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 RTX Corporation (NYSE:RTX) 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).
An aerial view of a commercial jetliner in flight, its airframe glinting in the sun.
RTX Corporation (NYSE:RTX)
5-year Beta (monthly): 0.54
Number of Hedge Fund Holders: 54
One of the best low beta stocks, RTX Corporation (NYSE:RTX), previously known as Raytheon Technologies Corporation, is a known force in the aerospace and defense sectors. The company was formed in April 2020 from the merger of Raytheon Company and United Technologies Corporation. It rebranded to RTX in July 2023. Its extensive portfolio serves a diverse range of clients, including commercial, military, and government customers both domestically and internationally.
The company operates through four segments, Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense. The diversified approach allows it to offer an impressive range of products and services, from aircraft engines and avionics systems to missile defense solutions and advanced cybersecurity technologies.
In the second quarter, 54 hedge funds held positions in RTX (NYSE:RTX) worth $2.817 billion. As of Q2, Fisher Asset Management is the most dominant shareholder in the company and has a position worth $1.769 billion.
In 2024, the company has secured several significant contracts that signify its leadership in the industry. A standout achievement came in July when the Missile Defense Agency awarded the company a substantial $1.94 billion contract to produce Standard Missile-3 Block IIA interceptors for the U.S. government and Japan’s defense ministry. The project, based in Tucson, Arizona, and Huntsville, Alabama, is set to continue until February 2031, which affirms its role in enhancing global defense capabilities.
Additionally, in April, Raytheon, a subsidiary of RTX, was granted a $344 million contract aimed at modernizing the electronics for two missile variants, the SM-2 Block IIICU and SM-6 Block IU. The initiative is crucial for improving missile guidance systems, which ensures the effectiveness of these systems for the U.S. Navy and allied forces.
Another key development occurred in August when RTX’s (NYSE:RTX) Raytheon received a $478 million contract from the NATO Support and Procurement Agency to supply additional GEM-T missiles to Germany. The contract plays an important role in replenishing Patriot missiles that Germany donated to Ukraine.
Further solidifying its position, on September 11, Raytheon was awarded a landmark $1.19 billion contract for the production of Advanced Medium Range Air-to-Air Missiles (AMRAAM), including additional support hardware. The contract involves Foreign Military Sales to multiple countries such as Bahrain, Canada, Germany, Japan, and Ukraine, which shows its essential role in global defense partnerships.
Overall RTX ranks 2nd on our list of the best low beta stocks to buy. While we acknowledge the potential of RTX 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.