In this article, we will take a look at the 11 best investments for beginners. To see more such companies, go directly to 5 Best Investments for Beginners.
Investors remain skeptic on the economy’s ability to completely avoid a recession. Last month equities saw a selloff driven by persistent inflation, weak jobs report and China’s economic woes. Analysts believe the Fed’s battle against inflation still has a long way to go and recession could hit the economy in the first half of 2024. Some circles however voice a lot of optimism on the back of solid state of the consumer in the US. While inflation worried some segments of the market, the bulls say the latest uptick in inflation was caused by higher energy prices. Consumer spending in the US remains strong despite the hammering households have taken due to inflation over the past several months. The Chicago Board Options Exchange’s CBOE Volatility Index (VIX), also known as the “fear gauge” of the Wall Street, recently fell to its lowest point since the pandemic. VIX shows the market’s expectation of volatility based on S&P 500 index options.
For beginner investors with low risk appetite and limited budgets, the current market environment may seem like a chaos. Inflation storm, meme stocks, recession warnings, loads of data to process and make sense of every week and never-ending news cycle that always sound like we are an inch away from doomsday – all of this can be overwhelming and oftentimes disheartening for an average investor. But long-term investors tend to stick to their principles and ignore short-term market movements. But what if you don’t have any investing principles? After all not everyone out there is Warren Buffett or Ray Dalio. One of the best ways to get clarity in this age of volatility is to learn from the masters of the game. As Guy Spier, the legendary value investor, author of The Education of a Value Investor and manager of Aquamarine fund, says:
“I read other managers’ letters. I look at the positions they own. The lists of portfolio securities that other managers own are very useful because it means the investment has already passed a very important filter. I think that whenever something in Seth Klarman’s portfolio is trading below the price that he paid for it, it is worthy of looking at, and at the same time, it performs another function. To get better at investing you want to study the moves of the masters.”
Photo by Austin Distel on Unsplash
Our Methodology
For this article we first listed all holdings of Vanguard Total Stock Market Index Fund ETF (NYSEARCA:VTI) and Vanguard 500 Index Fund ETF (NYSEARCA:VOO). These two ETFs are considered ideal and safest choices for beginner investors by experts and Wall Street analysts. We sorted the holdings of these two funds by hedge fund sentiment, using Insider Monkey’s database of 910 hedge funds. We picked 11 stocks from the resultant dataset with the highest number of hedge fund investors. This way, we were able to pick the top investments in the stock market which are safe, less volatile and backed by smart money investors.
Best Investments for Beginners
11. UnitedHealth Group Incorporated (NYSE:UNH)
Number of Hedge Fund Holders: 111
UnitedHealth Group Incorporated (NYSE:UNH) is one of the best investments for beginners, thanks to the company’s strong business model, diversified revenue streams and a safe dividend. UnitedHealth Group Incorporated (NYSE:UNH) is a potential breakout stock according to Wells Fargo. Recently the firm gave a list of mega-cap stocks that it believes have the potential to gain value and called them breakout stocks. UnitedHealth Group Incorporated (NYSE:UNH) was one of these companies.
As of the end of the second quarter of 2023, 111 hedge funds out of the 910 tracked by Insider Monkey had stakes in UnitedHealth Group Incorporated (NYSE:UNH). The biggest stakeholder of UnitedHealth Group Incorporated (NYSE:UNH) was Rajiv Jain’s GQG Partners which owns a $2.4 billion stake in the company.
Mairs & Power Growth Fund made the following comment about UnitedHealth Group Incorporated (NYSE:UNH) in its second quarter 2023 investor letter:
“Notable detractors to performance in the first half were US Bank (USB), Charles Schwab (SCHW), and UnitedHealth Group Incorporated (NYSE:UNH), which were down 22.09%, 31.65%, and 8.65%, respectively. Another detractor from relative performance was UnitedHealth Group, which was down 8.65%. However, we have a positive long-term view of the company, headquartered in Minnesota, and especially its potential when it comes to harnessing its vast amounts of patient data via AI. Additionally, its Optum unit, which provides technology and data-driven care delivery, has AI-enabled tools that can help healthcare providers drive more efficient and accurate care to patients.”
10. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 112
While Advanced Micro Devices, Inc. (NASDAQ:AMD) might be out of the canvas in the AI race as Nvidia gets all the attention, the company has an impressive history of catching up to its competition quickly and behind the scenes AMD is launching full-throttle efforts to launch AI chips to compete with Nvidia. Advanced Micro Devices, Inc. (NASDAQ:AMD)’s CEO earlier this year landed in Taiwan to meet her team and to light a fire under the company’s AI efforts. According to media reports, Advanced Micro Devices, Inc. (NASDAQ:AMD) CEO Lisa Su said the high growth phase for AI will last 5-10 more years. She said that AI products market could hit $150 billion 3-5 years from now.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a long-term investment as the company slowly but surely gains market share in the AI chips industry
As of the end of the second quarter of 2023, 112 hedge funds tracked by Insider Monkey reported owning stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD). The biggest stakeholder of Advanced Micro Devices, Inc. (NASDAQ:AMD) was Philippe Laffont’s Coatue Management which owns a $1.6 billion stake in the company.
Artisan Global Opportunities Fund made the following comment about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q2 2023 investor letter:
“Among our top contributors were Advanced Micro Devices, Inc. (NASDAQ:AMD), NU Holdings and Netflix. AMD’s data center CPUs are used in the cloud service provider (CSP) servers. In addition to the broader secular tailwind from cloud adoption, the company has a performance and pricing advantage over Intel, which we believe will enable it to continue capturing market share. However, the recent stock price rally was due to growing excitement around the company’s AI exposure. It will launch its new MI300 graphics processing unit (GPU) chip later this year to compete against the dominant market leader NVIDIA. Similar to its approach that won market share from Intel within the CPU market, AMD’s product will aim to provide similar performance at a more attractive price. AMD is already working with Microsoft and Meta, while Amazon publicly stated that it is evaluating AMD’s inferencing chips. Using assumptions around the total GPU market size, potential market share gains and price points, our research indicates this could be a $20 billion opportunity for AMD. That would nearly double its revenue. While the company has not historically missed many deadlines, there is execution risk as it works to manufacture and distribute these complex chips at scale, which, combined with an elevated valuation after the stock’s strong performance run, led us to trim the position.”
9. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 122
Salesforce, Inc. (NYSE:CRM) is being seen as an AI boom beneficiary as the CRM software company announced AI-related features for its CRM platform. Salesforce, Inc. (NYSE:CRM) also posted strong Q2 results and gave an upbeat guidance, after which several analysts praised the stock. Wedbush Securities analyst Dan Ives increased his price target on Salesforce, Inc. (NYSE:CRM) to $255.
Ives wrote in a note to investors:
“With the bears expecting a softer print this quarter with macro fears swirling heading into CRM earnings, Salesforce came out of the gates swinging featuring a Djokovic-like performance with a top and bottom-line beat and raise quarter driven by MuleSoft momentum and its overall subscription business further proving strength in the Beltway.”
Salesforce, Inc. (NYSE:CRM)’s CEO Marc Benioff, answering a question during the company’s Q2 earnings call, said the following about generative AI:
“These are mostly predictive transactions, but we’re moving rapidly into the second zone that we all know is generative AI and these GPT products, which we’ve now released to our customers. We’re very excited about the speed of our engineering organization and technology organization, our product organization and their ability to deliver customer value with generative AI.
We have tremendous AI expertise led by an incredible AI research team. And this idea that we’re kind of now in a generative zone means that’s zone number two. But as you’re going to see at Dreamforce, zone number three is opening up with autonomous and with agent-based systems as well. This will be another level of growth and another level of innovation that we haven’t really seen unfold yet from a lot of companies, and that’s an area that we are excited to do a lot of innovation and growth and to help our customers in all those areas. And then we’re eventually going to move into AGI and that will be the fourth area. And I think as we move through these four zones, CRM will become more important to our customers than ever before. Because you’re going to be able to get more automation, more intelligence, more productivity, more capabilities, more augmentation of your employees, as I mentioned.”
Read the full earnings call transcript here.
Harding Loevner Global Equity Strategy made the following comment about Salesforce, Inc. (NYSE:CRM) in its Q2 2023 investor letter:
“Salesforce, Inc. (NYSE:CRM), a company we’ve owned since 2019, recently added ChatGPT-like capabilities onto its existing Al module, Einstein, to support its internal sales efforts and customer-facing software. For example, Einstein GPT can help generate marketing emails tailored to specific clients by using Salesforce’s customer database and past email correspondence to learn the most effective approach for each client. Einstein GPT is also different from off-the-shelf LLMS in three important ways: It keeps personal identifiable information private and secure, compared with external tools that retain anything a user enters. It employs the latest data in Salesforce’s system, as opposed to the sometimes-stale public data that train generic models. And generative Al capabilities can be integrated with other Salesforce offerings; the company has already introduced Slack GPT and Tableau GPT, Al-equipped versions of its workplace collaboration and analytics tools.”
8. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Apple Inc. (NASDAQ:AAPL) is generating all the buzz around the latest iPhone 15 as analysts are swooning over the company’s new products and their revenue potential. Wedbush Securities analyst Dan Ives recently said in a report that iPhone 15 pre-orders are up between 10% and 12% year-over-year – as of the night of September 17, which is “much stronger” than Wall Street expected.
“This is a clear positive for Apple with [average selling prices] set to be a major tailwind for Cupertino in this iPhone 15 cycle with our expectation of an ASP in the ~$925 range and up roughly $100 over the last 12-15 months given heavy Pro mix model shifts,” Ives wrote in an investor note.
Dan Ives has a $240 price target on Apple Inc. (NASDAQ:AAPL). He reiterated his forecast for 85 million iPhone unit production for this cycle.
As of the end of the second quarter of 2023, 135 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Apple Inc. (NASDAQ:AAPL).
Choice Equities Capital Management made the following comment about Apple Inc. (NASDAQ:AAPL) in its second quarter 2023 investor letter:
“Dramatic valuation differences across market cap sizes continue. This has been the case for some time now. Perhaps I have spent too much time discussing these dichotomies, as generally, I feel like if we pick the right stocks and manage market exposures thoughtfully, our equities- oriented portfolio will prosper across various market cycles. However, when markets become as lopsided as they have lately, I feel additional discussion on the market environment is worthwhile, if only to help highlight the opportunities that are available and the likely path forward. I expect future discussions to soon be focused again on our moderately concentrated portfolio. But for now, let’s take one last in-depth look at how far reaching these valuation dichotomies have again become.(Please note: charts that accompany the following can be found in the Appendix.)
Take Apple Inc. (NASDAQ:AAPL) for example. It is the largest stock by market cap, and fairly considered one of the best companies in the world. The company has been extraordinarily successful and improved standards of living everywhere in the process with their ubiquitous products. Along the way, shareholders have been richly rewarded, with shares increasing nearly fourteen-fold over the last ten years while generating an annualized total shareholder return of 31%, including dividends.
On the back of another big quarter for large cap tech, it is now the first stock to surpass the $3T market cap threshold. This makes its weighting in the ~$37T market cap of the S&P 500, ~8%. It also means this one stock’s market cap is larger than that of the entire ~$2.98T market cap of the Russell 2000 index, the first time in history a single stock has outweighed the Russell 2000 – aside from two brief days in September 2020 when Apple’s market cap then accomplished the same…” (Click here to read the full text)
7. Mastercard Incorporated (NYSE:MA)
Number of Hedge Fund Holders: 139
Payments giant Mastercard Incorporated (NYSE:MA) is one of the best investments in the stock market for beginners. Recently, Jefferies upped its price target on Mastercard Incorporated (NYSE:MA) from $460.00 to $475.00. With over a decade of dividend increases and a dominance in the payment processing industry Mastercard Incorporated (NYSE:MA) is a safe choice in an otherwise volatile market.
As of the end of the second quarter of 2023, 139 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Mastercard Incorporated (NYSE:MA). The biggest hedge fund stakeholder of Mastercard Incorporated (NYSE:MA) was Charles Akre’s Akre Capital Management $2.31 billion.
Baron FinTech Fund made the following comment about Mastercard Incorporated (NYSE:MA) in its second quarter 2023 investor letter:
“We modestly trimmed Visa Inc., Mastercard Incorporated (NYSE:MA), and Accenture plc to manage the position sizes and raise capital to fund purchases elsewhere. These stocks remain full-sized positions and high-conviction ideas in the Fund.
Another fintech industry trend we’re seeing is a pickup in M&A activity, most notably in the payments sector. The year started with Nuvei’s $1.3 billion acquisition of Paya announced in January. In April, Network International received an initial takeover offer from a group of private equity firms, which was then topped by Brookfield Asset Management whose $2.8 billion offer was accepted by the Board in June. Following reports earlier this year of a bidding war between Visa Inc. and Mastercard Incorporated to acquire cloud-based issuer processor and core banking software provider Pismo.”
6. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 171
Visa Inc. (NYSE:V) is enjoying gains from the resilient consumer spending, as the company’s fiscal Q3 results show. Analysts believe Visa Inc. (NYSE:V) will gain even more once the economy turns the corner and consumer spending comes back to normal after inflation pressures cool.
Commenting on fiscal Q3 results, Visa Inc. (NYSE:V) CEO Ryan McInerney said that “consumer spending remained resilient, driving growth in payments volume and processed transactions.”
Out of the 910 hedge funds tracked by Insider Monkey, 171 hedge funds reported owning stakes in Visa Inc. (NYSE:V). The biggest stakeholder of Visa Inc. (NYSE:V) during this period was Chris Hohn’s TCI Fund Management which owns a $4.2 billion stake in the company.
Baron FinTech Fund made the following comment about Visa Inc. (NYSE:V) in its second quarter 2023 investor letter:
“We modestly trimmed Visa Inc. (NYSE:V), Mastercard Incorporated, and Accenture plc to manage the position sizes and raise capital to fund purchases elsewhere. These stocks remain full-sized positions and high-conviction ideas in the Fund.
Another fintech industry trend we’re seeing is a pickup in M&A activity, most notably in the payments sector. The year started with Nuvei’s $1.3 billion acquisition of Paya announced in January. In April, Network International received an initial takeover offer from a group of private equity firms, which was then topped by Brookfield Asset Management whose $2.8 billion offer was accepted by the Board in June. Following reports earlier this year of a bidding war between Visa Inc. and Mastercard Incorporated to acquire cloud-based issuer processor and core banking software provider Pismo, Visa announced its intention to acquire the Brazilian company for $1 billion in late June.”
Click to continue reading and see 5 Best Investments for Beginners.
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Disclosure: None. 11 Best Investments for Beginners is originally published on Insider Monkey.
