We recently compiled a list of the 10 Best Low Beta Stocks To Buy. In this article, we are going to take a look at where Lockheed Martin Corporation (NYSE:LMT) stands against the other low beta stocks.
After a rough few years, the market is coming together and is on a healthy trajectory. The recent Fed rate cuts triggered a lot of bullish sentiment toward the broader market. For example, on September 20, Business Insider reported that Brian Belski from BMO raised his S&P 500 price target for 2024 to 6,100 from 5,600, followed by the Fed’s recent rate cut and strong seasonal market data.
Moreover, Belski talked about broadening stock market gains and the increased likelihood of a soft landing for the U.S. economy. He finds current elevated valuations justified as he compared the situation to the mid-1990s when the market sustained high multiples.
In addition, Tom Lee of Fundstrat is bullish on the market for several upcoming years and expects the broader market to nearly triple to 15,000 by 2030. His bullish sentiment is driven by demographic shifts, millennial spending, and technology advancements. He mentioned the prime earning years of millennials and Gen Z, which mirror previous periods of high stock market returns. Furthermore, he also highlighted the role of technology in addressing global labor shortages and projects significant spending on AI and tech solutions.
Broadening Market Participation and the Outlook for Recession Risks
On September 24, Prashant Bhayani of BNP Paribas Wealth Management joined CNBC to discuss the current market conditions. He discussed the improving liquidity and noted the tight credit spreads, near-record equities, and steady lending. While U.S. hiring is slowing, he explained that rising unemployment is partly due to labor force growth, not just layoffs, which makes it different from past cycles. Bhayani stressed that employment data, like jobless claims, will be important in determining market outlooks.
On market valuations, Bhayani acknowledged some sectors are overvalued but sees broader market participation beyond AI-related stocks. He suggested that stocks could outperform bonds if a soft landing or no recession occurs.
Addressing concerns about potential triggers for volatility, Bhayani said that a credit event, similar to those seen in 2000 or 2007, could lead to significant market declines. However, current credit spreads and a healthy banking system support the soft landing view.
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify over 30 mid to mega-cap stocks with a 5-year beta (monthly) between 0.2 to 0.8. Next, we narrowed the list to 10 stocks most widely held by institutional investors. The 10 best low-beta stocks to buy are listed in ascending order of their hedge fund sentiment and we used the beta as a tie-breaker as well.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A military aircraft in flight, showing the strength of the company’s combat & air mobility capability.
Lockheed Martin Corporation (NYSE:LMT)
5-year Beta (monthly): 0.47
Number of Hedge Fund Holders: 56
Lockheed Martin Corporation (NYSE:LMT) is a Maryland-based global aerospace, defense, and security company. The company focuses primarily on the research, design, development, manufacture, and integration of advanced technological systems and services. The company’s expertise spans key sectors, including aerospace, military defense, cybersecurity, and space exploration.
The company operates through key segments, namely, Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space. Its Aeronautics division is known for developing military several aircraft like the F-35 Lightning II, one of the most advanced fighter jets in the world. The Missiles and Fire Control division focuses on precision weaponry and advanced missile systems, while Rotary and Mission Systems covers naval warfare, radar technologies, and cybersecurity. Lastly, the Space segment handles satellite technologies, missile defense, and space exploration.
Lockheed Martin (NYSE:LMT) has been receiving a significant number of contracts recently, including the latest NASA contract. NASA has awarded the company with a contract to develop the next-generation GeoXO Lightning Mapper instruments for the National Oceanic and Atmospheric Administration (NOAA). The initial contract is valued at around $297 million for two instruments, with options for two more.
The innovation is designed to provide meteorologists with improved tools for issuing timely warnings about severe weather events, including rapidly intensifying hurricanes. The company’s joint venture (JV) with RTX, Javelin, has received several contracts in September.
Earlier in August, Reuters reported that Lockheed Martin’s (NYSE:LMT) JV secured a follow-on contract valued at $1.3 billion from the U.S. Army for Javelin missiles, which have been crucial in Ukraine’s defense against Russia. The contract is part of a broader agreement awarded last year, potentially worth up to $7.2 billion, which covers an unspecified quantity of missiles from 2023 to 2026.
Lockheed Martin (NYSE:LMT) tops our list of 10 best low beta stocks as its stock was held by 56 hedge funds, at a combined value of $2.056 billion in Q2. Two Sigma Advisors is the company’s largest shareholder with 855,600 shares worth $399.65 million as of the second quarter.
Overall LMT ranks 1st on our list of the best low beta stocks to buy. While we acknowledge the potential of LMT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center