains well-positioned in a more challenging macro environment due to its strong value proposition.”

8. Humana Inc. (NYSE:HUM) 

Revenue Growth (YoY): 10.31%

3-Year Revenue Growth: 12.69%

Number of Hedge Fund Holders: 67

Humana Inc. (NYSE:HUM)  was held by 67 hedge funds at the end of Q4 2022. These funds held positions worth $3.9 billion in the company. As of December 31, GQG Partners is the top shareholder in the company and has a stake worth $1 billion.

On April 11, Morgan Stanley analyst Michael Ha raised his price target on Humana Inc. (NYSE:HUM) to $637 from $620 and maintained an Overweight rating on the shares.

Humana Inc. (NYSE:HUM) has returned 11.25% to investors over the past 12 months, as of April 21. In fiscal 2022, the company grew its revenue by 10.31% year over year, and it has a 3-year revenue CAGR of 12.69%. Humana Inc. (NYSE:HUM) is one of the best beginner stocks to buy in 2023.

7. CVS Health Corporation (NYSE:CVS) 

Revenue Growth (YoY): 10.56%

3-Year Revenue Growth: 7.94%

Number of Hedge Fund Holders: 70

This April, Cantor Fitzgerald took coverage of CVS Health Corporation (NYSE:CVS) with an Overweight rating and an $87 price target.

CVS Health Corporation (NYSE:CVS) grew its revenue by 10.56% year over year in fiscal 2022. The company has a 3-year revenue growth rate of 7.94%. CVS Health Corporation (NYSE:CVS) is placed seventh among the best beginner stocks to buy in 2023 and, as of April 23, is offering a forward dividend yield of 3.32%.

At the close of Q4 2022, 70 hedge funds were eager on CVS Health Corporation (NYSE:CVS) and disclosed stakes worth $2.1 billion in the company. Of those, AQR Capital Management was the dominant stockholder and disclosed a position worth $396 million.

In addition to CVS Health Corporation (NYSE:CVS), other blue chip stocks that are popular among elite hedge funds include PepsiCo, Inc. (NYSE:PEP), UnitedHealth Group Inc. (NYSE:UNH), and Microsoft Corporation (NASDAQ:MSFT).

6. Intuitive Surgical, Inc. (NASDAQ:ISRG)

Revenue Growth (YoY): 8.89%

3-Year Revenue Growth: 11.78%

Number of Hedge Fund Holders: 70

Intuitive Surgical, Inc. (NASDAQ:ISRG) reported strong earnings for the FQ1 2023 on April 18. The company reported an EPS of $1.23 and beat EPS expectations by $0.03. The company’s revenue for the quarter amounted to $1.70 billion, up 14.01% year over year and ahead of Wall Street estimates by $103.41 million. Intuitive Surgical, Inc. (NASDAQ:ISRG) is one of the best beginner stocks to buy in 2023 and has a 3-year revenue CAGR of 11.78%.

On April 20, Bernstein raised its price target on Intuitive Surgical, Inc. (NASDAQ:ISRG) to $350 from $325 and reiterated an Outperform rating on the shares.

Intuitive Surgical, Inc. (NASDAQ:ISRG) was spotted on 70 hedge funds’ portfolios at the end of Q4 2022. These funds disclosed collective stakes worth $3.6 billion in the company. As of December 31, Citadel Investment Group is the most prominent shareholder in the company and has a position worth $447.5 million.

ClearBridge Investments made the following comment about Intuitive Surgical, Inc. (NASDAQ:ISRG) in its Q4 2022 investor letter:

“A second way to generate alpha is through ownership of high-quality secular growth companies with countercyclical characteristics. These include several of the health care positions we have added in the last 18 months that were impacted by FX and supply chain headwinds earlier in the year but are now benefiting from the return of elective medical procedures. Advanced medical device makers Intuitive Surgical, Inc. (NASDAQ:ISRG) and Stryker (SYK) have rebounded strongly as hospitals and other payors fund the profitable surgical procedures where they supply robotics-assisted surgical tools and orthopedic implants.”

5. PepsiCo, Inc. (NYSE:PEP)

Revenue Growth (YoY): 8.70%

3-Year Revenue Growth: 8.76%

Number of Hedge Fund Holders: 70

PepsiCo, Inc. (NYSE:PEP) was held by 70 hedge funds at the close of the fourth quarter of 2022. These funds disclosed stakes worth $4.4 billion in the company. As of December 31, Fundsmith LLP is the top shareholder in the company and has disclosed a stake worth $1.2 billion.

As of April 21, PepsiCo, Inc. (NYSE:PEP) has returned 6.72% to investors over the past 12 months and is offering a forward dividend yield of 2.48%. The company grew its annual revenue by 8.70% year over year in 2022, and has a 3-year revenue CAGR of 8.76%. PepsiCo, Inc. (NYSE:PEP) is one of the best beginner stocks to buy now, according to hedge funds.

This April, JPMorgan analyst Andrea Teixeira raised her price target on PepsiCo, Inc. (NYSE:PEP) to $196 from $190 and maintained an Overweight rating on the shares.

Madison Investments made the following comment about PepsiCo, Inc. (NASDAQ:PEP) in its Q1 2023 investor letter:

“PepsiCo, Inc. (NASDAQ:PEP) announced that it will commit $3.3 million in funds toward water replenishment projects across North America. These projects aim to reduce absolute water use and replenish back into the local watershed more than 100% of the water used at company-owned and third-part sites in high water-risk areas.”

4. NIKE, Inc. (NYSE:NKE)

Revenue Growth (YoY): 8.13%

3-Year Revenue Growth: 7.04%

Number of Hedge Fund Holders: 71

On April 10, BMO Capital analyst Simeon Siegel maintained an Outperform rating and his $120 price target on NIKE, Inc. (NYSE:NKE).

On March 21, NIKE, Inc. (NYSE:NKE) announced earnings for the fiscal third quarter of 2023. The company reported an EPS of $0.79 and outperformed EPS estimates by $0.24. The company generated a revenue of $12.39 billion, up 13.97% year over year and ahead of Wall Street estimates by $908.80 million.

In fiscal 2022, NIKE, Inc. (NYSE:NKE) grew its revenue by 8.13% year over year. The company has a 3-year revenue CAGR of 7.04%. NIKE, Inc. (NYSE:NKE) is placed fourth on our list of the best beginner stocks to buy now.

NIKE, Inc. (NYSE:NKE) was a part of 71 hedge funds’ portfolios at the close of the fourth quarter of 2022. These funds held collective positions worth $4 billion in the company. As of December 31, Fundsmith LLP is the largest investor in the company and has a stake worth $787 million.

ClearBridge Investments made the following comment about NIKE, Inc. (NYSE:NKE) in its Q4 2022 investor letter:

“NIKE, Inc. (NYSE:NKE) has been pressured by an uneven global recovery that led to surplus inventory. We added to the position earlier in the year with the view that its inventory write-down should not derail the company’s long-term high-single-digit revenue growth or the margin expansion from its enhanced focus on the direct-to-consumer business. While near-term earnings estimates may have some risk, much of the multiple contraction is in the current value of Nike shares and sentiment has shifted, with the shares bouncing 40% higher during the quarter. Netflix is another earnings reset name that has taken decisive actions, developing an ad-supported subscription tier and cracking down on password sharing, that have helped its shares rerate strongly.”

3. Elevance Health, Inc. (NYSE:ELV)

Revenue Growth (YoY): 11.31%

3-Year Revenue Growth: 13.75%

Number of Hedge Fund Holders: 75

On April 19, Elevance Health, Inc. (NYSE:ELV) reported strong earnings for FQ1 2023. The company generated a revenue $41.90 billion, up 10.59% year over year and ahead of market consensus by $969.57 million. Elevance Health, Inc. (NYSE:ELV) reported an EPS of $9.46 and outperformed EPS estimates by $0.17. In fiscal 2022, the company’s annual revenue grew by 11.31% year over year. Elevance Health, Inc. (NYSE:ELV) is one of the best beginner stocks to invest in.

This April, Deutsche Bank raised its price target on Elevance Health, Inc. (NYSE:ELV) to $575 from $571 and reiterated a Buy rating on the shares.

At the end of the fourth quarter of 2022, 75 hedge funds were long Elevance Health, Inc. (NYSE:ELV) and disclosed stakes worth $6 billion in the company. As of December 31, Viking Global is the leading shareholder in the company and has a stake worth $960 million.

Sequoia Fund made the following comment about Elevance Health, Inc. (NYSE:ELV) in its Q4 2022 investor letter:

“Elevance Health, Inc. (NYSE:ELV)’s stock was Sequoia’s best performing stock this year, for all the same reasons that United’s stock performed well. For full-year 2022, Elevance’s revenues and EPS are expected to be up approximately 14% and 12%, respectively. Versus 2019, the company’s revenues and EPS are expected to have compounded at annual rates of 14% and 15%, respectively.

Elevance (renamed from Anthem in 2022) is, like United, primarily a managed care company. In terms of revenues and profits, it is big, but not quite as big as United. Further, it is less scaled and less diversified than United in non-insurance business lines. However, Elevance has its own strengths. It is the largest operator of for-profit Blue Cross Blue Shield plans in the country. Built up over the course of decades, these plans have unrivaled brand recognition as well as a network of provider relationships that is unique in terms of market coverage and negotiated rates.

Elevance has long been an advantaged business, but it has not always been particularly well run. In 2017, Gail Boudreaux, formerly a senior executive at United, took over the reins. She is experienced and results-oriented. We believe Boudreaux can help Elevance make more of the enviable position it has long enjoyed…” (Click here to read the full text)

2. UnitedHealth Group Inc. (NYSE:UNH)

Revenue Growth (YoY): 12.90%

3-Year Revenue Growth: 10.91%

Number of Hedge Fund Holders: 110

UnitedHealth Group Inc. (NYSE:UNH) is one of the best beginner stocks to buy now according to hedge funds. In fiscal 2022, the company grew its revenue by 12.90% year over year. Moreover, the company has a 3-year revenue CAGR of 10.91%. As of April 21, the stock is offering a forward dividend yield of 1.36%.

On April 20, Cantor Fitzgerald analyst Sarah James started coverage of UnitedHealth Group, Inc. (NYSE:UNH) with an Overweight rating and a $591 price target.

UnitedHealth Group Inc. (NYSE:UNH) was spotted on 110 hedge funds’ portfolios at the end of Q4 2022 that held collective stakes worth $11.4 billion in the company. Of those, GQG Partners was the dominant investor and disclosed a position worth $2 billion.

FMI made the following comment about UnitedHealth Group Incorporated (NYSE:UNH) in its Q1 2023 investor letter:

“UnitedHealth Group Incorporated (NYSE:UNH) is the largest, best-managed, and most-diversified managed care organization in the U.S. and is among the largest providers of health services and technology through its fast-growing Optum businesses. In managed care (health insurance), UNH is the number one national provider in the rapidly expanding Medicare Advantage market, in addition to the number one and number two positions in most other sub segments. Today, scale is more important than ever in delivering top benefits at competitive prices. Scaled buying power (and network building) ensures the most visibility into medical costs at a given site-of-care and scaled investment gives UNH the most enhanced capabilities (tools and technology, typically from Optum) that nudge participants towards lower cost sites-of-care. We view the forward valuation (17 times 2024E EPS) and long-term growth algorithm as attractive.”

1. Microsoft Corporation (NASDAQ:MSFT) 

Revenue Growth (YoY): 10.38%

3-Year Revenue Growth: 14.98%

Number of Hedge Fund Holders: 259

This April, KeyBanc analyst Michael Turits raised his price target on Microsoft Corporation (NASDAQ:MSFT) to $335 from $316 and reiterated an Overweight rating on the shares.

Shares of Microsoft Corporation (NASDAQ:MSFT) have gone up by 19.28% since the beginning of 2023, as of April 21. The company grew its revenue by 10.38% year over year in fiscal 2022, and has a 3-year revenue CAGR of 14.98%. Microsoft Corporation (NASDAQ:MSFT) is the best beginner stock to buy in 2023, according to hedge funds.

At the close of the fourth quarter of 2022, 259 hedge funds were eager on Microsoft Corporation (NASDAQ:MSFT) and held stakes worth $58.6 billion in the company. Of those, Bill & Melinda Gates Foundation Trust was the leading stockholder in the company and held a position worth $9.4 billion.

Diamond Hill Capital made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2022 investor letter:

“Other bottom contributors to return included railroad operator Union Pacific, software and IT services provider Microsoft Corporation (NASDAQ:MSFT), and banking and financial services company Truist Financial. Union Pacific and Microsoft, though among our bottom contributors, still contributed positively to performance in Q4 as their share prices rose 7% and 3%, respectively. Truist’s stock ended flat in Q4.”

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a look at 10 Best Electric Utility Stocks To Buy Now and 10 Best Fertilizer Stocks to Buy.

 

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Disclosure: None. 10 Best Stocks To Invest In 2023 For Beginners is originally published on Insider Monkey.