In this article, we will take a look at the 7 best stocks to invest in for a couch potato stock portfolio.

Couch Potato investing is the concept of having a portfolio of assets that operate almost entirely on autopilot. This portfolio is intended to withstand shifting market circumstances without needing investors to make major modifications to their asset allocation or objectives. In 1991, Scott Burns came up with the idea, seeking to construct the simplest investment strategy possible: a 50/50 combination of equities and bonds using only two funds. Burns claims that this makes it possibly the most accessible portfolio available, stating that anyone who “can divide by 2” can understand it.

Barclays calculated the weighted average returns of hedge fund portfolios by investor type, which ranged from 10% to 11%. Based on performance, a conventional 60/40 portfolio model would have comfortably outperformed these gains. According to the Lazy Portfolio ETF, a 60% stock/40% bond strategy incorporating the Vanguard Total Stock Market ETF and the Total Bond Market Index Fund would have returned little less than 15% in 2024. Even after 5 years, including 2022, when both stocks and bonds fell in value, the 60/40 method has an average return of 8%. In essence, couch potato investing is a more conservative version of the 60/40 method. More importantly, its dependability shines through in difficult circumstances. For example, between 2000 and 2002, the S&P 500 sank 43.1%, whereas the couch potato portfolio declined just 6.3%.

Unsurprisingly, one possible downside of the couch potato portfolio is that it tends to underperform during notable market upswings. Portfolios with a larger allocation to equities can better capitalize on bullish markets, resulting in higher returns than the more conservative couch potato strategy. This disparity is especially prominent when the proportion of shares in a portfolio exceeds the couch potato approach’s balanced 50/50 mix of stocks and bonds. However, Burns recommends that investors evaluate this strategy comprehensively.

“Your 35-year portfolio, for instance, was worth $884,481 at the end of 2021 and declined $155,601 during 2022. That’s a loss greater than the original $100,000 value.

But so what? The portfolio is way larger than expected or needed.

The good news here is that the historical evidence shows, once again, that we can get through some pretty hard times if we keep our investments simple and cheap.”

Our Methodology

Although couch potato investing discourages individual stock trading in favor of index investment, we chose to examine the Vanguard Total Stock Market ETF and identified some of its best holdings for this list. These equities were then filtered down further based on many parameters, including the hedge fund sentiment around them, a history of stable dividend payments, and well-established businesses.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

7. The Coca-Cola Company (NYSE:KO)

Number of Hedge Fund Holders: 81

The Coca-Cola Company (NYSE:KO) is a multinational beverage company that sells in over 200 countries. The corporation manufactures, develops, and distributes a wide range of nonalcoholic beverages, and has progressed far beyond soda and pop. Coca-Cola’s brands include Fanta, Fresca, Schweppes, Sprite, and others.

In Q4 2024, the company recorded revenues of $11.5 billion, a 6.5% increase over the previous year. Organic revenue also increased by 14%, thanks to a 9% jump in price/mix and a 5% increase in concentrate sales. In addition, The Coca-Cola Company (NYSE:KO) generated decent cash flow, with $2.9 billion in operations and $1.6 billion in free cash flow. It also maintained a respectable adjusted operating margin of 30.7%, indicating strong profitability.

On February 26, Erste Group analysts raised Coca-Cola (NYSE:KO) from Hold to Buy, highlighting the beverage giant’s strong profitability and positive future prospects. The company expects organic sales growth of 5% to 6% year-over-year, building on its strong market position. This predicted rise is due in part to the launch of new goods, such as probiotic lemonades, which are expected to drive sales growth throughout the year.

6. Costco Wholesale Corporation (NASDAQ:COST)

Number of Hedge Fund Holders: 95

Costco Wholesale Corporation (NASDAQ:COST) is a membership-based warehouse club company that provides bulk pricing on a variety of products such as food, electronics, and home items. The loyalty of its members drives the company’s growth, with membership fees accounting for a sizable amount of its revenue.

Costco Wholesale Corporation (NASDAQ:COST) reported $62 billion in revenue for the first quarter of 2025, a 7.5% increase over the previous year. Furthermore, net earnings for the corporation increased to $1.8 billion from $1.6 billion the previous year. The company also concluded the quarter in a strong financial position, with around $11 billion in cash and cash equivalents, up from $9.9 billion the previous quarter.

On February 6, Loop Capital Markets raised its price target for Costco Wholesale Corporation (NASDAQ:COST) from $1,095 to $1,150 while maintaining a Buy rating on the company’s stock. The change is in response to Costco’s published January sales statistics, which beat analyst estimates. Furthermore, Loop Capital identified Costco’s value proposition as a crucial element driving increasing consumer traffic to its clubs.

5. Exxon Mobil Corporation (NYSE:XOM)

Number of Hedge Fund Holders: 104

Exxon Mobil Corporation (NYSE:XOM) engages in the production, trading, transportation, and sale of crude oil, natural gas, petroleum products, petrochemicals, and specialty goods. The firm is also concentrating on low-emission options such as carbon capture and storage, hydrogen production, and sustainable fuel development.

The company aims to more than triple its Permian output and produce 1.3 million bpd from its very profitable assets in Guyana. As a result, XOM expects to provide incremental growth potential of $20 billion in earnings and $30 billion in cash flow by the end of this decade.

In December, RBC Capital maintained its Sector Perform rating on Exxon Mobil Corporation (NYSE:XOM), with a price target of $115. The firm’s study recognized Exxon Mobil’s goal of increasing its activities in the Permian Basin and Guyana, as well as its LNG business. The company’s capital investment is increasingly focused on new growth areas. According to RBC Capital’s projections, Exxon Mobil’s free cash flow yield is estimated to be 5.4% in 2025, rising to 9% by 2030.

4. Walmart Inc. (NYSE:WMT)

Number of Hedge Fund Holders: 115

Walmart Inc. (NYSE:WMT), the world’s largest brick-and-mortar retailer, operates over 100,000 locations globally, utilizing its financial strength to maintain competitive and consistent profits in a traditionally low-margin market.

BMO Capital Markets maintained an Outperform rating and a $110 price target for Walmart Inc. (NYSE:WMT). According to the firm’s research, despite Walmart’s conservative forecast, which has resulted in a drop in share price, the retail behemoth’s fundamental business momentum remains stable. BMO Capital says Walmart’s recent performance shows a strategic reversal in expectations, which is consistent with the company’s past strategy.

On February 21, Walmart Inc. (NYSE:WMT) earned $22.9 billion in operational cash flow over the first nine months of 2024. During this time, the company’s free cash flow increased from $1.9 billion to $6.2 billion. On account of its financial situation, the retailer has been able to increase dividends for the past 51 years.

3. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Hedge Fund Holders: 150

UnitedHealth Group Incorporated (NYSE:UNH), based in Minnetonka, Minnesota, is a renowned US multinational corporation that provides managed healthcare and insurance services. UnitedHealthcare is a for-profit firm with four main segments: Optum Health, Optum Insight, and Optum Rx.

UnitedHealth Group Incorporated (NYSE:UNH) outperformed analyst forecasts with its fiscal year 2024 results. The company’s revenue increased by 8% to $400 billion this year, owing to growth throughout its entire service portfolio. UnitedHealth Group Incorporated (NYSE:UNH) also posted strong cash flow results that were in line with investor expectations.

Piper Sandler maintained its Overweight rating and price target of $600 for UnitedHealth Group Incorporated (NYSE:UNH) on February 26. The firm’s confidence follows a recent drop in UnitedHealth’s stock price, which was impacted by a Wall Street Journal story published on February 21. The article raised questions about risk adjustment coding in Medicare Advantage (MA) programs. Jessica Tassan, an analyst at Piper Sandler, feels the market’s reaction is extreme, calling the stock’s selloff “mathematically nonsensical.”

Bretton Fund stated the following regarding UnitedHealth Group Incorporated (NYSE:UNH) in its Q4 2024 investor letter:

“We invest in UnitedHealth Group Incorporated (NYSE:UNH) because we believe this revealed preference is real. The regulatory landscape changes constantly, there is plenty of noise in the system, and it is possible to imagine a world where health insurers would not be necessary. However, the massive healthcare system we’re in today structurally relies on private companies to play the crucial role of managing care and negotiating prices, and we don’t think the US government is prepared to take all that over. It was a bad year for our investment, as the stock returned a negative 2.4%, but it trades for a meaningful discount to the market despite consistently delivering double digit earnings growth for years, including 10% last year.

First, the elephant in the room. On December 4, Brian Thompson, who ran UnitedHealth’s insurance business, was assassinated in New York City. Shell casings had the words “deny” and “depose” written on them, a bullet was inscribed with “delay.” Five days later, Luigi Mangione was arrested in Pennsylvania with what appears to be the murder weapon and a manifesto criticizing the American healthcare system. Mangione has since become a cult celebrity.

Healthcare is not a normal market. Governments have decided that healthcare is worth intervening in to achieve noneconomic outcomes, most notably providing care for people who can’t afford it. Each country’s regulatory system designs its system and rations healthcare in its own way: the UK employs providers directly and attempts a central triage function to allocate care; continental European systems typically have private providers but some version of all-payer rate setting; and the US has a decentralized model where providers can charge whatever they want, but payers can choose not to pay it, plus government-run systems like Medicare and Medicaid that cover about 35% of Americans. Every system implements some type of brake on costs, usually a combination of the government and private companies, and the US system leans more on the private sector for this than others. Our system is not without its benefits. It is vastly more lucrative for providers like surgeons and medical device companies. It also allows for some measure of money signal; if you are a rich weekend warrior with an orthopedic issue, the American system will offer a dizzying array of cutting-edge specialists where the UK would suggest getting used to the feeling of aging and stiffening one’s upper lip. However, our system violates the social expectation of the word “insurance…” (Click here to read the full text)

2. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 166

Apple Inc. (NASDAQ:AAPL) is a technology powerhouse best known for its main products, the iPhone, Mac, and Apple Watch, as well as its diverse range of services, which includes iCloud and Apple Music.

According to Morgan Stanley, Apple Inc.’s (NASDAQ:AAPL) latest AI program, Apple Intelligence, appears to have boosted iPhone demand in the United States somewhat during the December quarter. Looking ahead, Morgan Stanley expects iPhone demand in emerging nations other than China to remain robust, with India leading the way.

On February 4, JPMorgan restated an Overweight rating and a $270 price target for Apple Inc. (NASDAQ:AAPL). The firm’s assessment was based on Sensor Tower data, which showed that Apple’s App Store sales climbed by 2.7% month-over-month in January, above the historical average growth rate of 2.3% from December to January.

Tsai Capital stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q4 2024 investor letter:

“We initiated our investment in Apple Inc. (NASDAQ:AAPL) in 2016 and elevated it to a core holding in 2018, the same year the company introduced its redesigned 13-inch and 15-inch MacBook Pro models. Under Tim Cook’s visionary leadership, Apple has consistently redefined innovation in hardware and software.

The September 2024 launch of the iPhone 16, with its groundbreaking AI capabilities, including enhanced image generation tools, marks another inflection point. We believe this transformative device is the foundation for an AI-driven supercycle and could entice approximately 100 million consumers to upgrade, reinforcing Apple’s leadership in the industry.

Today, Apple’s ecosystem spans over two billion active devices, supported by a rapidly-growing base of subscription services. This strategy has helped to turbocharge customer engagement and spending. In the most recent fiscal year, which ended in September 2024, Apple’s high-margin services division accounted for 39.3% of total gross profits, up from 32.8% just two years ago.

Apple’s financial footing remains exceptional, with approximately $50 billion in net cash and marketable securities. Looking ahead, we expect earnings-per-share growth to outpace revenue growth, driven by margin expansion and continued share buybacks.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 317

Microsoft Corporation (NASDAQ:MSFT) is a leading technology company known for its core software products, which include the Windows OS, Microsoft 365 suite, and Edge browser. Its product portfolio includes corporate software, software development tools, video games, gaming gear, and cloud services.

On January 30, RBC Capital Markets reaffirmed its Outperform rating for MSFT shares, with a $500 price objective. The company recently revealed its software industry projection for 2025, and it selected Microsoft Corporation (NASDAQ:MSFT) for its diverse market exposure and position to benefit from generative AI.

Furthermore, on February 11, Microsoft Corporation (NASDAQ:MSFT) announced an expanded partnership with Anduril, an American defense technology company, to begin the next phase of the United States Army’s Integrated Visual Augmentation System (IVAS) program.

Bretton Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q4 2024 investor letter:

“Microsoft Corporation (NASDAQ:MSFT) has become the go-to provider of computing services for many emerging AI companies, and its franchise is much more diversified than Alphabet’s, making it a net beneficiary of the AI arms race. Demand for its cloud computing services continued to grow, and the rest of its business (Orce, Windows, Xbox, GitHub, LinkedIn) are also thriving, sending earnings per share up 22% while the stock returned 13%.”

While we acknowledge the potential of MSFT, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.