In this piece, we will take a look at the ten low risk high reward stocks set to triple by 2027. If you want to skip our introduction to stock trading indicators and the current market sentiment, then check out 5 Low Risk High Reward Stocks Set To Triple By 2027.
Choosing the right stock, or stocks, to trade can be a tricky decision, especially given the volumes of data that are available even to the ordinary retail trader today. Stocks are typically selected based on a variety of indicators. These can range from their technical metrics, such as share price moving averages or standard deviation, or their fundamentals such as free cash flow, dividends, earnings per share, or revenue. Each company has different strengths or weaknesses, and a sound investment decision requires a careful analysis of a variety of factors to wager a guess about future price movement and prospects.
When it comes to measuring the ‘risk’ of a stock or a security, several factors can be used. On the fundamental front, a risky firm is typically one that has untested products that are in the research or final stages of market launch. Since the products have not been launched, it is uncertain what the market response will be to them unless they are part of a well established lineup such as the iPhone. Unlaunched products mean that not only has a company spent large sums of money developing them, but also that it might find it difficult to recover the investment through sales and operate profitability. This phenomenon is found most commonly in high risk biotechnology firms, and consequently, the share price is vulnerable to large downswings should investors even get a hint that problems lie down the road.
On the technical front, measuring risk is a different ball game. The single best indicator of a stock price’s risk on the technical side of things is its standard deviation. Standard deviation, for those out of the loop, is the variation of a share price in relation to its historical values, and a higher value is indicative of a riskier stock. In financial management, analysts and portfolio managers are taught to build out portfolio boundaries based on standard deviations. Officially called the ‘efficient frontier’, this boundary plots the standard deviation of returns for multiple portfolios along with the expected returns to limit the risk that an investment might face as well as achieve certain return targets. Stocks or portfolios with higher standard deviations, that is a greater variation of their share prices over historical averages, are naturally more riskier since not only do they carry the potential for higher returns due to larger price variations but also equally if not greater losses due to similar price movements in the opposite direction.
Shifting gears to focus on the economy, the picture is starting to clear up as we head to 2023’s exit. It is clear that the Federal Reserve’s aggressive interest rate hikes that have seen rates soar to record high levels have started to make their impact on both inflation and the job market. While core inflation in the U.S. is still higher than the Fed’s preferred level, it has rapidly dropped over the past couple of months. At the same time, the job market is also showing significant signs of stress as corporate budgets tighten and earning revenue becomes difficult due to a tight credit environment. However, October 2023 has been a roller coaster of a ride for financial markets that few people would have thought was possible even during the last week of September.
A rout in the bond market has pushed yields for some U.S. treasuries to levels not seen since before the financial crisis, creating worries about the broader economic health. At the same time, fresh jobs data from the ADP shows that the private sector added 89,000 jobs in September, which was significantly below expectations. At the same time, the number of people filing for state unemployment benefits in America continues to be low, showing that the labor market is as tight as ever. Finally, a crucial nonfarms payrolls report shocked and stunned markets as the figure of 360,000 new jobs was more than double the estimates. These factors put together make the Federal Reserve’s future actions uncertain.
After all, the central bank might decide that the labor market has cooled down significantly to merit the end of this rate hiking cycle, or it could decide that since the economy continues to grow, an additional rate hike would be more beneficial by reducing inflation and cooling labor demand rather than inflict damage that could cause a recession. The latest nonfarms data supports the latter conclusion, and just as the nonfarm payroll data was released, its impact on markets was clear as the U.S. dollar soared on the anticipation of future interest rate hikes and stock futures dropped.
With these details in mind, let’s take a look at some great low risk, high reward stocks, out of which the notable ones are Verisk Analytics, Inc. (NASDAQ:VRSK), ImmunoGen, Inc. (NASDAQ:IMGN), and Veeva Systems Inc. (NYSE:VEEV).
Photo by Karolina Grabowska from Pexels
Our Methodology
To compile our list of the best low risk, high reward stocks, we made a list of 20 firms with a beta of less than 1 and positive earnings per share growth over the past five years. Then, micro cap stocks were excluded since they are inherently risky due to their business models. This allowed us to make a list of 20 companies ranked by the P/S ratio, out of which the ones with the highest number of hedge fund investors during Q2 2023 were picked as the best low risk, high reward stocks.
10 Low Risk High Reward Stocks Set to Triple By 2027
10. Wheaton Precious Metals Corp. (NYSE:WPM)
Number of Hedge Fund Investors In Q2 2023: 24
Wheaton Precious Metals Corp. (NYSE:WPM) is a Canadian gold mining company headquartered in Vancouver, British Columbia. After missing analyst EPS estimates for three consecutive quarters, the second quarter of 2023 provided some respite as the firm beat analyst EPS estimates. Its shares are also rated Strong Buy on average.
During the second quarter, 24 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Wheaton Precious Metals Corp. (NYSE:WPM). Out of these, the firm’s largest shareholder is Jean-Marie Eveillard’s First Eagle Investment Management since it owns 20.3 million shares that are worth $879 million.
Just like ImmunoGen, Inc. (NASDAQ:IMGN), Verisk Analytics, Inc. (NASDAQ:VRSK), and Veeva Systems Inc. (NYSE:VEEV), Wheaton Precious Metals Corp. (NYSE:WPM) is a top low risk high reward stock.
9. Equity Commonwealth (NYSE:EQC)
Number of Hedge Fund Investors In Q2 2023: 25
Equity Commonwealth (NYSE:EQC) is an American real estate investment trust that invests in office properties. The firm’s second quarter earnings report was a crucial one since it provided a state of the office real estate sector that has seen significant turmoil this year. The results saw the firm grow its funds from operations (FFO) but experienced a drop in occupancy over the year ago quarter.
As of June 2023, 25 out of the 910 hedge funds polled by Insider Monkey were the firm’s investors. John W. Rogers’ Ariel Investments is Equity Commonwealth (NYSE:EQC)’s biggest investor in our database courtesy of a $141 million stake.
8. Extra Space Storage Inc. (NYSE:EXR)
Number of Hedge Fund Investors In Q2 2023: 27
Extra Space Storage Inc. (NYSE:EXR) is a large REIT that operates thousands of storage units all over the U.S. The firm expanded its operating portfolio in September after it bought another storage company for a $2.5 billion price tag.
After digging through 910 hedge funds for their second quarter of 2023 investments, 27 out of the 910 hedge funds part of Insider Monkey’s database had bought Extra Space Storage Inc. (NYSE:EXR)’s shares. The firm’s largest stakeholder in our database is Ken Griffin’s Citadel Investment Group since it owns $148 million worth of shares.
7. MarketAxess Holdings Inc. (NASDAQ:MKTX)
Number of Hedge Fund Investors In Q2 2023: 28
MarketAxess Holdings Inc. (NASDAQ:MKTX) is a financial services firm that enables large investors to buy and sell bonds. The shock waves in the bond market this year due to the Fed’s interest rate hiking cycle have helped the firm since it has beaten analyst EPS estimates in all four of its latest quarters.
During this year’s June quarter, 28 out of the 910 hedge funds tracked by Insider Monkey had invested in the company. MarketAxess Holdings Inc. (NASDAQ:MKTX)’s biggest hedge fund investor is Guardian Capital’s GuardCap Asset Management through a $519 million investment.
6. Rexford Industrial Realty, Inc. (NYSE:REXR)
Number of Hedge Fund Investors In Q2 2023: 29
Rexford Industrial Realty, Inc. (NYSE:REXR) is an industrial REIT that has properties concentrated in California. Industrial REITs perform well when the economy is growing, and Rexford Industrial Realty, Inc. (NYSE:REXR)’s shares are also rated Strong Buy on average.
29 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database had bought Rexford Industrial Realty, Inc. (NYSE:REXR)’s shares. Dmitry Balyasny’s Balyasny Asset Management is the largest investor among these since it owns 2.1 million shares that are worth $111 million.
Verisk Analytics, Inc. (NASDAQ:VRSK), ImmunoGen, Inc. (NASDAQ:IMGN), Rexford Industrial Realty, Inc. (NYSE:REXR), and Veeva Systems Inc. (NYSE:VEEV) are some top low risk high reward stocks.
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Disclosure: None. 10 Low Risk High Reward Stocks Set to Triple By 2027 is originally published on Insider Monkey.
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