In this article, we will take a look at the 11 best beginner stocks to invest in now.
The Downsides to Stocks Rallying Higher
Stocks in the United States are rallying high, but some strategists are eyeing a few risks. On December 5, Max Kettner, Chief Multi-Asset Strategist at HSBC, appeared in an interview on Yahoo Finance to discuss the market outlook heading into 2025. Kettner shared that investors and analysts alike hold extremely bullish expectations of the market in 2025. While that may likely be true, an extremely bullish market may pose a significant risk and have multiple downsides.
He stated that the market will likely see strong upsides on the earnings front, leading to higher yields, which will leave a question on the future of the cutting cycle and whether the Fed will have to commence a rate hike again. He emphasized that higher terminal rates will bring in bond volatility and impact nearly every risk asset in the market.
Speaking of positives, Kettner highlighted that the next few quarters exhibit pretty low growth expectations and earnings expectations for the S&P. He reiterated that with a much lower growth rate, the cutting cycle will be executed as planned. As for inflation, he highlighted the importance of super core inflation, also referred to as underlying inflation. He believes super core inflation is more likely to decline, especially in the first half of the year, adding that he is not as worried about inflation as he was almost three to four months ago.
Kettner stated that the next six to seven months will deliver a supportive market environment for equities in the S&P, especially for global equities. He also believes that the market will see a 12% to 13% upside in the next 12 months until the end of 2025. While Kettner remained inclined to tech stocks, he added that other sectors, such as industrials, will also see a “mini re-acceleration.”
He emphasized that the market rally will go beyond the S&P especially with the current “goldilocks” backdrop, high growth projections, and consensus expectations, benefiting other asset classes. Kettner shared that the ideal portfolio for investors will be tech stocks and a combination of stocks in other sectors, especially industrials and US banks. He added that these sectors are likely to benefit from regulatory changes and the current economic backdrop.
As economic and political turmoil encapsulates the market, some stocks have been performing consistently well over the years, positioned as solid investments, especially for new investors. That said, let’s take a look at the 11 best beginner stocks to invest in now.
Stocks
Our Methodology
To come up with the 11 best beginner stocks to invest in now, we compiled a list of the top blue chip stocks. We then tracked the hedge fund sentiment of each stock and picked the most popular ones. Our list is in ascending order of the number of hedge fund holders as of Q3 2024, according to Insider Monkey’s database.
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 (see more details here).
11 Best Beginner Stocks To Invest In Now
11. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 82
The Home Depot, Inc. (NYSE:HD) is a home improvement retailer based in the United States. The company sells tools, construction products, and appliances. The company was founded in 1979 and now owns more than 2,300 stores and over 780 branches across North America. The company’s financial performance reflects its position on our list and explains why 82 hedge funds were bullish on the stock at the close of Q3 2024.
Rapid expansion has been the company’s economic moat. The Home Depot’s (NYSE:HD) network of downstream supply chain facilities, including its 19 direct fulfillment centers, has allowed the company to reach 90% of the population in the United States through same-day or next-day delivery experiences. In addition to that, the company has also made recent investments to expand its assortment within these facilities to allow for faster delivery across other product categories, supported by an improved and immersive digital experience.
Amid macroeconomic uncertainty, The Home Depot, Inc. (NYSE:HD) reported solid financial results in the third quarter of 2024, with total revenue reaching $40.2 billion, up by 6.6% from the third quarter in the fiscal year 2023. Operating income, on the other hand, remained constant at $5.4 billion. By the end of the full financial year of 2024, the company expects to open 12 new stores and increase sales by approximately 4%.
Carillon Tower Advisers stated the following regarding The Home Depot, Inc. (NYSE:HD) in its Q3 2024 investor letter:
“While Home Depot, Inc.’s (NYSE:HD) recent reported earnings were somewhat tepid, the market seems to be pricing in an inversion of the company’s sales, driven by lower interest rates. Home Depot reported its seventh consecutive quarter of same-store sales declines, giving back substantial gains that it enjoyed during the pandemic. High mortgage rates have also put a damper on existing home sales. People typically spend the most on home repairs and improvements in years when they buy or sell houses, often conducting both transactions in the same year.”
10. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK) is a pharmaceutical company headquartered in the United States. The company specializes in the production of vaccines and the provision of hospital care services. In the third quarter of 2024, Merck & Co., Inc. (NYSE:MRK) logged $16.7 billion in total sales, up by 4% from the third quarter in 2023. Its star cancer drug, KEYTRUDA saw an increase in sales by 17% to reach $7.4 billion, accounting for nearly 50% of the revenue.
The company is a long-standing entity with a strategic position to expand. During the quarter, Merck & Co., Inc. (NYSE:MRK) also completed the acquisition of Investigational B-Cell Depletion Therapy, CN 201, from Curon Biopharmaceutical. In addition to that, the company also presented data for four approved medicines and six pipeline candidates providing coverage for more than 20 types of cancer. Besides its expansion plans, Merck & Co., Inc. (NYSE:MRK) also received regulatory approvals and made significant advancements for its existing drug pipeline over the past few months.
For the complete financial year 2024 outlook, Merck & Co., Inc. (NYSE:MRK) expects revenue to range between $63.6 billion and $64.1 billion. The company is positioned to become a market leader in the biopharmaceutical industry attributable to its increasing popularity, expanding drug pipeline, and growing financial performance. Analysts are also bullish on the stock and their median price target of $130 represents an upside of 25% from current levels.
Oakmark Equity and Income Fund stated the following regarding Merck & Co., Inc. (NYSE:MRK) in its Q3 2024 investor letter:
“Merck & Co., Inc. (NYSE:MRK) is a global pharmaceutical firm with leading oncology, vaccine and animal health franchises. Premier products in Merck’s portfolio include Keytruda, Gardasil, Winrevair and Bravecto. Outsized contributor Keytruda is an immuno-oncology drug that treats several cancers and tumors. Keytruda is an astounding clinical and commercial success that is on track to become one of the best-selling prescription drugs to date. Investor angst surrounding Keytruda’s pending U.S. patent expiration in 2028 presented a chance to buy shares at a discounted valuation. We believe opportunities to extend Keytruda’s duration through life cycle management are underappreciated. More importantly, discounted cash flows from products already on market cover today’s entire stock price, meaning there is minimal value ascribed to a promising pipeline with strong sales potential. We believe Merck is led by a capable management team that looks to reinvest these cash flows in an accretive manner.”