In this article we are going to share 11 best low beta stocks to buy according to 900+ hedge funds tracked by Insider Monkey. You can also check out our recently published article – 12 Safest Stocks to Invest In – on a related topic.
Geopolitical tensions, concerns about inflation, and a hawkish Federal Reserve continue to make equity markets volatile. As a result, investors are bound to focus on low-beta stocks as such stocks act as a shield to current market scenario. Therefore, including some of the low-beta stocks comes as a necessity as such stocks deliver healthy returns in the long run. Inclusion of some low-beta stocks in the portfolio can make it somewhat defensive.
Stocks having a beta value of 1 means that their price activity is strongly correlated with general market. If beta value is less than 1, they tend to be less volatile in comparison to general market. On the contrary, beta value of more than 1 signifies that the stock is more volatile than general market.
As a matter of fact, low-volatility/low-beta stocks have the characteristics of a bond. Such stocks are typically large, and are profitable and dividend-paying firms. Such companies have mediocre growth opportunities. Simply put, low-beta stocks have characteristics of safety rather than components of risk and opportunity. As a result, such stocks exhibit higher correlations with long-term bond returns.
Empirical research exhibits that low-volatility securities generate higher risk-adjusted returns in the long run. That is true because such securities usually fall less in down markets. Study by Bradford Jordan and Timothy Riley in 2016 stated that high-volatility/high-beta stocks and stocks having high short interest deliver poor risk-adjusted future performance. Low-beta premium largely depends on whether low volatility is in value or growth regime, whether past returns were high or low, and general performance of size premium. Studies have shown that when low-volatility stocks continue to have value exposure, they on average, outperformed general market by approximately 2%. When low-volatility stocks have growth exposure, they tend to underperform by approximately 1.4%, on average.
Therefore, returns to low beta anomaly are justified when low-beta stocks are in value regime, and when high-beta stocks having low short interest are excluded.
PepsiCo, Inc. (NASDAQ:PEP), Exxon Mobil Corporation (NYSE:XOM), and Walmart Inc. (NYSE:WMT) are some of the best low beta stocks to buy.
Investments, Finance
Our Methodology
In order to identify the best low beta stocks to buy, we first need to identify the list of low beta stocks. For that purpose we used the holdings of ETC 6 Meridian Low Beta Equity Strategy ETF (SIXL). According to its website SIXL uses the following methodology to come up with its 200+ low beta stocks: “Stocks are first screened to remove those that score poorly on financial and growth measures. Those stocks that remain are then ranked according to their beta.” After identifying 240 low beta stocks we ranked these stocks using Insider Monkey’s proprietary hedge fund sentiment index. So our list of the 11 best low beta stocks to buy is based on more than 900 equity hedge funds’ consensus views.
11 Best Low Beta Stocks to Buy
11. Bristol-Myers Squibb Company (NYSE:BMY)
No. of Hedge Fund Holders: 68
Bristol-Myers Squibb Company (NYSE:BMY) discovers, develops, and markets drugs for a range of therapeutic areas including cardiovascular, cancer, and immune disorders. Key focus for the company is immuno-oncology, where the firm has been categorised as a leader in drug development. The company has exited several non-pharmaceutical businesses in the past to focus on branded specialty drugs.
Bristol-Myers Squibb Company’s (NYSE:BMY) Q3 results exhibit strong in-line and new product portfolio growth. The company continues to progress its product pipeline with significant regulatory and clinical milestones. It has also completed the acquisition of Turning Point Therapeutics, further expanding its precision oncology portfolio. In terms of estimates, Bristol-Myers Squibb Company (NYSE:BMY) expects total sales for FY22 of approximately $46.0 billion on US GAAP basis, while gross margin is expected to come at approximately 78%.
Analysts at Atlantic Securities initiated coverage on Bristol-Myers Squibb Company (NYSE:BMY) and increased their price target on shares of the company from $85.00 to $88.00. They gave the stock an “Overweight” rating on November 10.
Bristol-Myers Squibb Company (NYSE:BMY) was found among the 13F holdings of 68 elite hedge funds in the third quarter, with a total stake value of $1.73 billion. The company has a strong pipeline of potential treatments for over 35 diseases. Through both acquisitions and organic growth, Bristol-Myers Squibb Company (NYSE:BMY) doubled its revenues over past 5 years.
Here is what RGA Investment Advisors has to say about Bristol-Myers Squibb Company (NYSE:BMY) in their third-quarter 2022 investor letter:
“Bristol-Myers Squibb Company (NYSE:BMY), which we referenced above, boasts a double-digit free cash flow yield that gets divided roughly equally between repurchases, a dividend, and M&A in what is the best environment for acquisitions perhaps ever. In 2019, BMY acquired Celgene, who had one of the better corporate development programs in the industry. We view this as a great outlet for us as generalists considering a company like BMY should truly thrive with the ability to acquire outstanding assets and science at depressed valuations. We touched on the Turning Point acquisition above and we expect the company to be increasingly active in the M&A landscape. Importantly, Celgene also came to BMY with a phenomenal CAR-T platform. CAR-T is a cell therapy that activates the body’s immune system to target cancers. This will be a key growth vector alongside M&A in overcoming the company’s patent cliff.”
10. Charter Communications, Inc. (NASDAQ:CHTR)
No. of Hedge Fund Holders: 68
Charter Communications, Inc. (NASDAQ:CHTR) is a leading broadband connectivity company and cable operator which serves over 31 million customers in 41 states through its Spectrum brand. The company provides a full range of state-of-the-art residential and business services such as Spectrum Internet, TV, Mobile and Voice.
Charter Communications, Inc. (NASDAQ:CHTR) posted Q3 revenue of $13.6 billion which grew by 3.1% year-over-year. Mobile revenue growth of 40.2%, and advertising sales revenue growth of 22.9% were the principal growth enablers. However, residential revenue saw 0.7% growth. The company expects FY22 cable capital expenditures to be in the range of $7.1 billion – $7.3 billion.
Charter Communications, Inc. (NASDAQ:CHTR) had 27 elite hedge funds long its stock in the third quarter of 2022. Their total stake value came out to be $3.39 billion.
Pivotal Research covered Charter Communications, Inc. (NASDAQ:CHTR) on October 31, and reduced its price target on the company’s shares from $560.00 to $475.00. They have a “Buy” rating on the stock.
After getting the advantages of synergies and upgrading each network to modern broadband technologies, the company saw steady broadband growth for years. As a result, it has been able to generate healthy gains between 2016 and 2021.
Alongside PepsiCo, Inc. (NASDAQ:PEP), Exxon Mobil Corporation (NYSE:XOM), and Walmart Inc. (NYSE:WMT), Charter Communications, Inc. (NASDAQ:CHTR) is one of the 11 best low beta stocks to buy.
Weitz Investment Management, an investment management firm, published its third-quarter 2022 investor letter and mentioned Charter Communications, Inc. (NASDAQ:CHTR). Here is what the fund said:
“Liberty Broadband’s primary asset is a 26% stake in Charter Communications (NASDAQ:CHTR). Charter is not sitting still; the company is adapting via footprint expansion into underserved areas, price-advantaged mobile line growth, and so on. Charter’s hefty free cash flows are valuable in the hands of proven, astute capital allocators. Time will tell, but to paraphrase country music artist Merle Haggard, we do not yet think cable’s good times are really over for good.”
9. Walmart Inc. (NYSE:WMT)
No. of Hedge Fund Holders: 68
Walmart Inc. (NYSE:WMT) is America’s largest retailer by sales, and operates more than 10,500 stores under 46 banners in 24 countries and eCommerce websites. The company sells a variety of general merchandise and grocery items.
In Q3 2023, Walmart Inc. (NYSE:WMT) delivered strong revenue growth globally as it saw strength in Walmart U.S., Sam’s Club U.S., Flipkart, and Walmex. The company’s total revenue came in at $152.8 billion, exhibiting 8.7% growth year-over-year. Subsequent to this quarter, it approved $20 billion share repurchase authorization which replaces its existing authorization.
The company has raised its FY 2023 outlook. It expects consolidated net sales growth of approximately 5.5%. However, it expects adjusted EPS decline of 6.0% – 7.0% in Q3 2023. The decline is expected due to risk of persistent inflation, principally in general merchandise category. This is made up of discretionary items.
Research analysts at UBS Group covered Walmart Inc. (NYSE:WMT) and gave the price objective of $170.00. Elsewhere, Truist Financial raised its price target on shares of the company from $134.00 to $150.00, giving a “Hold” rating on November 16.
The company’s grocery business continues to dominate. It’s by far the largest seller of groceries in the U.S., principally when Sam’s Club is included.
At the end of Q3 2022, 68 elite hedge funds reported owning stakes in Walmart Inc. (NYSE:WMT) worth $4.08 billion. In the preceding quarter, 67 hedge funds held stakes worth $3.78 billion.
Leaven Partners, an investment management firm, released third-quarter 2022 investor letter. Here is what the fund has to say about Walmart Inc. (NYSE:WMT):
“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%.”
8. The Procter & Gamble Company (NYSE:PG)
No. of Hedge Fund Holders: 69
The Procter & Gamble Company (NYSE:PG) is one of the world’s largest consumer product manufacturers. It operates a line-up of over 20 leading brands that include Tide laundry detergent, Charmin toilet paper, Pantene shampoo, and Pampers diapers. It is focused on providing branded products of superior quality.
The company’s net sales came in at $20.6 billion in Q1 2023, exhibiting 1% growth against prior year, with organic sales growing by 7%. Organic sales growth stemmed from 9% percent growth from higher pricing and 1% rise from positive product mix. These increases were partially offset by 3% fall in shipment volumes.
For fiscal year 2023, The Procter & Gamble Company (NYSE:PG) maintained its outlook for organic sales growth of between 3%-5%. It expects capital spending of approximately 5% of fiscal 2023 net sales, and adjusted free cash flow productivity of 90%. The company expects to pay approximately $9 billion in dividends and to repurchase $6 billion – $8 billion of common shares in fiscal year 2023.
Jefferies Financial Group covered The Procter & Gamble Company (NYSE:PG) and they increased its price objective from $149.00 to $164.00 on November 22.
According to Insider Monkey’s data, 69 hedge funds were long The Procter & Gamble Company (NYSE:PG) at the end of Q3 2022. In the preceding quarter, 71 hedge funds held stakes in the company.
7. PepsiCo, Inc. (NASDAQ:PEP)
No. of Hedge Fund Holders: 72
PepsiCo, Inc. (NASDAQ:PEP) is a global leader in snacks and beverages, and it owns renowned household brands such as Pepsi, Mountain Dew, Gatorade, Lay’s, Cheetos, and Doritos, among others. It continues to dominate global savory snacks market and ranks as the second-largest beverage provider in the world.
PepsiCo, Inc. (NASDAQ:PEP) achieved net revenue growth of 8.8% year-over-year in the third quarter of 2022. Given the company’s YTD performance, it anticipates achieving full-year organic revenue growth of around 12% (previously 10%) and core constant currency EPS growth of around 10% (previously 8%).
Deutsche Bank Aktiengesellschaft covered PepsiCo, Inc. (NASDAQ:PEP) in their research report on September 27, and gave a “Hold” rating on the stock. On October 14, analysts at Barclays provided their take on PepsiCo, Inc. (NASDAQ:PEP) and raised its price objective from $183 to $185.
72 of the 920 hedge funds profiled by Insider Monkey during Q3 2022 reported owning the company’s shares. Their total stakes were valued at approximately $4.82 billion.
ClearBridge Investments, an investment management firm, published its Q2 2022 investor letter. It mentioned about PepsiCo, Inc. (NASDAQ:PEP). Here is what the fund said:
“Also in the stable and predictable cash flow camp, though with a very different business model, global food and beverage company PepsiCo (NYSE:PEP) reported very strong organic growth in the first quarter, driven by healthy price/mix, and raised revenue guidance, while holding EPS guidance. Notably, its beverage business showed expanding margins.”
6. Exxon Mobil Corporation (NYSE:XOM)
No. of Hedge Fund Holders: 75
Exxon Mobil Corporation (NYSE:XOM) is an integrated oil and gas company which explores, produces, and refines oil around the world.
Q3 2022 earnings came in at $19.7 billion in comparison to $17.9 billion in the preceding quarter. Higher natural gas realizations, record throughput in Energy products, and continued cost control were principal growth enablers of earnings growth. Focused cost control and growth of higher-margin petroleum and chemical products also helped earnings and cash flow growth.
Analysts at Citigroup released a research note on Exxon Mobil Corporation (NYSE:XOM) on November 22. They have raised their target price of shares of the company from $98.00 to $110.00.
By the end of third quarter of 2022, 75 of the 920 hedge funds polled by Insider Monkey held stakes worth $5.53 billion in Exxon Mobil Corporation (NYSE:XOM).
Exxon Mobil Corporation (NYSE:XOM) plans to wind down its oil production in Equatorial Guinea and intends to leave West African country once its license expires in 2026. This move exhibits wider move by major oil producers who plan to reduce crude production in West Africa. Now, they intend to shift investments to lower-carbon natural gas development on the continent.
Just like Walmart Inc. (NYSE:WMT), Merck & Co., Inc. (NYSE:MRK), and AbbVie Inc. (NYSE:ABBV), Exxon Mobil Corporation (NYSE:XOM) is one of the 11 best low beta stocks to buy.
Let us see what First Eagle Investments has to say about Exxon Mobil Corporation (NYSE:XOM) in their second-quarter 2022 investor letter. Here are the details:
“Integrated oil and gas giant Exxon Mobil performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industrywide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”
5. Pfizer Inc. (NYSE:PFE)
No. of Hedge Fund Holders: 77
Pfizer Inc. (NYSE:PFE) is a research-based, global biopharmaceutical company. The company discovers, develops, manufactures, markets, sells and distributes biopharmaceutical products worldwide.
Pfizer Inc.’s (NYSE:PFE) Q3 2022 revenues came in at $22.6 billion. There was a fall of 2% operationally over Q2 2022 principally due to exceptionally strong growth achieved in Q2 2022.
Over the course of next 18 months, the company expects to have up to 19 new products or indications in the market. The company has already begun co-promotion or commercialization earlier this year for 5 of these new products or indications. The company has raised and narrowed its FY 2022 adjusted diluted EPS guidance from $6.30 – $6.45 to $6.40 – $6.50.
Pfizer Inc. (NYSE:PFE) has been ranked 5th on our list of 11 best low beta stocks to buy.
Pfizer Inc. (NYSE:PFE) was in 77 hedge funds’ portfolios at the end of Q3 2022, compared to 70 in the preceding quarter. At the end of the third quarter, combined value of their stakes was $2.44 billion.
The Goldman Sachs Group gave $47.00 price target on the shares of the company on November 8.
Diamond Hill Capital, an investment management company, released its “Large Cap Strategy” third-quarter 2022 investor letter. Here is what it said:
“Also among our bottom contributors were health care products manufacturer Abbott Labs, global pharmaceutical company Pfizer Inc. (NYSE:PFE), media and technology giant Alphabet, and insurance company American International Group (AIG). Although Pfizer continues to report strong performance of its core drugs, sales of its COVID vaccine and treatment have likely peaked and sales are expected to decline going forward. We remain optimistic about the company long term as we believe management is taking the company in the right direction, focusing R&D, and making strategic acquisitions with profits generated from COVID vaccine sales.”
4. AbbVie Inc. (NYSE:ABBV)
No. of Hedge Fund Holders: 80
AbbVie Inc. (NYSE:ABBV) is a research-based global biopharmaceutical company. The company uses its expertise and unique approach to develop and market advanced therapies which address some of the serious diseases.
AbbVie Inc. (NYSE:ABBV) and HotSpot Therapeutics, Inc. have announced exclusive worldwide collaboration and option to license agreement for HotSpot’s discovery-stage IRF5 program for treatment of autoimmune diseases.
In Q3 2022, the company saw healthy momentum in its key immunology assets, Skyrizi and Rinvoq. This strong performance and strength from other growth enablers within its diverse portfolio mitigated impact of temporary economic headwinds on the company’s aesthetics products. It has delivered Q3 2022 net revenues of $14.812 billion, exhibiting 3.3% growth year-over-year on reported basis.
AbbVie Inc. (NYSE:ABBV) confirms midpoint of its FY 2022 adjusted diluted EPS guidance range and has narrowed the range from $13.76 – $13.96 to $13.84 – $13.88. It has declared dividend increase of 5.0% year-over-year.
Credit Suisse Group started coverage on AbbVie Inc. (NYSE:ABBV) on November 17. The group has issued an “Outperform” rating and has set $170.00 as target price on the stock.
As per Insider Monkey’s database, 80 hedge funds remained bullish on AbbVie Inc. (NYSE:ABBV) at the end of Q3 2022.
Here is what Baron Funds, an investment management company, said about AbbVie Inc. (NYSE:ABBV) in its third-quarter 2022 investor letter:
“AbbVie Inc. (NYSE:ABBV) is a drug developer best known for Humira, an immunosuppressant that is the best-selling drug of all time. Given outsized key product risk (patent cliff and generic launches beginning in 2023), AbbVie has broadened its pipeline, highlighted by its Allergan acquisition. Shares fell on results that missed consensus and indications that legacy franchises were outperforming newer product launches, calling into question AbbVie’s long-term strategy. With promising assets in the pipeline and its robust cash flow profile, we believe AbbVie will grow well into the future.”
3. Merck & Co., Inc. (NYSE:MRK)
No. of Hedge Fund Holders: 82
Merck & Co., Inc. (NYSE:MRK) is an American multinational pharmaceutical company. The company develops and produces medicines, vaccines, biologic therapies and animal health products. It focuses on becoming premier research-intensive biopharmaceutical company.
The company ranks 3rd on our list of 11 Best Low Beta Stocks to Buy.
Merck & Co., Inc. (NYSE:MRK) and Imago BioSciences, Inc. (NASDAQ:IMGO) announced that they have entered into a definitive agreement as per which former’s subsidiary will acquire the latter for $36.00 per share in cash for an approximate total equity value of $1.35 billion.
The company has posted worldwide sales of $15.0 billion in Q3 2022, exhibiting 14% improvement year-over-year. Results of the company stemmed from sustained strong business momentum in critical growth enablers and investment and progress in pipeline. Merck & Co., Inc. (NYSE:MRK) has raised and narrowed expected FY 2022 worldwide sales to $58.5 billion – $59.0 billion, exhibiting full-year growth of 20% – 21%. It has lowered the expected FY 2022 GAAP EPS to $5.68 – $5.73.
At the end of Q3 2022, 82 hedge funds in Insider Monkey’s database were long on Merck & Co., Inc. (NYSE:MRK).
Stock market experts believe that the company has huge growth potential given their current line-up of blockbuster drug Keytruda, Gardasil, Bridion and possible future drugs that can come either through their pipeline or acquisitions.
Carillon Tower Advisers released its second quarter 2022 investor letter in which it mentioned Merck & Co., Inc. (NYSE:MRK). Here is what it has to say:
“Merck & Co., Inc. (NYSE:MRK) reported a strong first quarter and raised its financial guidance for 2022. The company also continues to benefit from the recent rotation into pharmaceuticals, which historically has been a more defensive industry.”
2. Johnson & Johnson (NYSE:JNJ)
No. of Hedge Fund Holders: 85
Johnson & Johnson (NYSE:JNJ) is the world’s largest and most diverse healthcare firm. It carries out its operations into 3 business segments: Consumer Health, Pharmaceutical and Medical Devices.
Johnson & Johnson (NYSE:JNJ) and Abiomed, Inc. (NASDAQ:ABMD) have entered into a definitive agreement under which the former will acquire the latter, through a tender offer, all outstanding shares for an upfront payment of $380.00 per share in cash at an enterprise value of approximately $16.6 billion, including cash acquired.
Morgan Stanley covered Johnson & Johnson (NYSE:JNJ) and raised its target price on shares of the company from $170.00 to $178.00 in a report on December 1, 2022.
The company’s EVP Ashley Mcevoy sold 73,323 shares in a transaction November 30, 2022 at an average price of $175.47 for a total value of $12,865,986.81. Post this sale, EVP now directly owns 41,813 shares of the company’s stock worth $7,336,927.11.
Business of the company is fairly diverse as it generates billions in revenue from its consumer health, pharmaceutical, and med-tech businesses. Interestingly, the company’s pharmaceutical segment accounts for more than half of its overall sales. Annually, its revenue from the pharma business over the trailing 12 months came in at approximately $53.7 billion. However, it expects that its annual sales from this business should top $60 billion by 2025.
Of 920 hedge funds tracked by Insider Monkey at the end of the third quarter of 2022, 85 hedge funds were long Johnson & Johnson (NYSE:JNJ), with a total stake value of $5.46 billion.
Distillate Capital Partners LLC, an investment management firm, published its second-quarter 2022 investor letter in which it mentioned Johnson & Johnson (NYSE:JNJ). Here is what the fund said:
“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”
1. Activision Blizzard, Inc. (NASDAQ:ATVI)
No. of Hedge Fund Holders: 96
Activision Blizzard, Inc. (NASDAQ:ATVI) was formed in 2008 as a result of the merger of Activision, which was one of the largest console video game publishers, and Blizzard, one of largest PC video game publishers. As a result, the combined firm has been categorised as one of the world’s largest video game publishers.
Activision Blizzard, Inc. (NASDAQ:ATVI) has released its results for the third quarter of 2022, and generated net revenues of $1.78 billion against $2.07 billion for the third quarter of 2021.
Microsoft Corporation (NASDAQ:MSFT) intends to acquire Activision Blizzard, Inc. (NASDAQ:ATVI) for $95.00 per share in all-cash transaction. This transaction is expected to close in Microsoft Corporation’s (NASDAQ:MSFT) fiscal year ending June 30, 2023, and has been approved by the Boards of Directors of both the companies and by stockholders of Activision Blizzard, Inc. (NASDAQ:ATVI).
At the end of Q3 2022, 96 elite hedge funds reported owning stakes in Activision Blizzard, Inc. (NASDAQ:ATVI) worth $9.07 billion. In the preceding quarter, 84 hedge funds held stakes worth $9.24 billion.
Analysts at Robert W. Baird recently initiated coverage on Activision Blizzard, Inc. (NASDAQ:ATVI) and gave an “Outperform” rating with the price target of $95.00 on the stock on November 22, 2022.
The company’s COO Daniel Alegre decided to sell 10,000 shares in a transaction dated September 9, 2022.
Cooper Investors, an asset management company, released its second quarter 2022 investor letter and mentioned Activision Blizzard, Inc. (NASDAQ:ATVI). Here is what the fund said:
“Activision Blizzard, Inc. (NASDAQ:ATVI) – our investment preceded news that the company was under investigation for workplace bullying. When it became clear management had misled the market on the extent of the problem we sold, led by our principles of Responsible Investing. We did not benefit from the subsequent M&A premium paid by Microsoft.”
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Disclosure: None. 11 Best Low Beta Stocks to Buy is originally published on Insider Monkey.
