10 Best Sectors To Invest In Long-Term

Published August 1, 2023 at 3:58 pm EDT Updated August 19, 2026 at 10:12 am EDT

In this article, we discuss 10 best sectors to invest in the long-term.

The S&P 500 had a robust performance in the first half of 2023, ending June with a gain of over 6%. Overall, the index has risen almost 16% as it enters the third quarter of this year. In addition to that, as we previously reported, the NASDAQ 100 Index has skyrocketed 40% in 2023, regardless of fears about a potential bubble. In 2023, technology stocks, growth stocks, and cryptocurrencies emerged as star performers, benefiting from renewed interest in risk assets. As we enter the second half of 2023, there are signs of inflation starting to cool off. Nonetheless, market experts are skeptical that the Federal Reserve’s efforts to combat inflation are not yet complete, and there is still a possibility of the US falling into recession.

In 2023, Fidelity Investments expects some consumer staples firms to outperform. Ben Shuleva, Fidelity’s sector portfolio manager, commented at the end of December 2022:

“In 2023, many of the trends that emerged in 2022 will probably continue. However, consumers may be more sensitive to further price hikes than they were to previous price hikes—particularly if the economy softens further and the unemployment rate rises. Those best positioned for this backdrop may include companies that can raise prices further without losing sales volumes.”

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Similarly, precious metals like gold are considered to be safe haven assets against a backdrop riddled with inflation, devaluation of currency, and macroeconomic weakness. Eric Strand, manager of the AuAg ESG Gold Mining UCITS ETF, told CNBC in December 2022:

“Central banks as a group have continued, since the great financial crisis, to add more and more gold to their reserves, with a new record set for [the third quarter of] 2022. It is our opinion that central banks will pivot on their rate hikes and become dovish during 2023, which will ignite an explosive move for gold for years to come. We therefore believe gold will end 2023 at least 20% higher, and we also see miners outperforming gold with a factor of two.”

In addition to that, Citibank analysts maintained an “Overweight” rating for the healthcare sector for 2023, setting aside concerns about the past year’s strong performance. They emphasized the sector’s defensive nature and held particular optimism about pharmaceuticals.

Also Read: How to Play The AI Boom And NASDAQ Rally

According to NASDAQ’s “June, Mid-Year 2023 Review and Outlook” report, in the first half of 2023, 7 out of 11 sectors recorded gains, with Technology, Communications, and Discretionary sectors being market leaders. Technology stocks neared their previous all-time high from December 2021. While technology and growth sectors contributed significantly to the strong performance in the early months of this year, there was a noticeable shift towards cyclicals in June, possibly indicating an improvement in economic activity. All sectors ended June with positive returns. Industrials stood out with strong performance in June and continued momentum in early July, reaching new all-time highs. Housing also rebounded despite higher mortgage rates, driven by factors such as favorable demographics and migration patterns. These trends suggest positive prospects for the real estate sector as well.

Some of the top stocks in the market include Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), and UnitedHealth Group Incorporated (NYSE:UNH). This article sheds light on some of the best sectors to invest in for the long-term.

Our Methodology

Insider Monkey’s first quarter database tracks the stock picks of 943 elite hedge funds. For this article, we assessed the top 100 stocks popular among hedge funds and calculated the number of companies in each sector. We used the number of companies in each sector from the top 100 hedge fund holdings to rank the following sectors.

Source:Pixabay

Best Sectors To Invest In Long-Term

10. Real Estate

Number of Companies: 1

According to Research and Markets, the worldwide real estate market was valued at $3.69 trillion in 2021, and it is projected to increase from $3.88 trillion in 2022 to $6.13 trillion by 2030, with a compound annual growth rate (CAGR) of 5.2% during the forecast period of 2023 to 2030. Real estate is one of the best sectors to invest in.

American Tower Corporation (NYSE:AMT) is the most popular real estate stock among hedge funds. American Tower Corporation (NYSE:AMT) is a prominent global REIT recognized for its significant presence in the communication real estate and data center industry. It operates, owns, and develops multitenant communications sites and has a substantial network of data center facilities in the United States. On July 27, the company reported a Q2 AFFO of $2.46 and a revenue of $2.77 billion, outperforming Wall Street estimates by $0.04 and $50 million, respectively.

Overall, 65 hedge funds were bullish on American Tower Corporation according to Insider Monkey’s first quarter database, with Charles Akre’s Akre Capital Management holding the largest stake in the company.

In addition to Microsoft Corporation, Meta Platforms, Inc., and UnitedHealth Group Incorporated, American Tower Corporation is a favorite stock of smart investors.

Akre Focus Fund made the following comment about American Tower Corporation in its second quarter 2023 investor letter:

“The Fund owns many businesses that stand to benefit enormously from A.I. The compute power demanded by A.I. is growing exponentially and will continue to fuel demand for the wireless and data center infrastructure provided by American Tower Corporation. The two negative detractors from performance this quarter were American Tower and Danaher.”

9. Industrials

Number of Companies: 3

A report from Research and Markets indicates that the global industrial services market is expected to experience steady growth, from $31.35 billion in 2022 to $33.31 billion in 2023, showing a CAGR of 6.2%. Further, the market is anticipated to expand to $40.75 billion by 2027, growing at a CAGR of 5.2% during the period. Similarly, as per Reportlinker, the worldwide industrial machinery market rose from $506.67 billion in 2022 to $545.67 billion in 2023, with a CAGR of 7.7%. The market is projected to further expand to $708.3 billion by 2027, exhibiting a CAGR of 6.7% during that period.

Union Pacific Corporation (NYSE:UNP) is one of the most popular stocks among hedge funds from the industrial sector. Union Pacific Corporation (NYSE:UNP) is an American railroad company that provides transportation services for agricultural products, petroleum, chemicals, construction materials, and automobiles, among others. On July 26, Union Pacific Corporation declared a $1.30 per share quarterly dividend, in line with previous. The dividend is distributable on September 9, to shareholders of record as of August 31.

According to Insider Monkey’s first quarter database, 85 hedge funds were bullish on Union Pacific Corporation, compared to 83 funds in the prior quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the largest stakeholder of the company, with 8.2 million shares worth $1.6 billion.

Madison Sustainable Equity Fund made the following comment about Union Pacific Corporation in its second quarter 2023 investor letter:

“Union Pacific Corporation released its annual Sustainability report. Highlights include improved safety metrics as a result of its comprehensive approach to safe train operations through the use of technology in combination with training of its workforce. Train derailments declined by 21% compared to 2019. The company implemented a new qualitative cybersecurity risk management system to protect from cyber events. To date, the company has not experienced any material disruption due to a cyber attack or threat. The report also highlighted its annual giving with $24 million in donations across 2,500 non-profit organizations in 2022.”

8. Consumer Defensive

Number of Companies: 3

The Morningstar US Consumer Defensive Index had a slight decline of 0.3% in the second quarter of 2023, in contrast to the broader market’s 5.4% gain. However, most stocks in the index still seem fairly valued, trading at a slight discount to their fair value estimates, as per Morningstar. Opportunities exist in consumer-packaged goods and alcoholic beverages, where many companies are undervalued. Consumer Defensive is one of the best sectors to invest in for the long-term.

American retail giant Walmart Inc. (NYSE:WMT) is a prominent consumer defensive stock among hedge funds. On July 30, Walmart Inc. (NYSE:WMT) announced that it has invested $1.4 billion to increase its ownership in the Indian e-commerce company Flipkart by acquiring hedge fund Tiger Global’s stake. This move follows Walmart’s initial purchase of a 77% stake in Flipkart for $16 billion in 2018.

According to Insider Monkey’s Q1 data, Walmart Inc. was part of 91 hedge fund portfolios, up from 66 in the prior quarter. D E Shaw is the largest stakeholder of the company, with 4.8 million shares worth $709.8 million.

In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Walmart Inc. was one of them. Here is what the fund said:

“The pandemic has created challenges for businesses large and small; one major challenge for large essential retailers such as ClearBridge holdings Home Depot, Walmart Inc. and Costco have been ensuring adequate staffing to meet demand under trying conditions. All three instituted enhanced pay practices during the pandemic, with raises, unplanned bonuses and other benefits helping compensate employees for their efforts in a difficult environment. In September 2020 Walmart raised wages for 165,000 employees, including a number of entry positions to $15 an hour. It followed this in February with a raise for 425,000 workers that moved its average pay above $15 an hour.”

7. Basic Materials

Number of Companies: 4

Basic Materials is one of the best sectors to invest in long-term. According to Fortune Business Insights, the global construction materials market was worth $1,272.60 billion in 2022. It is expected to grow from $1,320.01 billion in 2023 to $1,729.62 billion by 2030, with a CAGR of 3.9% during the forecast period. As per a separate report by Fortune Business Insights, the global core materials market was valued at $1,937.5 million in 2022. It is expected to increase from $2,056.3 million in 2023 to $3,700.2 million by 2030, exhibiting a CAGR of 8.8% during the forecast period.

Freeport-McMoRan Inc. (NYSE:FCX) is the preferred basic materials stock among smart investors. On July 20, Freeport-McMoRan Inc. reported a Q2 non-GAAP EPS of $0.35, falling short of market estimates by $0.02. Revenue for the quarter increased 5.9% year-over-year to $5.74 billion, beating Wall Street consensus by $80 million. In the second quarter of 2023, consolidated production figures were as follows – 1.1 billion pounds of copper, 483 thousand ounces of gold, and 21 million pounds of molybdenum.

Among the hedge funds tracked by Insider Monkey, 77 funds were bullish on Freeport-McMoRan Inc. at the end of Q1 2023, compared to 68 funds in the prior quarter. Ric Dillon’s Diamond Hill Capital is the largest stakeholder of the company, with 9.50 million shares worth $389 million.

Diamond Hill Large Cap Strategy made the following comment about Freeport-McMoRan Inc. in its Q4 2022 investor letter:

“Other top contributors during the quarter were copper producer Freeport-McMoRan Inc. and health care facilities operator HCA Healthcare. With little fundamental news to report, Freeport-McMoRan’s share price advance in Q4 reflected a rebound in copper prices, driven by the recognition that copper inventories are low relative to historical norms. We believe the company continues to have meaningful price and volume leverage in a copper constrained world.”

6. Energy

Number of Companies: 6

Energy sector remains one of the best sectors to invest in for the long-term. As per a report by The Business Research Company, the global oil and gas market increased from $6,989.65 billion in 2022 to $7,330.80 billion in 2023, with a compound annual growth rate of 4.9%. The market is forecasted to further expand to $8,670.91 billion by 2027, with a CAGR of 4.3% during that period. According to Precedence Research, the global power generation market was valued at approximately $1.8 trillion in 2022. It is projected to reach around $3.9 trillion by 2032, exhibiting a CAGR of 8.04% from 2023 to 2032.

Occidental Petroleum Corporation (NYSE:OXY) is the preferred energy play for most smart investors this year. It is involved in acquiring, exploring, and developing oil and gas properties in the United States, the Middle East, North Africa, and Latin America. On July 27, Occidental Petroleum Corporation (NYSE:OXY) declared a quarterly dividend of $0.18 per share, in line with previous. The dividend is payable on October 13, to shareholders of record on September 8.

According to Insider Monkey’s first quarter database, 81 hedge funds were bullish on Occidental Petroleum Corporation, compared to 71 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of Occidental Petroleum Corporation, with 211.70 million shares worth $13.2 billion.

Like Microsoft Corporation, Meta Platforms, Inc., and UnitedHealth Group Incorporated, elite hedge funds are piling into Occidental Petroleum Corporation.

Here is what Smead Value Fund has to say about Occidental Petroleum Corporation in its Q3 2022 investor letter:

“Our top-performing stocks in the quarter include Occidental Petroleum. Oil and gas have been the best game in the stock market town this year and it was a pleasant surprise to see home builders pick up even with dour news on interest rates and the economy. For the first three quarters of the year, we should change the name of our fund to the Jed Clampett Fund. Occidental Petroleum, was one of the standouts. Up through the bear market came a “bubblin’ crude!”

5. Communication Services

Number of Companies: 10

Communication Services is one of the best sectors to invest in for the long-term. According to Allied Market Research, the size of the global telecommunication services market was $1602.5 billion in 2021, and it is estimated to reach $2556.2 billion by 2031, with a projected compound annual growth rate (CAGR) of 5.1% from 2022 to 2031.

Meta Platforms, Inc. (NASDAQ:META) is a favorite communication services stock among hedge funds. On August 1, the company announced that it plans to introduce AI-powered chatbots with distinct personalities on its social media platforms, starting from September. The chatbots will be designed as different characters, including an Abraham Lincoln-like talker and a surfer-style travel advisor, aimed at enhancing user engagement.

According to Insider Monkey’s first quarter database, Meta Platforms, Inc. was found in 220 hedge fund portfolios, compared to 194 in the prior quarter. Philippe Laffont’s Coatue Management is a prominent stakeholder of the company, with 8 million shares worth $1.70 billion.

Wedgewood Partners Large Cap Focused Growth Fund made the following comment about Meta Platforms, Inc. in its second quarter 2023 investor letter:

“Meta Platforms, Inc. was the top contributor to performance during the quarter. The Company managed to grow adjusted expenses more in line with revenue growth, which helped re-establish management’s credibility with investors with respect to future profitability and returns. The Company also guided to accelerated revenue growth as product investments are beginning to bear fruit relative to easier comparisons from a year ago. Meta has been at the forefront of investing in some of the most valuable artificial intelligence IP extant, particularly with its ranking and recommendation systems that are in use across its suite of user-facing products and advertiser-facing tools. Despite the recent frenzy of attention around “Gen-AI,” Meta has been researching and developing generative-AI tools for years, so we don’t expect to see a large ramp up in expenses around this phenomenon. Although we trimmed Meta as positions reached our maximum weighting, it ended the quarter as our largest holding.”

4. Financial Services

Number of Companies: 13

According to Growth Market Reports, the global financial services market was valued at $25.51 trillion in 2022, and it is predicted to exceed $58.69 trillion by 2031, with a compound annual growth rate (CAGR) of 9.7% during the forecast period from 2023 to 2031. Financial Services is one of the best sectors to invest in.

Visa Inc. (NYSE:V) is the most popular financial services stock among smart investors. Visa Inc. (NYSE:V) operates as a global payments technology company. On July 25, the company declared a $0.45 per share quarterly dividend, in line with previous. The dividend is payable on September 1, to shareholders of record on August 11.

According to Insider Monkey’s first quarter database, 173 hedge funds were bullish on Visa Inc., compared to 177 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the largest stakeholder of the company, with 19.3 million shares worth $4.3 billion.

Manole Capital Management made the following comment about Visa Inc. in its second quarter 2023 investor letter:

“We like to start out all of our discussions by telling investors who we are. We are FINTECH investors, and we define Fintech as “anything utilizing technology to improve an established process.” We realize that half of Fintech is financial, but we don’t invest in traditional, credit sensitive banks. Having managed money during the Financial Crisis, we learned firsthand how certain opaque and balance sheet intensive financials could go bankrupt or insolvent.

We prefer transaction-based businesses, generating recurring revenue, with sustainable margins, and significant cash flow. From our perspective, the perfect example of a FINTECH business is the secularly growing payments industry. Names like Visa Inc. or Mastercard, that generate revenue and profit per swipe or transaction, without the underlying credit sensitivity or risk associated with that underlying line of credit.”

3. Consumer Cyclical

Number of Companies: 14

Consumer Cyclical is one of the best sectors to watch. In the second quarter of 2023, the US Morningstar Consumer Cyclical Index performed better than the overall market, surpassing it by 260 basis points. The median stock in the consumer cyclical sector is undervalued, trading at an 18% discount to their fair value estimates. Additionally, 52% of the coverage in this sector is considered to be in 4- or 5-star territory, according to Morningstar.

Amazon.com, Inc. (NASDAQ:AMZN) is the preferred consumer cyclical stock among the hedge funds tracked by Insider Monkey. On July 25, Amazon.com, Inc. (NASDAQ:AMZN) and iRobot Corporation (NASDAQ:IRBT) reached an agreement to modify their merger deal, adjusting the price per share. As per the new terms, Amazon will now pay $51.75 per share to iRobot, which is lower than the original acquisition price of $61.00 per share.

According to Insider Monkey’s first quarter database, 243 hedge funds were bullish on Amazon.com, Inc., compared to 240 funds in the earlier quarter. Harris Associates is a significant position holder in the company, with 22.8 million shares worth $2.3 billion.

The Ithaka Group made the following comment about Amazon.com, Inc. in its second quarter 2023 investor letter:

“Founded in 1994, Amazon.com, Inc. has evolved from its early roots as an online bookstore to become one of the world’s largest eCommerce retailers. At the end of 2022 Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services (“AWS”) has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon’s site. Despite providing tepid forward guidance on its 1Q23 earnings call, Amazon’s stock appreciated on the back of increased confidence the company would be able to contain expenses and push operating margins above prior peaks in the near-to medium term.”

2. Healthcare

Number of Companies: 21

According to Research Dive, the size of the global health and wellness market was $4,712.5 billion in 2021. It is expected to grow at a compound annual growth rate (CAGR) of 10.9% and reach a revenue of $12,850.3 billion by 2031. Healthcare is one of the best sectors to invest in for the long-term.

UnitedHealth Group Incorporated (NYSE:UNH) is one of the most popular healthcare stocks among elite investors. It is a diversified healthcare company that operates through four segments – UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. On July 14, UnitedHealth Group Incorporated reported a Q2 non-GAAP EPS of $6.14 and a revenue of $92.9 billion, outperforming Wall Street estimates by $0.16 and $1.94 billion, respectively.

According to Insider Monkey’s Q1 database, 116 hedge funds were bullish on UnitedHealth Group Incorporated, compared to 110 funds in the last quarter. Rajiv Jain’s GQG Partners is the largest stakeholder of the company, with 4.8 million shares worth $2.28 billion.

L1 Capital International Fund made the following comment about UnitedHealth Group Incorporated in its second quarter 2023 investor letter:

“Close observers of the Fund will note the increased exposure to healthcare, currently 13% of the portfolio. Healthcare is generally less macro-sensitive than some other sectors. In a reversal of market sentiment compared to 2022, the healthcare sector has been under modest pressure due to what we consider to be some short-term transitory issues, while technology, particularly anything to do with AI, has become the market’s dish du jour. We have been selectively increasing our investment in a few very high-quality healthcare businesses at prices we consider to be fair. UnitedHealth Group Incorporated is now a top 10 holding, and our investment thesis is outlined in this report.

We have previously written on our exposure to taxes through our investment in Intuit and its market leading TurboTax franchise (Intuit also owns the QuickBooks small business accounting franchise, Credit Karma and Mailchimp). UnitedHealth Group (UnitedHealth) is leading the charge to postpone the inevitable, while lowering overall healthcare system costs.

U.S. health spending has outpaced GDP growth for decades, with spending on healthcare increasing from around 12% of GDP in the 1980s to nearly 20% today, driven by advancements in healthcare capabilities and an aging population with increased life expectancy…” (Click here to read the full text)

1. Technology

Number of Companies: 25

Research and Markets forecasts the global technology market to increase from $8179.48 billion in 2022 to $8852.41 billion in 2023, with a compound annual growth rate (CAGR) of 8.2%. The market is projected to further expand to $11995.97 billion by 2027, with a CAGR of 7.9% during that period. Technology sector is one of the best investments for the long-term.

Microsoft Corporation (NASDAQ:MSFT) is the preferred technology stock among the 943 hedge funds tracked by Insider Monkey in Q1 2023. On July 25, Microsoft Corporation announced its financial results for the quarter ended June 30, 2023. The company posted an EPS of $2.69 and a revenue of $56.2 billion, exceeding Wall Street estimates by $0.14 and $710 million, respectively.

According to Insider Monkey’s first quarter database, 289 hedge funds were bullish on Microsoft Corporation, compared to 259 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 39.2 million shares worth $11.3 billion.

L1 Capital International Fund made the following comment about Microsoft Corporation in its second quarter 2023 investor letter:

“Microsoft Corporation is a clear and substantial beneficiary of AI – not only through its investment in OpenAI/ChatGPT but through the incorporation of AI into core Microsoft products and services, and increasingly through Azure (Microsoft’s cloud computing business) providing ‘AI-as-a-service’. At this stage we don’t know what the long-term financial benefits of AI will be to Microsoft, but we have confidence that it will be meaningful, that barriers to competition are increasing and that Microsoft is worth more today than it was 12 months ago. That said, Microsoft’s share price has increased 33% (in U.S. dollars) over the past year, and we no longer consider the company to be undervalued in our central base case. We have started to trim our investment in Microsoft, although it remains one of the Fund’s largest positions.”

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