In this article, we examined the 10 best defensive stocks to buy today according to billionaire Ken Fisher with a beta of less than 1. If you want to skip our detailed analysis of Fisher’s history and hedge fund performance, go directly to the 5 Best Defensive Stocks to Buy Today According to Billionaire Ken Fisher.
Ken Fisher, the American billionaire investor and the founder of the $159 billion hedge fund Fisher Asset Management, is famous for taking risks and capitalizing on market opportunities. This is clearly reflected from his $143 billion worth of 13F stock portfolio, which is significantly inclined towards high-growth stocks from information technology, communication, and consumer discretionary sectors. But this doesn’t mean he won’t consider the risk factor. His stock selection criteria is tight; he strongly believes in diversification instead of concentrating on a few stocks and sectors. The billionaire hedge fund manager has diversified his stock portfolio with growth, value, divided, and defensive stocks to tackle the market uncertainty.
Future fundamentals as well as revenue and earnings growth potential are among the key factors in Ken Fisher’s investment philosophy when it comes to stock picking. As of the end of the first quarter, Fisher Asset Management held stakes in 933 stocks, according to the 13F filings with the SEC. We will keep the focus of this article on Fisher’s defensive stocks with a beta of less than 1.0.
Beta is one of the best metrics to gauge securities volatility. Generally, a stock with a beta value of less than 1.0 is considered less volatile than the market. Adding these types of stocks into the portfolio would help in lowering risk factors. Stocks from the industrial, consumer staples, and utility sectors normally have lower beta. Meanwhile, tech and other high-growth stocks tend to have higher betas compared to the broader market. Adding these stocks to the portfolio increases the risk, but may enhance the potential returns.
Some notable holdings of Fisher’s fund as of the end of the first quarter include Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Netflix, Inc. (NASDAQ: NFLX), Costco Wholesale Corporation (NYSE: COST), Walmart Inc. (NASDAQ: WMT), Caterpillar Inc. (NYSE: CAT) and Intel Corporation (NASDAQ: INTC).
Ken Fisher, 70, who stated in a YouTube video that 2021 will be the last year of bull-run and reiterated his stance another YouTube video that the tech stocks will bounce back, generated robust returns during the pandemic year as Fisher Asset Management’s 24 out of 25 top stock positions outperformed the broader market index, thanks to his bet on growth stocks that benefited from pandemic related staying at home policies.
Despite growth stocks underperformance since the beginning of this year, Ken Fisher claimed in a recent article that value stocks are unlikely to seize a leadership position from growth stocks.
“After a growth stock-dominated decade, value fans are crowing. Since November 6, world value stocks are up 19.7%, beating growth stocks’ 8.7% (through 2/24, using MSCI World Growth and Value Indexes). Value bulls claim COVID vaccines and approaching business re-openings mean this is just the start of a long run—and that economically sensitive value stocks are poised for their typical, lengthy early bull market boom. Maybe. But I don’t think so, and I don’t think it matters much,” Ken Fisher said in his recent column.
Ken Fisher of Fisher Asset Management
While Ken Fisher’s reputation remains intact, the same can’t be said of the hedge fund industry as a whole, as its reputation has been tarnished in the last decade during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 111 percentage points since March 2017. Between March 2017 and February 5th, 2021 our monthly newsletter’s stock picks returned 187.5%, vs. 75.8% for the SPY. Our stock picks outperformed the market by more than 111 percentage points. (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Let’s start digging into the 10 best defensive stocks to buy today according to billionaire Ken Fisher.
10. Costco Wholesale Corporation (NYSE: COST)
Number of Hedge Fund Holders: 56
Fisher Asset Management has been holding a position in Costco Wholesale Corporation (NYSE: COST) since 2014. COST is the list of 10 best defensive stocks to buy today according to billionaire Ken Fisher amid its low beta of 0.64. Costco Wholesale Corporation (NYSE: COST) has raised dividends in the past five successive years while its share price surged 27% in the last twelve months.
In the first quarter investor letter, ClearBridge Investments, an investment management firm, mentioned reasons for selling Costco Wholesale Corporation (NYSE: COST)’s stake. Here is what ClearBridge Investments stated:
“To take a more discretionary stance in retailing and make room for our additional purchases where we see better opportunities, we closed our position in Costco Wholesale Corporation (NYSE: COST). Costco was a big winner during the most restrictive periods of the COVID-19 lockdowns with its focus on staples, larger basket size, necessities and bulk items, and it remains an exceptional retailer in its category, with a sticky subscription base and non-U.S. growth ahead. However, the company is facing very tough comparisons as well as margin pressure in its core business and we believe its valuation has become stretched.”
Like Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Walmart Inc. (NASDAQ: WMT), Caterpillar Inc. (NYSE: CAT) and Intel Corporation (NASDAQ: INTC), Costco Wholesale Corporation (NYSE: COST) is one of the best stocks to buy based on Ken Fisher’s Q1 portfolio.
9. Caterpillar Inc. (NYSE: CAT)
Number of Hedge Fund Holders: 53
The machinery maker Caterpillar Inc. (NYSE: CAT) is one of the best defensive stocks to hold for the long term. Its beta of 0.92 also suggests that Caterpillar Inc. (NYSE: CAT) is a less volatile stock. The company’s dividend history and steady share price growth potential also make it a good stock for defensive investors. At the end of the first quarter, Caterpillar Inc. (NYSE: CAT) weighted around 1.05% of the Fisher Asset Management stock portfolio.
Caterpillar Inc. (NYSE: CAT) was in 53 hedge funds’ portfolios at the end of March, flat compared to the previous quarter. The all-time high for this statistic is 63.
8. Walmart Inc. (NYSE: WMT)
Number of Hedge Fund Holders: 58
Billionaire Ken Fisher has been holding a stake in Walmart Inc. (NASDAQ: WMT) since 2001. At the end of the first quarter, Ken Fisher held $1.65 billion worth of stake in Walmart Inc. (NASDAQ: WMT), accounting for 1.17% of the entire 13F portfolio. With a beta of 0.47, the shares of Walmart Inc. (NASDAQ: WMT) are less volatile compared to the broader market. Its stock price is up 16% in the last twelve months. The dividend aspect also makes it one of the best defensive stocks to hold.
Walmart Inc. (NASDAQ: WMT) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. It was in 58 hedge funds’ portfolios at the end of the first quarter of 2021. The all-time high for this statistic is 71.
7. Intel Corporation (NASDAQ: INTC)
Number of Hedge Fund Holders: 83
The information technology company Intel Corporation (NASDAQ: INTC) is on the list of 10 best defensive stocks to buy today according to billionaire Ken Fisher amid its beta of 0.60. At the end of the first quarter, Fisher’s hedge fund held a $1.93 billion worth of stake in Intel Corporation (NASDAQ: INTC). Along with share price gains, the company offers hefty dividends to investors. Intel Corporation (NASDAQ: INTC)’s dividend yield is currently standing at around 2.50%.
Money managers were betting on the stock. The number of bullish hedge fund positions moved up by 11 recently. Intel Corporation (NASDAQ: INTC) was in 83 hedge funds’ portfolios at the end of the first quarter of 2021 compared to 72 positions in the prior quarter. The previous all-time high for this statistic was previously 78.
Like Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Netflix, Inc. (NASDAQ: NFLX), Costco Wholesale Corporation (NYSE: COST), Walmart Inc. (NASDAQ: WMT) and Caterpillar Inc. (NYSE: CAT), Intel Corporation (NASDAQ: INTC) is one of the best stocks to buy based on Ken Fisher’s Q1 portfolio.
6. Netflix, Inc. (NASDAQ: NFLX)
Number of Hedge Fund Holders: 110
The world’s largest streaming giant Netflix, Inc. (NASDAQ: NFLX) is also ranked among the 10 best defensive stocks to buy today according to billionaire Ken Fisher. With a beta of 0.75, Netflix, Inc. (NASDAQ: NFLX) shares appear less volatile compared to the broader market. Sustainable growth potential along with an extensive user base support its share price.
Polen Capital, an investment management firm, mentioned a few stocks including Netflix in the first quarter investor letter. Here is what Polen Capital stated:
“We purchased Netflix, Inc. (NASDAQ: NFLX) in March, initiating a 3% position in the Portfolio. We believe Netflix, Inc. (NASDAQ: NFLX) is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix, Inc. (NASDAQ: NFLX)’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
Like Apple Inc (NASDAQ: AAPL), Amazon.com, Inc. (NASDAQ: AMZN), Alibaba Group Holding Ltd – ADR (NYSE: BABA), Costco Wholesale Corporation (NYSE: COST), Walmart Inc. (NASDAQ: WMT), Caterpillar Inc. (NYSE: CAT) and Intel Corporation (NASDAQ: INTC), Netflix, Inc. (NASDAQ: NFLX) is one of the best stocks to buy based on Ken Fisher’s Q1 portfolio.
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Disclosure: None. 10 Best Defensive Stocks to Buy Today According to Billionaire Ken Fisher is originally published on Insider Monkey.
