In this article, we will be taking a look at a conservative stock portfolio with the 10 best stocks to buy.
Markets are jittery again amid analyst firms downgrading banks and some circles still warning about recession despite inflation showing some signs of cooling. At the same time, the US is going through a rough patch in terms of its debt rating, what with the Fitch Ratings downgrading US debt from AAA to AA+, a move that was claimed to be influenced by deteriorating governance standards. The US financial sector is also facing yet another challenge, with Moody’s this time downgrading about 11 US banks while taking 16 other negative rating actions on other regional banks in the country. All of these moves have come about in close succession to one another in July and August, putting the everyday investor in a frantic state of mind when it comes to figuring out where they can put their money and be able to rest easy.
What Is Conservative Investing?
Considering the above, there are many investors today who are looking for safe and reliable stock options to beef up their portfolios and ensure they aren’t hit too hard by worrying market conditions. Because of this, conservative investing is a strategy that is coming to the forefront. This strategy entails a defensive investment style with a focus on low-risk investments. The aim of the strategy is to achieve capital security while providing investors with steady and reliable income and protection for their invested capital. Many investors look at reliable dividend stocks as part of this strategy since these stocks offer steady passive income that can tide them by in volatile markets. Blue chip stocks, or generally renowned companies with solid balance sheets and financial strength, are also top picks for conservative stock portfolios.
While building a conservative stock portfolio in the second half of 2023, investors can take a look at several sectors that have been performing well and are expected to continue this level of performance later in the year as well. These include the tech and consumer staples sectors and even the healthcare sector, among others. On August 14, Paul Meeks, a tech investor and portfolio manager at Independent Solutions Wealth Management, was invited to CNBC’s TechCheck, and he said the following about the tech sector in particular:
“What I’ve seen is that there were a number of tech stocks that deserved to have big 2023 ramps, and there were a number of tech stocks that probably were frauds that didn’t deserve it. And so unfortunately, the whole sector got grossly overbought, and now we’re starting to see some reality, we’re starting to see some consolidation, and I actually think that consolidation might continue a bit further.”
Buying Opportunities In Tech
Meeks’ insights on the tech sector can prove valuable to any conservative investors looking to buy into this sector today since he clearly lays out the ground reality of the sector by stating that stocks within this area have been overbought by eager investors. Despite this, Meeks stated that while tech weakness is expected to continue, he does see a “buying opportunity” in some tech names. The mega-cap stocks Meeks is favoring so far include Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and NVIDIA Corporation (NASDAQ:NVDA). He sees further upside for these stocks and several others in the tech sector today.
However, conservative investors should keep in mind that tech is not the only sector they can invest in at this point. While it has been overwhelmingly dominating market discourse so far this year, other sectors, such as healthcare and consumer staples, are also equally good conservative plays because of their historical performance and reliability, especially in times of recession. Considering these factors, we have compiled a list of some of the best conservative stocks to buy today. By following lists like these, investors can build up conservative stock portfolios full of some of the best stocks to buy for long-term gains as well. Additionally, these names can also be considered some of the top safe stocks to buy for beginner investors today.
Pixabay/Public Domain
Our Methodology
For this article we scanned Insider Monkey’s database of 943 hedge funds and picked 10 conservative (safe, reliable and defensive) stocks with the highest number of hedge fund investors. These stocks are the top conservative choices of hedge funds. The list is ranked in ascending order of the number of hedge fund investors in these stocks.
Conservative Stock Portfolio: Best Stocks To Buy
10. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 65
The Home Depot, Inc. (NYSE:HD) is a home improvement retail company based in Atlanta, Georgia. The company sells building materials, home improvement products, and garden products, among more. It also offers installation services for flooring, water heaters, baths, garage doors, and more.
An Outperform rating was reiterated on shares of The Home Depot, Inc. by Timothy Horan, an analyst at Oppenheimer, on August 9. The analyst also maintains a price target of $360 on the stock.
We saw 65 hedge funds holding stakes in The Home Depot, Inc. at the end of the first quarter. Their total stake value in the company was $2.1 billion.
Madison Investments mentioned The Home Depot, Inc. in its second-quarter 2023 investor letter:
“The Home Depot, Inc. (NYSE:HD) celebrates 30 years of giving back. Team Depot was created in 1993 as a way of organizing associates who were eager to volunteer in their communities. For 30 years, Team Depot associates have worked side by side with non-profits around the United States. Focus areas include spending time with the elderly and activities with at risk youth. Team Depot also improves the homes and lives of veterans and helps communities impacted by natural disasters.
During the quarter, Home Depot set a goal for battery-powered products to represent over 85% of outdoor lawn equipment sales in the U.S. and Canada by the end of fiscal 2028. Push lawn mowers and handheld leaf blowers and trimmers will run on rechargeable battery technology instead of gas. This will reduce 2 million metric tons of greenhouse gas emissions annually.”
Like Amazon.com, Inc., Meta Platforms, Inc., and NVIDIA Corporation, The Home Depot, Inc. is a reliable stock for conservative investors this year.
9. AbbVie Inc. (NYSE:ABBV)
Number of Hedge Fund Holders: 75
Christopher Raymond, an analyst at Piper Sandler, maintains an Overweight rating on shares of AbbVie Inc. (NYSE:ABBV) as of July 28. The analyst also raised his price target on the stock from $163 to $170.
Based in North Chicago, Illinois, AbbVie Inc. is a healthcare and biotechnology company. It offers treatments and therapies for autoimmune, intestinal Behçet’s diseases, psoriasis, arthritis, dermatitis, and many more illnesses.
AbbVie Inc. was spotted in the 13F holdings of 75 hedge funds in the first quarter, with a total stake value of $2.1 billion.
Adage Capital Management was the most prominent shareholder in AbbVie Inc., holding 1.5 million shares in the company at the end of the first quarter.
This is what Baron Funds said about AbbVie Inc. in its second-quarter 2023 investor letter:
“Apart from stock selection, the Fund also benefited from its lower exposure to AbbVie Inc. (NYSE:ABBV), whose shares were down almost 15% in the Benchmark due to concerns about the company’s growth profile after the loss of exclusivity for lead drug Humira. We exited our position during the quarter. We sold AbbVie Inc. due to our less optimistic view of the company’s pipeline and long-term growth profile.”
8. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 75
Fundsmith LLP was the most prominent shareholder in The Procter & Gamble Company at the end of the first quarter, holding 4.8 million shares in the company.
The Procter & Gamble Company is a consumer staples company. It is based in Cincinnati, Ohio. The company offers branded consumer packaged goods under several renowned brands, including Pantene, Head & Shoulders, Olay, and Old Spice. It operates through its Beauty, Grooming, Healthcare, Fabric & Home Care, and Baby, Feminine & Family Care segments.
As of August 1, Dara Mohsenian, an analyst at Morgan Stanley, holds an Overweight rating on shares of The Procter & Gamble Company. The analyst also maintains a price target of $174 on the stock.
There were 75 hedge funds long The Procter & Gamble Company in the first quarter. Their total stake value in the company was $4.7 billion.
7. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 75
A total of 75 hedge funds held stakes in Merck & Co., Inc. in the first quarter, with a total stake value of $3.7 billion.
Merck & Co., Inc. is a healthcare and pharmaceutical company based in Rahway, New Jersey. The company operates through its Pharmaceutical and Animal Health segments. It offers treatments and pharmaceutical products in the areas of oncology, hospital acute care, immunology, vaccinations, and more.
Robyn Karnauskas, an analyst at Truist Securities, maintains a Buy rating on shares of Merck & Co., Inc. as of August 2. The analyst also raised the firm’s price target on the stock from $116 to $122.
Holding 2.9 million shares in the company, Adage Capital Management was the largest shareholder in Merck & Co., Inc. at the end of the first quarter.
Baron Funds said the following about Merck & Co., Inc. in its second-quarter 2023 investor letter:
“During the second quarter, Merck & Co., Inc. (NYSE:MRK) filed the first lawsuit (followed by the filing of additional lawsuits by other parties) against the federal government challenging the constitutionality of the Medicare Drug Price Negotiation Program (the Program) that Congress established as part of the Inflation Reduction Act. In Merck’s complaint, Merck argues that the Program violates the Fifth Amendment because it allows the federal government to take Merck’s innovative drugs without providing just compensation for them. In addition, Merck argues the Program violates the First Amendment because it forces them to sign an agreement saying the government mandated prices are fair and the result of a negotiation when in fact, Merck argues, prices are not negotiated or fair. These lawsuits will take time to work their way through the legal process and in the meantime, the Program moves ahead on its scheduled path. The consensus view is that these lawsuits will not be successful, and the Program will remain in place. We suspect Merck’s arguments may convince at least a few U.S. Supreme Court Justices when the case reaches the U.S. Supreme Court, but the ultimate outcome is impossible to predict. For now, we assume the Program will remain in place and invest with that framework in mind.”
6. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 91
Walmart Inc. (NYSE:WMT) is another consumer staples company on our list. Based in Bentonville, Arkansas, the company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores across the globe. It offers groceries and consumables, among more, at its stores.
Walmart Inc. was seen in the portfolios of 91 hedge funds at the end of the first quarter. Their total stake value in the company was $5.7 billion.
On August 14, Robert Drbul, an analyst at Guggenheim, maintained a Buy rating on shares of Walmart Inc.. The analyst also raised his price target on the stock from $170 to $180.
Like Amazon.com, Inc., Meta Platforms, Inc., and NVIDIA Corporation, Walmart Inc. is a top-tier pick for a conservative stock portfolio.
5. Berkshire Hathaway Inc. (NYSE:BRK.B)
Number of Hedge Fund Holders: 108
Berkshire Hathaway Inc. (NYSE:BRK.B) is a financial company based in Omaha, Nebraska. It engages in the insurance, freight rail transportation, and utility businesses.
UBS analyst Brian Meredith maintains a Buy rating and a $414 price target on Berkshire Hathaway Inc. shares as of August 7.
We saw 108 hedge funds long Berkshire Hathaway Inc. in the first quarter, with a total stake value of $12.6 billion.
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Canaccord’s Michael Walkley has a Buy rating and a $205 price target on Apple Inc. (NASDAQ:AAPL) shares as of August 4.
Apple Inc. is a big tech company based in Cupertino, California. It manufactures smartphones, computers, tablets, wearables, and more.
Apple Inc. had 131 hedge funds long its stock in the first quarter, with a total stake value of $165.2 billion.
Here’s what Choice Equities Capital Management said about Apple Inc. in its second-quarter 2023 investor letter:
“Dramatic valuation differences across market cap sizes continue. This has been the case for some time now. Perhaps I have spent too much time discussing these dichotomies, as generally, I feel like if we pick the right stocks and manage market exposures thoughtfully, our equities- oriented portfolio will prosper across various market cycles. However, when markets become as lopsided as they have lately, I feel additional discussion on the market environment is worthwhile, if only to help highlight the opportunities that are available and the likely path forward. I expect future discussions to soon be focused again on our moderately concentrated portfolio. But for now, let’s take one last in-depth look at how far reaching these valuation dichotomies have again become.(Please note: charts that accompany the following can be found in the Appendix.)
Take Apple Inc. (NASDAQ:AAPL) for example. It is the largest stock by market cap, and fairly considered one of the best companies in the world. The company has been extraordinarily successful and improved standards of living everywhere in the process with their ubiquitous products. Along the way, shareholders have been richly rewarded, with shares increasing nearly fourteen-fold over the last ten years while generating an annualized total shareholder return of 31%, including dividends.
On the back of another big quarter for large cap tech, it is now the first stock to surpass the $3T market cap threshold. This makes its weighting in the ~$37T market cap of the S&P 500, ~8%. It also means this one stock’s market cap is larger than that of the entire ~$2.98T market cap of the Russell 2000 index, the first time in history a single stock has outweighed the Russell 2000 – aside from two brief days in September 2020 when Apple’s market cap then accomplished the same…” (Click here to read the full text)
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Our hedge fund data shows 155 funds long Alphabet Inc. (NASDAQ:GOOG) in the first quarter. Their total stake value was $18.6 billion.
Alphabet Inc. is a communication services company. It is based in Mountain View, California.
An Outperform rating and a $140 price target were held on Alphabet Inc. shares on July 13 by TD Cowen’s John Blackledge.
This is what Weitz Investment Management said about Alphabet Inc. in its second-quarter 2023 investor letter:
“The year-to-date’s top contributors Microsoft Corp. (MSFT) and Google parent Alphabet Inc. (NASDAQ:GOOG) (also a top quarterly contributor) have generated an enormous volume of AI-centric headlines. Both are at the vanguard of introducing AI-powered technologies into consumer-facing products, most notably their respective search engine. We trimmed several of the year’s winners on strength, including Meta, Microsoft, Alphabet, CoStar Group, Inc. (CSGP), and CarMax.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. is a broad-line retail and e-commerce company with a dedicated cloud services business as well. It is based in Seattle, Washington.
Amazon.com, Inc. was found in the portfolios of 243 hedge funds, with a total stake value of $25.8 billion.
Redburn Partners analyst Alex Haissl holds a Buy rating and a $230 price target on Amazon.com, Inc. shares as of August 11.
Weitz Investment Management said the following about Amazon.com, Inc. in its second-quarter 2023 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) was another top performer for the quarter and year-to-date, also with an AI role to play. AI systems require massive computational resources, meaning that as these technologies become more pervasive for businesses of all sizes, customers will increasingly lean on cloud computing platforms like Amazon Web Services to harness the benefits.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 289
There were 289 hedge funds long Microsoft Corporation (NASDAQ:MSFT) in the first quarter, with a total stake value of $57.9 billion.
Alex Haissl at Redburn Partners holds a Buy rating and a $440 price target on Microsoft Corporation shares as of August 11.
Microsoft Corporation is another big tech company on our list. It is based in Redmond, Washington.
Third Point Management made the following comment about Microsoft Corporation in its second-quarter 2023 investor letter:
“While our gross equity exposure is still modest (below 100% on the long side), we have increased our nets to 70% as of this writing and 77% on a beta adjusted basis. About 45% of that net long exposure is composed of direct and indirect AI beneficiaries trading at reasonable valuations. We have sized up our investments in certain cloud software businesses including Microsoft Corporation (NASDAQ:MSFT), a clear AI winner as a result of its rapidly growing Azure cloud business, upside from applying AI features to its core Office products, investment in Open AI, and ability to provide AI services to other companies (for example, Microsoft holds a stake in one of our portfolio companies, LSE, which it is also assisting in harnessing greater value in its data via AI).”
See also Starter Stock Portfolio: 15 Safe Stocks To Buy and 12 Dividend Kings To Buy For Safe Dividend Growth.
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This article is originally published at Insider Monkey.
