In this article, we take a look at 11 safe stocks to buy 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.
Recent selloffs have devastated several equities, and investors are still divided on whether the market has reached oversold territory. Some predict a recession and blame it on the Federal Reserve’s (Fed) upcoming interest rate increases, while others blame the gigantic valuations of major tech companies. Whatever it may be, the stock market is presently quite volatile. Uncertainty levels are at an all-time high as the Fed fights against inflation and a weakening economy. The Fed cannot deploy quantitative easing to boost the economy, unlike in 2008 and 2020. Inflation will only get worse if this is done.
However, just because there is uncertainty in the stock market doesn’t mean investors should stay out. Contrarily, historically speaking, bear markets have been a great investment opportunity. Additionally, investors have choices on how to put their money to work. Buy safe investments to weather the short-term storm and steadily increase your wealth over time if you don’t have the stomach for more volatility or danger.
Pixabay/Public Domain
Our Methodology:
We turn to the smart money to see how they are playing the current turmoil. For this article we scanned Insider Monkey’s database of 895 hedge funds and picked some of the safest stocks these funds were piling into as of the end of June. These are safe, blue-chip companies. Some of them have long-term growth potential while others pay consistent dividend income without any uncertainty. Some of the notable names in the list include Apple Inc. (NASDAQ:AAPL), Visa Inc. (NYSE:V), and Alphabet Inc. (NASDAQ:GOOGL), among others.
Safe Stocks To Buy According To Hedge Funds
11. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders as of Q2, 2022: 55
Colgate-Palmolive Company (NYSE:CL) specializes in producing and distributing healthcare, household, and personal care products. On October 17, Deutsche Bank analyst Steve Powers lowered his price target on Colgate-Palmolive Company (NYSE:CL) to $85 from $87 but kept a Buy rating on the shares. The analyst anticipates Colgate-Palmolive Company (NYSE:CL) to release a “solid set” of third-quarter financial results, with persistent pressure on gross margins offset by robust organic growth evenly distributed across all regional divisions including its per food segment Hill’s.
The company was a popular stock among elite funds in Q2 2022, as 55 hedge funds in Insider Monkey’s database owned stakes in the stock, up from 50 a quarter earlier. These stakes have a total value of nearly $3 billion.
According to CNBC, Third Point’s Loeb sees unrecognized value in Colgate-Palmolive Company (NYSE:CL) Hill business. Here is what Third Point specifically said about Colgate-Palmolive Company (NYSE:CL) in its Q3 2022 investor letter:
“Third Point recently acquired a significant position in Colgate-Palmolive Company (NYSE:CL). The investment fits several important criteria in the current investment environment. First, the business is defensive and has significant pricing power in inflationary conditions. Second, there is meaningful hidden value in the company’s Hill’s Pet Nutrition business, which we believe would command a premium multiple if separated from Colgate’s consumer assets. Third, there is a favorable industry backdrop in consumer health, with new entrants via spin-offs and potential for consolidation. Finally, the current valuation is attractive both because earnings growth is poised to inflect higher, and because shareholders are paying very little for the optionality around Hill’s or Colgate’s ability to participate in further consolidation in the consumer health sector.
Colgate has a strong portfolio of brands and operates across four categories that should perform well across most economic conditions: oral care, home care, personal care, and pet nutrition. Although Colgate has delivered organic sales growth of 5-6% over the past few years, earnings growth has been disappointing, and the stock has become a perennial underperformer. Foreign exchange headwinds have pressured reported results. Business reinvestment, supply chain disruption, and inflationary pressures have weighed heavily on margins; those headwinds are now reversing. Stepped up investments in demand generation, product innovation, and digital capabilities are starting to pay off. Global supply chain bottlenecks are easing and product availability on the shelf is improving. And, most importantly, raw material, transportation, and wage pressures are stabilizing, and even reversing in some areas, at the same time additional pricing takes effect. Taken together, the stage is set for Colgate to deliver several years of outsized earnings growth, as sales continue to increase, foreign exchange movements are annualized, and margins finally recover…” (Click here to view the full text)
10. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders as of Q2, 2022: 60
The Coca-Cola Company (NYSE:KO) is a beverage manufacturer with a brand portfolio of 200 brands of soft drinks, coffee, teas, and water across more than 200 countries and regions. Berkshire Hathaway’s holding of The Coca-Cola Company (NYSE:KO) remained unchanged during the second quarter of 2022, and the fund had an investment value of approximately $25 billion in the company at the end of Q2 2022. The fund is the leading shareholder of The Coca-Cola Company (NYSE:KO) out of the 895 hedge funds tracked by Insider Monkey during Q2.
Given the relatively stable demand for its products, The Coca-Cola Company (NYSE:KO) shares are up 0.39% year to date and the company remains very profitable despite the economic headwinds. It released its latest quarter results on October 25, reporting an EPS of $0.69, beating estimates by $0.05, and revenue of $11.10 billion, beating the estimates by $602.57 million.
On October 26, UBS analyst Peter Grom raised his price target on The Coca-Cola Company (NYSE:KO) to $68 from $63 and kept a Buy rating on the shares. According to the analyst’s research note to investors, the company’s Q3 earnings performance was “impressive” since organic growth more than offset further currency challenges. The Coca-Cola Company (NYSE:KO) risk/reward ratio appears positive, says Grom, given that its shares have recently underperformed and there is a possibility for better revenue growth to support a prolonged premium compared to its competitors.
At the end of the second quarter of 2022, 60 hedge funds in the database of Insider Monkey held stakes worth $28 billion in The Coca-Cola Company (NYSE:KO), compared to 64 in the preceding quarter worth $29 billion.
Here is what Aristotle Capital specifically said about The Coca-Cola Company (NYSE:KO) in its Q2 2022 investor letter:
“The Coca-Cola Company (NYSE:KO), the global beverage business, was a leading contributor for the period. Coca-Cola continues to benefit from the refranchising of its bottling operations and realignment of incentives, catalysts we previously identified. These initiatives are demonstrating their strength in an inflationary and supply-chain-challenged environment. Additionally, the company has focused on evolving its customer engagement practices by leveraging digital and social medias for targeted campaigns, such as the design and launch of Coke Byte in the metaverse. Lastly, Coca-Cola has furthered its transformation into a total beverage company, as it debuted its new Jack Daniel’s Tennessee Whiskey and Coca-Cola ready-to-drink premixed cocktail. Although uncertainties surrounding cost pressures, lockdowns and geopolitical conflicts remain, we believe Coca-Cola is uniquely positioned to successfully continue its transition toward a total beverage business.”
09. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders as of Q2, 2022: 61
Abbott Laboratories (NYSE:ABT) is an American manufacturer of healthcare products worldwide. It operates through four segments – Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. On September 15, Abbott Laboratories (NYSE:ABT) declared a $0.47 per share quarterly dividend, which is payable on November 15 to shareholders of record on October 14. The forward yield was a solid 1.91%. Abbott Laboratories (NYSE:ABT) has increased its dividend payout for 50 consecutive years, making it a reliable dividend king.
On October 26, Mizuho analyst Anthony Petrone initiated coverage of Abbott Laboratories (NYSE:ABT) with a Neutral rating and a $105 price target. According to Insider Monkey’s data, 61 hedge funds held stakes worth $3.60 billion in Abbott Laboratories (NYSE:ABT) at the end of Q2 2022, compared to 68 funds in the earlier quarter worth $4 billion. Ric Dillon’s Diamond Hill Capital is a significant company shareholder, with 5.8 million shares worth $639.5 million.
Diamond Hill Capital discussed Abbott Laboratories (NYSE:ABT) in its Q3 2022 investor letter. Here is what the fund said:
“Also among our bottom contributors were health care products manufacturer Abbott Laboratories (NYSE:ABT), global pharmaceutical company Pfizer, media and technology giant Alphabet, and insurance company American International Group (AIG).
Abbott has been working through a recall of its infant formula brand Similac in the US, which has continued to pressure its share price. Although the recall will impact near-term revenues, we are not concerned about any long-term impacts. We remain optimistic about the company given it is one of the highest quality names in health care, in our view, with a talented management team that makes smart capital allocation decisions. Abbott also has leading health care and consumer franchises with a particularly strong competitive position in its medical device business. The company continues to launch innovative products in key strategic areas (such as diabetes, structural heart, and diagnostics), which should help drive not only revenue growth but margin expansion.”
08. PepsiCo, Inc. (NYSE:PEP)
Number of Hedge Fund Holders as of Q2, 2022: 65
PepsiCo, Inc. (NASDAQ:PEP) is an American multinational manufacturer and distributor of beverages and convenience foods worldwide. PepsiCo, Inc. (NASDAQ:PEP) reported strong earnings in its recently-published earnings report. The company posted an operating cash flow of $6.3 billion in the first nine months of the year. The company had over $6.4 billion in cash and cash equivalents, compared with $5.6 billion nine months ago.
On July 21, PepsiCo, Inc. (NASDAQ:PEP) declared a quarterly dividend of $1.15 per share, in line with its previous dividend. The company has been raising its dividends consistently for the past 50 years, which makes it one of the best dividend stocks. As of October 29, the stock has a forward dividend yield of 2.57%. Unlike the broader market, PepsiCo, Inc. (NASDAQ:PEP) hasn’t fallen much this year, with shares up 5.18% year to date. On October 14, Barclays analyst Lauren Lieberman raised his price target on PepsiCo, Inc. (NYSE:PEP) to $185 from $183 and kept an Overweight rating on the shares.
65 hedge funds we track owned shares of PepsiCo, Inc. (NASDAQ:PEP) at the end of the second quarter with Yacktman Asset Management holding over 4.25 million shares. Just like Apple Inc. (NASDAQ:AAPL), Visa Inc. (NYSE:V), and Alphabet Inc. (NASDAQ:GOOGL), PepsiCo, Inc. (NYSE:PEP) is one of the safe stocks to buy according to hedge funds.
07. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders as of Q2, 2022: 67
Walmart Inc. (NYSE:WMT), the American multinational retail corporation, is one of the premier safe stocks to buy in 2022. On October 18, after taking over coverage of the name, Jefferies analyst Corey Tarlowe increased his price target for Walmart Inc. (NYSE:WMT) from $161 to $165 and maintained a Buy rating on the shares. Walmart Inc. (NYSE:WMT) is well positioned in the current climate as the value leader in retail.
Walmart Inc. (NYSE:WMT) currently pays a quarterly dividend of $0.56 per share. In 2022, the company marked its 49th consecutive year of dividend growth. As of October 28, the company’s shares have a yield of 1.59%.
Among the hedge funds tracked by Insider Monkey, 67 reported owning stakes worth $3.8 billion in Walmart Inc. (NYSE:WMT) at the end of June 2022, compared to 60 funds in the earlier quarter worth $6.6 billion. Rajiv Jain’s GQG Partners is the biggest stakeholder of the company, with 9.82 million shares worth $1.2 billion.
Here is what Leaven Partners has to say about Walmart Inc. (NYSE:WMT) in its Q3 2022 investor letter:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Walmart (NYSE:WMT), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
06. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders as of Q2, 2022: 71
The Procter & Gamble Company (NYSE:PG) is one of the oldest and largest consumer packaged goods companies in the world that was set up in 1837 and is based in Cincinnati, Ohio. The firm’s products include personal grooming, healthcare, and many other products. The Procter & Gamble Company (NYSE:PG) is a dividend aristocrat, with the company having increased its dividend for 66 straight years. Given the dividend raises, The Procter & Gamble Company (NYSE:PG) has a forward dividend yield of 2.77% as of October 28. The Procter & Gamble Company (NYSE:PG) has a P/E ratio of 22.86, which is lower than the industry average of 25.
On October 20, Barclays analyst Lauren Lieberman raised his price target on The Procter & Gamble Company (NYSE:PG) to $145 from $139 and kept an Overweight rating on the shares.
71 hedge funds we track owned shares of The Procter & Gamble Company (NYSE:PG) at the end of Q2 2022, ranking it #6 on our list of 11 safe stocks to buy according to hedge funds. Out of these funds, Ray Dalio’s Bridgewater Associates is The Procter & Gamble Company (NYSE:PG) largest investor. It owns 6.7 million shares that are worth $970 million. Another famous hedge fund, D E Shaw owned almost 3.7 million shares of The Procter & Gamble Company (NYSE:PG). Mr. Buffett’s Berkshire Hathaway owned 315,400 shares of the company that were worth $45 million during the same period.
Along with Apple Inc. (NASDAQ:AAPL), Visa Inc. (NYSE:V), and Alphabet Inc. (NASDAQ:GOOGL), The Procter & Gamble Company (NYSE:PG) is one of the safe stocks to buy according to hedge funds.
Click to continue reading and see 5 Safe Stocks To Buy According To Hedge Funds.
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Disclosure: None. 11 Safe Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
