In this article, we will take a look at 15 good stocks to buy.
A good stock to buy is a stock of a strong company that can grow earnings in the future.
Although a good stock to buy might decline in the near term, there would be a good chance that the good stock to buy would be higher in the long term given the company’s normalized earnings potential and its competitive advantages. Ideally a good stock to buy would trade for a fair or attractive valuation.
Many good stocks to buy have historically been leading blue chips that have increased their earnings per share over time. Many of the same stocks make it to the Dividend Aristocrats list where the company has increased its annual dividend for 25 years or more. Many good stocks to buy also return capital back to shareholders through share repurchases. Good stocks to buy are generally less volatile than the general market although there can be exceptions.
Given that the Federal Reserve has increased interest rates significantly this year, the broader market has declined substantially with the S&P 500 down 15% year to date and the Dow Jones Industrial Average down 6% year to date. Many stocks, including good stocks to buy, have also declined substantially as well. As a result, some blue chips with competitive advantages trade for fairly attractive valuations if the economy can grow as expected.
Recently, stocks have increased due to Federal Reserve Chairman Jerome Powell’s comments that the Federal Reserve might increase interest rates at a slower pace.
Nevertheless, Powell also said the central bank will still raise rates until it defeats inflation. He added, “Despite some promising developments, we have a long way to go in restoring price stability.”
If economic data fails to meet expectations, the good stocks to buy could decline even further. Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
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Methodology
For our list of 15 Good Stocks to Invest in Right Now, we picked 15 companies with the right mix of scale, competitive advantages, and earnings growth potential.
We then ranked them based on the number of hedge funds in our database that owned shares of the same stocks at the end of Q3 2022.
15 Good Stocks to Invest in Right Now
15. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a leading tech company that provides infrastructure, software and consulting services for clients as they pursue a digital transformation for their businesses. In terms of the future, International Business Machines Corporation (NYSE:IBM) has a goal to eventually build quantum-centric supercomputers that are substantially faster than today’s computers for some applications. In Q3, International Business Machines Corporation (NYSE:IBM) reported adjusted EPS of $1.81 on revenue of $14.1 billion versus the consensus of $1.77 on revenue of $13.51 billion. International Business Machines Corporation (NYSE:IBM) ranks #15 on our list of good stocks to buy.
14. Honeywell International Inc. (NYSE:HON)
Number of Hedge Fund Holders: 53
Honeywell International Inc. (NYSE:HON) is a leading specialty industrial machinery conglomerate whose shares have trended higher in the long term given the strength of the company’s businesses. Although the S&P 500 is down 15% year to date, Honeywell International Inc. (NYSE:HON) stock is up 5.1% in 2022. On December 1, Julian Mitchell of Barclays raised his price target to $229 from $212 and kept an ‘Overweight’ rating on Honeywell International Inc. (NYSE:HON).
13. Lockheed Martin Corporation (NYSE:LMT)
Number of Hedge Fund Holders: 53
Lockheed Martin Corporation (NYSE:LMT) is a leading defense contractor that makes the F-22 and F-35. Given the growth in military spending over the years, demand for the latest and greatest defense airplanes has never been higher. With a stock price of over $483 per share, Lockheed Martin Corporation (NYSE:LMT) stock price is near an all time high as well. If Lockheed Martin Corporation (NYSE:LMT) can maintain its technological leadership, the company has more growth in the future.
12. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 53
McDonald’s Corporation (NYSE:MCD) has rallied from around $100 per share in 2015 to $273.4 on December 1, 2021 given the growth in the company’s earnings per share. Although the stock isn’t cheap with a forward P/E ratio of 26.14, bulls think the company’s same store sales will continue to increase despite the weakening macro environment. Out of the 920 hedge funds in our database, 53 owned shares of McDonald’s Corporation (NYSE:MCD) at the end of Q3 2022, ranking the company #12 on our list of good stocks to buy.
11. General Electric Company (NYSE:GE)
Number of Hedge Fund Holders: 53
Based on its past history over the last 10 years, General Electric Company (NYSE:GE) hasn’t been a good investment given the struggles at GE Capital and the pandemic affecting aerospace companies. Nevertheless, it seems that General Electric Company (NYSE:GE) has a chance to be a solid stock for the future given the company is more of a leading industrial. Although there could still be downside if there is a recession or if aerospace slows further, General Electric Company (NYSE:GE) has long term potential given its normalized earnings power.
10. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 68
Leading retailer Walmart Inc. (NYSE:WMT) ranks among the potential good stocks to buy given its substantial scale and earnings power. Despite the inflation headwind, analysts think Walmart Inc. (NYSE:WMT) will earn $6.04 per share in 2023 and $6.59 per share in 2024. Walmart Inc. (NYSE:WMT) shares also have a dividend yield of around 1.46%.
9. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 69
Given the inflation headwind, shares of The Procter & Gamble Company (NYSE:PG) stock have fallen 8.4% year to date. Nevertheless, The Procter & Gamble Company (NYSE:PG) has many leading consumer product brands that could rebound if the Federal Reserve wins its battle against inflation. In terms of Wall Street, analysts think The Procter & Gamble Company (NYSE:PG) will overcome its headwinds with expected EPS of $5.81 for 2023, $6.23 for 2024 and $6.73 for 2025.
8. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 75
Eli Lilly and Company (NYSE:LLY) is a pharmaceutical giant whose shares have surged over 36% year to date to near an all time high. Analysts expect substantial earnings growth in Eli Lilly and Company (NYSE:LLY)’s future with Wall Street expecting EPS of $7.80 in 2022, $9.17 in 2023, and $12.20 in 2024. 75 hedge funds in our database owned shares of Eli Lilly and Company (NYSE:LLY), ranking the company #8 on our list of 15 Good Stocks to Invest in Right Now.
7. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 85
Healthcare conglomerate Johnson & Johnson (NYSE:JNJ) ranks among the potential good stocks to buy given its substantial normalized earnings power and its forward P/E ratio of 17.24. Johnson & Johnson (NYSE:JNJ) has a strong history of increasing its dividend and returning capital back to shareholders. Furthermore, Johnson & Johnson (NYSE:JNJ) is held by many smart money funds with 85 hedge funds in our database holding shares at the end of Q3 2022.
6. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders: 110
Megabank JPMorgan Chase & Co. (NYSE:JPM) ranks #6 on our list of 15 Good Stocks to Invest in Right Now given 110 hedge funds in our database held shares at the end of Q3 2022. Although the company’s earnings might not meet expectations next year if there is a recession, analysts believe JPMorgan Chase & Co. (NYSE:JPM) will grow its EPS in the long term given its growing market share and its earnings power.
Vltava Fund commented on JPMorgan Chase & Co. (NYSE:JPM) in a Q3 2022 investor letter,
We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.
JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.
A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) ranks among the potential good stocks to buy given its leading position in the premium smartphone market which allows the company to sell high margin smartphones in addition to charging a percentage on revenues that the apps from its app store generates. Apple Inc. (NASDAQ:AAPL) has also returned a lot of capital back to its shareholders over the years with tens of billions in buybacks in recent years. 140 hedge funds in our database owned shares of Apple Inc. (NASDAQ:AAPL) at the end of Q3 2022.
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 156
Although Alphabet Inc. (NASDAQ:GOOG)’s search engine remains its primary source of profit, the company’s YouTube business is now a big business. For the future, Alphabet Inc. (NASDAQ:GOOG)’s Waymo and other AI projects could help increase earnings if the company successfully unlocks artificial intelligence’s potential. Shares of Alphabet Inc. (NASDAQ:GOOG) trade for a forward P/E ratio of 19.15 which is attractive given the company’s competitive advantages.
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 177
Meta Platforms, Inc. (NASDAQ:META) trades for a forward P/E ratio of 15.41 which is an attractive valuation for the social media company if it meets its expected earnings potential in the long term. Meta Platforms, Inc. (NASDAQ:META) is also held by 177 hedge funds in our database at the end of the third quarter.
ClearBridge Investments commented on Meta Platforms, Inc. (NASDAQ:META) in a Q3 2022 investor letter,
“Meta Platforms, Inc. (NASDAQ:META), one of two overweights among the mega cap stocks, underperformed in the third quarter (-15.9%) and is the Strategy’s largest detractor year to date. Meta has also trailed mega cap advertising peer Alphabet, which we don’t own, as revenue growth has slowed due to tough comparables to a strong e-commerce environment in early 2021, negative impacts from Apple’s privacy changes and rising expenses.
While we have trimmed our position close to 20%, we remain invested as we do not think the stocks’ valuation at about 13x consensus 2023 earnings appropriately reflects its long-term earnings and free cash flow generation potential. Despite current revenue headwinds, we believe Meta is well-positioned to navigate industrywide changes to advertising targeting and its transition to the Reels short-form video format will monetize in the coming years, helping to re-accelerate revenue growth.
We also welcome Meta’s implementation of cost-cutting measures, which should help uncover the company’s high underlying profitability. Lastly, we see Meta’s investments in augmented reality as a call option for long-duration investors.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 269
Amazon.com, Inc. (NASDAQ:AMZN) ranks among the potential good stocks to buy given its leading cloud business. For Q3 2022, Amazon.com, Inc. (NASDAQ:AMZN)’s cloud business sales rose 27.5% year over year to $20.5 billion and operating income for the division was $5.4 billion. Although the numbers were lower than analyst estimates, the growth in the cloud is still very strong for a business its size and there is likely more growth in the future. 269 hedge funds we track owned shares of Amazon.com, Inc. (NASDAQ:AMZN) at the end of Q3 2022.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 269
Microsoft Corporation (NASDAQ:MSFT) ranks #1 on our list of 15 Good Stocks to Invest in Right Now given 269 hedge funds in our database held shares in the software company. In addition to continuing to grow in the cloud, Microsoft Corporation (NASDAQ:MSFT) is trying to close its acquisition in Activision Blizzard which could give the company more diversification. According to Microsoft Corporation (NASDAQ:MSFT), the purchase is expected to be accretive to adjusted earnings per share upon close.
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Disclosure: None. 15 Good Stocks to Invest in Right Now is originally published on Insider Monkey.
