In this article, we take a look at 12 safe stocks to buy for the long-term according to hedge funds.
Even if there are many indications that the macro environment will remain challenging in 2023, this is not the time to stay on the sidelines. In reality, it’s still a good opportunity to establish positions in safe companies to purchase for the long term while fear, uncertainty, and doubt continue to roil the markets.
Although buying risk-free stocks sounds like a great idea, there isn’t a stock that is really secure. Even the most stable organizations frequently endure considerable stock price fluctuation, and even the finest companies might encounter unforeseen difficulties. This was evident in the early stages of the COVID-19 epidemic when the stock prices of numerous powerful firms fell sharply. One way to deal with individual stock risk is diversification.
Over the last 12 months, U.S. stocks declined slightly more than 10%. We had a great start to 2023, but the markets seem to be overly optimistic. Long-term interest rates are around 3.5% and consensus estimates for S&P 500 Index hover around $230. This means the market has a forward PE ratio of 18 assuming that the optimistic consensus earnings estimates are accurate.
Long-term investors, however, don’t pay attention to the volatile, short-term rise and fall of stock markets. Instead, they invest in shares of dependable businesses with consistent performance over years or even decades. The best long-term investments are equities of expanding companies that offer consistent profits. You must comprehend the measurements that provide reliable proof of trustworthy long-term success to locate them.
Factors include routinely outperforming the S&P 500 and avoiding the significant short-term drops (and gains) that high-flying firms typically go through. These companies often have solid, well-established operations, consistent revenues, and a reliable supply of dividends for shareholders. As the pandemic last year showed, safe equities may provide investors with a route out of a financial catastrophe during a recession. Some of the notable names in the list of safe stocks include Walmart Inc. (NYSE:WMT), Cisco Systems, Inc. (NASDAQ:CSCO), and Oracle Corporation (NYSE:ORCL), among others.
Our Methodology
We identified the top 50 holdings of iShares MSCI USA Min Vol Factor ETF (USMV) and ranked them using Insider Monkey’s proprietary hedge fund sentiment data. Finally, we eliminated stocks that lost more than 10% over the last 12 months. Here are the 12 safe stocks to buy for the long-term according to hedge funds.
Safe Stocks to Buy for the Long-Term According to Hedge Funds
12. The Procter & Gamble Company (NYSE:PG)
Beta Value: 0.43
Number of Hedge Fund Holders: 69
The Procter & Gamble Company is a multinational company that sells branded consumer packaged products. People need the company’s products regardless of the state of the economy. P&G is the parent company of brands such as Pampers, Downy, Tide, Charmin, Gillette, Old Spice, and Febreze. The company’s goods are sold in over 180 countries. Based on the ratings of 13 Wall Street analysts, The Procter & Gamble Company has a ‘Moderate Buy’ average rating.
The Procter & Gamble Company frequently outperformed quarterly projections, notching nine EPS victories over the previous ten quarters. In the last reported quarter, The Procter & Gamble Company registered earnings per share of $1.57, beating the estimates by $0.02, and reported revenue of $20.61 billion, modestly above expectations of $240 million.
Like Walmart Inc., Cisco Systems, Inc., and Oracle Corporation, The Procter & Gamble Company is one of the safe stocks to buy according to hedge funds.
The Procter & Gamble Company was a popular stock among hedge funds in the third quarter of 2022, as 69 funds tracked by Insider Monkey reported owning stakes in the company. The total value of these holdings is around $4.08 billion. With 25,072 shares, Ayrshire Capital Management is the company’s notable stakeholder in Q4.
11. PepsiCo, Inc. (NASDAQ:PEP)
Beta Value: 0.60
Number of Hedge Fund Holders: 72
PepsiCo, Inc. (NASDAQ:PEP) is a multinational American food and beverage company with products marketed in over 200 countries. PepsiCo, Inc. currently has a $241.43 billion market capitalization and delivered a 4.15% return in the past 12 months. For the past 50 years, the company has continuously increased its dividends. It paid a quarterly dividend of $1.15 per share on November 17.
On December 7, Argus analyst John Staszak boosted his price objective on PepsiCo, Inc. to $206 from $195 and retained a ‘Buy’ rating. Despite sluggish demand for many consumer essentials, PepsiCo, Inc. is well-managed, has a great brand portfolio, and continues to create excellent growth; the analyst said to investors in a research note.
As of the close of Q3 2022, 72 hedge funds in Insider Monkey’s database reported owning stakes in PepsiCo, Inc., up from 65 in the previous quarter. These stakes are collectively valued at nearly $4.82 billion. Ayrshire Capital Management was the company’s prominent stakeholder in Q4.
Lindsell Train, an investment management firm, mentioned PepsiCo, Inc. in its third-quarter 2022 investor letter. Here is what the fund said:
“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindycompatible anti-ageing properties. Consider, that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan….” (Click here to see the full text)
10. Eli Lilly and Company (NYSE:LLY)
Beta Value: 0.38
Number of Hedge Fund Holders: 75
Eli Lilly and Company (NYSE:LLY) ranks 10th on our list of the safe stocks to buy for the long-term. LLY conducts research, discovery, manufacture, and marketing of pharmaceutical products to cure illnesses such as diabetes, cancer, and neurological disorders. Its products include Forteo, Adrica, BAQSIMI, Basaglar, and GlucagnIn the following months, the business plans to offer four additional therapies: donanemab for early Alzheimer’s disease, mirikizumab for ulcerative colitis, lebrikizumab for atopic dermatitis, and pirtobrutinib, a Bruton’s tyrosine kinase (BTK) inhibitor for cancer.
Lilly’s shares have been up more than 323% in the past five years. Eli Lilly and Company has a consensus recommendation of ‘Strong Buy’ from 13 Wall Street analysts, with 11 buy ratings, 2 hold ratings, and 0 sell opinions.
At the end of the third quarter of 2022, 75 hedge funds in Insider Monkey’s database reported owning stakes in Eli Lilly and Company, up from 70 in the preceding quarter. The total value of these stakes is roughly $ 5.46 billion. Among these hedge funds, Fisher Asset Management was the company’s biggest stakeholder in Q3.
Here is what ClearBridge Investments has to say about Eli Lilly and Company in its Q3 2022 investor letter:
“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”
9. Pfizer Inc. (NYSE:PFE)
Beta Value: 0.63
Number of Hedge Fund Holders: 77
Pfizer Inc. (NYSE:PFE) is a biopharmaceutical research company. Pfizer’s late-stage pipeline includes 27 initiatives, including numerous novel therapeutic medicines. Pfizer has a consensus recommendation of ‘Moderate Buy’ from 11 Wall Street analysts, based on 5 buy ratings, 6 hold ratings, and 0 sell opinions.
Investors who purchase PFE shares also receive a quarterly dividend with a yield of 3.4%. The quarterly dividend paid out by Pfizer Inc. increased this year by 2.5% to $0.41. The company has consistently raised its dividend over the past 14 years.
Pfizer Inc. is getting the attention of the smart money, as 77 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the third quarter, up from 70 funds a quarter earlier. AQR Capital Management is Pfizer Inc.’s largest shareholder, with shares worth $467.59 million.
8. AbbVie Inc. (NYSE:ABBV)
Beta Value: 0.62
Number of Hedge Fund Holders: 80
AbbVie Inc. (NYSE:ABBV) is a biopharmaceutical business that discovers, develops, produces, and commercializes medications to treat chronic and complex illnesses. Its drugs are approved for the treatment of serious medical conditions. The stock is up more than 12% during the past year.
In 2023, 12 drugs produced by AbbVie Inc. are expected to generate sales of more than $1 billion, with the blockbuster Humira expected to generate at least $20 billion in sales. In addition, the business boasts a vast array of immunology and cancer treatments, including Rinvoq and Skyrizi, whose combined sales are anticipated to reach $7.5 billion this year and more than $15 billion by 2025.
On January 5, Robyn Karnauskas, a Truist analyst, increased her price objective on AbbVie Inc. from $160 to $180 and retained a ‘Buy’ recommendation. The analyst cited growing Botox usage in the aesthetics sector and higher prescription and share growth patterns for Skyrizi and Rinvoq as contributing factors to the target increase.
Fund managers added their holdings to AbbVie Inc. in the third quarter. ABBV was in 80 hedge funds’ portfolios at the end of the third quarter of 2022. There were 71 hedge funds in our database with ABBV holdings at the end of the previous quarter.
Baron Funds, an investment management company, mentioned AbbVie Inc. in its third-quarter 2022 investor letter. Here is what the fund said:
“AbbVie Inc. 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.”
7. Merck & Co., Inc. (NYSE:MRK)
Beta Value: 0.39
Number of Hedge Fund Holders: 82
Merck & Co., Inc. ranks 7th on our list of the safe stocks to buy for the long-term. MRK is a biopharmaceutical company that specializes in the development, manufacturing, and marketing of prescription medications, biologic therapies, vaccines, and animal health products. Another stock that has been included in our list of 12 safe stocks to buy for the long term is Merck & Co.. The company’s rapid profit growth and solid product pipeline helped drive MRK stock up 37.66% in the previous year.
The forward P/E for Merck & Co., Inc. shares is currently 14.8, higher than the 14.5 P/E for the Large Cap Pharmaceuticals industry, and the company is more appealing due to its significant dividend yield of 2.64%. On January 4, BofA analyst Geoff Meacham changed Merck & Co., Inc.’s recommendation from ‘Neutral’ to ‘Buy’ and lifted his price target from $110 to $130. He highlighted hopes for continuing the robust growth patterns observed the previous year and significant advancement in diversifying away from Keytruda.
There were 82 hedge funds in our database that held stakes in Merck & Co., Inc.’s at the end of the third quarter, compared to 79 funds in the second quarter. Fisher Asset Management is the company’s most significant stakeholder, with 12.04 million shares worth $1.04 billion.
In its Q2 2022 investor letter, Chartwell Investment Partners mentioned Merck & Co., Inc.. Here is what the firm said:
“In the Dividend Equity accounts, the three best performers in Q2 includes Merck (NYSE:MRK, 3.6%), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”
6. Johnson & Johnson (NYSE:JNJ)
Beta Value: 0.57
Number of Hedge Fund Holders: 85
Johnson & Johnson is a holding company involved in researching, developing, manufacturing, and selling healthcare goods. The big drug company pays a $4.52 yearly dividend. Shareholders also benefit from a 2.61% dividend yield. This is better than the industry average yield of 2.15%.
At the end of the third quarter of 2022, 85 hedge funds in the database of Insider Monkey held stakes worth $5.47 billion in Johnson & Johnson, up from 83 in the preceding quarter worth $6.76 billion. Fisher Asset Management is the company’s largest shareholder, with shares worth $967.26 million.
On December 12, Citi analyst Joanne Wuensch restated a ‘Buy’ recommendation on Johnson & Johnson’s stock and increased her price target to $205 from $198. Johnson & Johnson is looking for business combinations or acquisitions that can benefit its priority areas of orthopaedics, surgical robotics, eye care, and cardiovascular goods. Johnson & Johnson is also in the process of spinning off its consumer healthcare division under the name Kenvue.
Along with Walmart Inc., Cisco Systems, Inc., and Oracle Corporation, Johnson & Johnson is one of the safe stocks to buy according to hedge funds.
In its Q2 2022 investor letter, Mayar Capital, an asset management firm, highlighted a few stocks, and Johnson & Johnson was one of them. Here is what the fund said:
“Johnson & Johnson is currently our largest position and a long-standing holding. The majority of the group’s sales come from its collection of pharmaceutical franchises, but a large majority (~45%) comes from its collection of medical device businesses and its consumer brands (…read more)
5. Danaher Corporation (NYSE:DHR)
Beta Value: 0.82
Number of Hedge Fund Holders: 89
Danaher Corporation (NYSE:DHR) is a medical corporation that develops, produces, and sells professional, medical, industrial, and commercial products and services. It works in three divisions: Life Sciences, Diagnostics, and Environmental & Applied Solutions.
Danaher Corporation has a consensus recommendation of “Moderate Buy” from 12 Wall Street analysts, which is based on 8 buy ratings, 4 hold ratings, and 0 sell opinions. Danaher Corporation’s Forward P/E ratio is 24.33. Danaher is selling at a premium to the group compared to its industry, which has an average Forward P/E of 12.79.
According to Insider Monkey’s data, 89 hedge funds were bullish on Danaher Corporation at the end of third quarter of 2022, compared to 82 funds in the second quarter. Fisher Asset Management is the most significant position holder in Danaher Corporation, with 3.94 million shares worth $1.02 billion.
Here is what Stewart Asset Management, an investment management firm, said about Danaher Corporation in its Q3 2022 investor letter:
“We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Danaher (NYSE:DHR), among others, is a good example.”
4. Activision Blizzard, Inc. (NASDAQ:ATVI)
Beta Value: 0.43
Number of Hedge Fund Holders: 96
Activision Blizzard, Inc. (NASDAQ:ATVI) is a video game holding corporation in Santa Monica, California, US. Some of the top-grossing video games in the world have been created and published by ATVI. It has a diverse portfolio that is balanced across several platforms and genres. Call of Duty, Warcraft, Starcraft, Diablo, Candy Crush Saga, and Overwatch are among its best-known brands.
The company’s balance sheet is quite appealing, with a free cash flow of $1.67 billion. Over the last five years, Activision Blizzard, Inc.’s debt-to-equity ratio has decreased from 44% to 19.2%. Despite its lackluster performance, Activision Blizzard still pays a $0.47 dividend. The yearly dividend yield for ATVI is 0.61%.
According to Insider Monkey’s data, Activision Blizzard, Inc. was part of 96 hedge fund portfolios at the end of Q3 2022, compared to 84 in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the company’s biggest stakeholder, with 60.14 million shares worth $4.47 billion.
Cooper Investors discussed Activision Blizzard, Inc. shares in its Q2 2022 investor letter. Here is what the fund said:
“Activision Blizzard, Inc. – 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.”
3. T-Mobile US, Inc. (NASDAQ:TMUS)
Beta Value: 0.56
Number of Hedge Fund Holders: 100
T-Mobile US, Inc. (NASDAQ:TMUS) and its subsidiaries provide mobile communications services in the United States, Puerto Rico, and the US Virgin Islands. Our lives depend on wireless devices, which is the company’s area of expertise. The company shares have offered investors more than 37.48% in returns over the past twelve months. Therefore T-Mobile US, Inc. is one of the safe stocks to buy for the long term.
T-Mobile is the third-largest wireless provider in the United States after merging with Sprint in 2020. The company is also thinking about buying Mint Mobile, a supplier of low-cost cellphone plans with the ambition to strengthen its position in the cellular network industry.
On January 5, JPMorgan analyst Philip Cusick maintained an “Overweight” rating and $200 price objective on T-Mobile US, Inc.. T-Mobile is Cusick’s favorite communications services stock and the best long-term idea.
The number of hedge funds tracked by Insider Monkey having stakes in T-Mobile US, Inc. grew to 100 in Q3 from 96 in the preceding quarter. These stakes hold a consolidated value of $5.38 billion, up from $6.86 billion. Berkshire Hathaway is the leading shareholder of T-Mobile US, Inc., with 5.24 million shares worth over $703.32 million.
ClearBridge Investments mentioned T-Mobile US, Inc. in its Q4 2021 investor letter. Here is what the fund said:
“As mentioned, the communication services sector has come under some pressure, and irrational pricing competition has negatively impacted wireless industry growth and profitability of late, weighing on T-Mobile. Faced with these headwinds, and with pressure from other wireless carriers and cable companies that could cause the company to cede share in subscriber growth in 2022, we exited our position in the fourth quarter.”
2. Berkshire Hathaway Inc. (NYSE:BRK-A)
Beta Value: 0.90
Number of Hedge Fund Holders: 104
Berkshire Hathaway Inc. (NYSE:BRK.A) is a conglomerate that controls around 60 subsidiary firms, including auto insurance colossus GEICO, rail transport company BNSF, and battery manufacturer Duracell.
Due to its diversification and lower overall risk profile, Berkshire Hathaway Inc. has one of the superior risk-adjusted return profiles. Additionally, Berkshire has a sizable stock portfolio that includes substantial holdings in well-established companies like Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC), Coca-Cola (NYSE:KO), and many others. As a result, Warren Buffett’s firm makes a fantastic candidate for downside security.
At the end of Q3 2022, 104 hedge funds owned a stake in Berkshire Hathaway Inc., down from 109 in the preceding quarter. Michael Larson’s Bill & Melinda Gates Foundation Trust held a significant stake in Berkshire Hathaway Inc.) at the end of the third quarter of 2022, worth $7.93 billion.
Here is what Black Bear Value Fund has to say about Berkshire Hathaway Inc. (NYSE:BRK-A) in its Q3 2022 investor letter:
“Going forward I expect Berkshire to compound at above average returns from this price. BRK is a collection of high-quality businesses, excellent management, and a good amount of optionality in their cash position. If the cash were to be deployed accretively, the true value would be greater than an 8% premium (as mentioned above). The combination of a pie that is growing, an increasing share of said pie due to stock buybacks, upside optionality from cash and a tight range of likely business outcomes that span a variety of economic futures gives me comfort in continuing to own Berkshire.”
1. UnitedHealth Group Incorporated (NYSE:UNH)
Beta Value: 0.73
Number of Hedge Fund Holders: 110
The Minnesota-based UnitedHealth Group Incorporated (NYSE:UNH) is the world’s largest healthcare firm by revenue and the largest insurance company by net premiums. It specializes in both individual and group health insurance. On January 17, Joseph France an analyst at Loop Capital reiterated a ‘Buy’ rating on UnitedHealth Group Incorporated’s stock while increasing his price objective from $575 to $590. The analyst justified the target increase by pointing to the company’s “strong” Q4 performance and 2023 forecast.
UnitedHealth Group Incorporated stock has risen 2.97% over the past 12 months, exceeding the S&P 500 index, which has fallen 13.32% in the same period. Additionally, the business has been increasing EPS at a pace of over 13.7% annually. Over the next five years, analysts predict an average annual profits increase of 14.2%. In addition, the firm has gradually raised dividends for years, and it currently pays a dividend yield of 1.39%.
Hedge funds are loading up on UnitedHealth Group Incorporated, as Insider Monkey’s data shows that 110 hedge funds held a stake in the company as of the end of the third quarter of 2022, compared to 91 funds at the end of the previous quarter.
Here is what Stewart Asset Management has to say about UnitedHealth Group Incorporated in its Q3 2022 investor letter:
“Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. UnitedHealth’s earnings were resilient. While it reported modestly down earnings in 2008, its earnings rebounded quickly to record highs in 2010 and the shares responded strongly in anticipation of this.”
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This article is originally published at Insider Monkey.
