In this article, we will take a look at the 10 Best Retirement Stocks to Buy According to Hedge Funds.
After much suspense, the US Federal Reserve finally began cutting interest rates in late 2024, dropping the federal funds rate by 75 basis points in two cuts in September and November, with the market expecting further cuts this year. The Fed’s decision came in reaction to falling US inflation and employment market statistics, which suggested that the elusive soft landing was still within reach. However, as February comes to a close, things appear to have changed. For the time being, the Federal Open Market Committee is projected to leave interest rates unchanged on March 19. That’s because the labor market looks to be strong, and inflation is still over goal and slightly increasing. The FOMC’s most recent meeting in January also said that “respondents generally judged that policy rate reductions would occur later than previously assessed,” implying that any reduction (if at all) will occur sometime later in 2025.
According to the Census Bureau, the 65-and-older population in the United States will grow from 58 million in 2022 to 82 million by 2050, when it is expected to account for more than a quarter of the total population. The World Economic Forum further predicts that half of kids born in the United States in 2007 would survive to the age of 103. As such, wages seem to be falling behind inflation as people live longer lives. That’s especially true now that businesses have moved the burden of retirement savings to employees, giving 401(k)s instead of pensions that promise a fixed income each month.
One dilemma many face as they approach retirement is how much money they will need to live comfortably when they stop working. According to Consumer Expenditure Surveys, the average retiree household in the United States spends around $5,000 per month. With a median 401(k) balance of $210,724 for those aged 60 to 69, implementing the 4% withdrawal rule yields around $702 per month—which, when combined with the average monthly Social Security payment of $1,976, still falls short of meeting basic needs. According to Dan Doonan, executive director of the National Institute on Retirement Security, non-wealthy workers still have insufficient retirement coverage, forcing them to save on their own:
“In general, we’re just asking way too much of individuals to get all this right. And saving during the middle years of your life to provide income throughout retirement, it really is a challenging endeavor.”
Conversely, Doonan believes that a more streamlined network of retirement schemes across the country can help private-sector companies reduce employee turnover. In addition, Congress has already taken its own steps, passing laws like the Secure 2.0 Act of 2022, which alters federal retirement plan rules with the purpose of boosting access. According to Doonan, these revisions may encourage more employees to save in accounts similar to pensions.
In addition, retirees should monitor the equities market, which soared in 2023 and 2024, propelled by technology companies and optimism about AI-related advancements. According to FactSet statistics, the S&P 500 is predicted to expand by double digits this year, at a rate of 14.8%. This would outperform the trailing 10-year average of 8% profit growth. Furthermore, this strong performance may prove to be more significant than the Fed’s interest rate forecast. Regarding this, Garrett Melson, portfolio strategist at Natixis Investment Managers in Boston, said the following:
“While we anticipate 2025 is likely to be more volatile than the remarkably low volatility environment of 2024, the fundamentals remain supportive for both equities and fixed-income assets. And it’s those fundamentals that matter more for the outlook than the exact number of cuts.”
Photo by Max Harlynking on Unsplash
Our Methodology
For our list of the best retirement stocks, we used stock screeners, ETFs, and online rankings to find large companies with low beta values, a history of reliable dividend payments, and well-established businesses. These equities were then rated using hedge fund sentiment from Insider Monkey’s Q4 2024 database.
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).
10. United Parcel Service, Inc. (NYSE:UPS)
Beta Value: 0.94
Dividend Yield: 5.64%
Number of Hedge Fund Holders: 58
United Parcel Service, Inc. (NYSE:UPS) is a Georgia-based transportation and supply chain management company that provides a variety of package delivery and related services to its customers. United Parcel Service, Inc. (NYSE:UPS) currently pays a quarterly dividend of $1.64 per share, which increased by 0.6% in February. This was the company’s 23rd straight year of dividend increase.
On January 31, UBS analyst Thomas Wadewitz cut United Parcel Service, Inc.’s (NYSE:UPS) price target to $141 from $170, while maintaining a Buy rating on the company’s stock. The change follows UPS’s decision to cut its volume with Amazon by almost half and to move its Surepost business in-house from the US Postal Service. Wadewitz believes that these actions will help UPS to migrate to a better quality business mix, including more small and medium-sized company (SMB) and business-to-business (B2B) engagements, in the long run.
9. Lockheed Martin Corporation (NYSE:LMT)
Beta Value: 0.42
Dividend Yield: 3.00%
Number of Hedge Fund Holders: 65
Lockheed Martin Corporation (NYSE:LMT), created by the 1995 merger of Lockheed Corporation and Martin Marietta, is a global leader in aerospace, defense, weaponry, information security, and technology. The company is divided into four major business segments: Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space.
The company’s fourth-quarter 2024 earnings per share came in at $2.22, notably below the average forecast of $6.62. The reported EPS includes the impact of the aforementioned charges, totaling $5.45 per share. Adjusted for these expenses, the EPS would be $7.45. Lockheed Martin’s revenues for the quarter were $18.62 billion, slightly lower than the expected $18.86 billion. However, the corporation has a solid overall backlog of $179.4 billion and an exceptional book-to-bill ratio of 156%.
Notably, Lockheed Martin’s F-35 program maintained its performance, with 62 deliveries in the quarter. The allocation of Lot 18 for the F-35 in December marked a significant milestone, and management expects to deliver between 170 and 190 F-35 aircraft by 2025.
Delaware Ivy Core Equity Fund stated the following regarding Lockheed Martin Corporation (NYSE:LMT) in its Q3 2024 investor letter:
“Finally, we added Lockheed Martin Corporation (NYSE:LMT) to the portfolio. While demand for the company’s products remains strong as a function of increased defense industry expenditures and a favorable geopolitical backdrop, margins have been impaired by government contracts that were fixed in price before the onset of rapid inflation. We believe the longer-term profit outlook is inflecting as mispriced contracts are replaced by more favorable ones, beginning in 2025. As several observers have noted before, defense companies are a great insurance policy for what you don’t know, a saying that certainly rings true amid escalating conflict across the globe.”
8. Amgen Inc. (NASDAQ:AMGN)
Beta Value: 0.54
Dividend Yield: 3.14%
Number of Hedge Fund Holders: 72
Amgen Inc. (NASDAQ:AMGN) is a multinational biopharmaceutical company that specializes in human therapies for cancer, hematology, inflammation, bone health, and cardiovascular disorders. Repatha and EVENITY are two medications that are producing significant growth for the company.
On February 20, Bernstein analysts reduced the price target for Amgen (NASDAQ:AMGN) shares to $350 from $380, while keeping an Outperform rating. Amgen had a solid fourth quarter in 2024, with total revenues of $33.42 billion. This achievement was mostly due to the outstanding performance of the company’s key products, including Repatha, Evenity, and Tezspire. In addition, Bernstein analysts raised their projections for Repatha, emphasizing its consistent growth.
7. Verizon Communications Inc. (NYSE:VZ)
Beta Value: 0.42
Dividend Yield: 6.34%
Number of Hedge Fund Holders: 74
Verizon Communications Inc. (NYSE:VZ) is a global leader in communication, technology, and entertainment services. The company’s Consumer and Business sectors provide a wide range of goods and services, including wireless and wireline solutions, and fixed wireless access (FWA) internet.
Back in December, Raymond James confirmed its outlook for Verizon Communications Inc. (NYSE:VZ), maintaining an Outperform rating and a target price of $48. The firm noted Verizon’s strong long-term fundamentals, consistent performance, and competitive dividend yields as key factors for its appeal.
Verizon Communications Inc. (NYSE:VZ) had a successful fiscal year in 2024, above expectations with a 3.1% gain in cellular service revenue and a 2.1% increase in adjusted EBITDA. In 2024, the firm earned an astounding $19.8 billion in free cash flow, allowing it to pay down debt and prepare for the planned acquisition of Frontier. In addition, the firm increased its dividend for the 18th consecutive year, with a quarterly distribution of $0.6775 per share.
Third Point Management stated the following regarding Verizon Communications Inc. (NYSE:VZ) in its Q3 2024 investor letter:
“While some economic activity has been showing signs of slowing, the defensive composition of the current high yield market with a high mix of higher quality credit and short duration has let the rates tailwind overwhelm such concerns. The lowest quality sectors of the market have performed best, fueled by both soft/no landing expectations, as well as two positive events in the beleaguered telecom space. Telecom/cable have been poor performers year to date due to overhang from the growth of FWA (aka “wireless cable”) and increased fiber building, however the sector re-rated materially on two deals. Second, Verizon Communications Inc. (NYSE:VZ) announced a deal to acquire Frontier Communications (FYBR), a transaction which the fund benefited from by virtue of its investment in FYBR debt. This transaction, aimed at increasing’s VZ fiber footprint, has led to broad revaluation of fiber retail networks that we think is appropriate. While we continue to expect to see FWA rapidly erode non-upgraded cable and especially copper’s share of the low-end broadband market, the VZ deal underscores the value of the higher end footprint.”
6. The Coca-Cola Company (NYSE:KO)
Beta Value: 0.60
Dividend Yield: 2.86%
Number of Hedge Fund Holders: 81
The Coca-Cola Company (NYSE:KO), best known for its famous Coca-Cola brand, is a beverage company with over 200 brands, including sodas, waters, coffees, teas, juices, kombuchas, and alcoholic beverages. In last year’s payment increase announcement, the company’s management claimed a 63-year run of consecutive increases, making it an obvious choice for a retirement portfolio.
On February 20, The Coca-Cola Company (NYSE:KO) increased its quarterly dividend, marking the beverage giant’s 63rd consecutive year of dividend increases. This rise lifts the yearly dividend to $2.04 per share, up from $1.94 last year.
On February 11, Citi analyst Filippo Falorni confirmed his Buy rating and price target of $85 for The Coca-Cola Company (NYSE:KO). Falorni’s decision follows the company’s Q4 2024 performance and projected profitability in 2025. Since pricing was 9% higher than the expected 5.9%, the company’s organic sales growth was 14% higher than the 7% consensus estimate.
5. Cisco Systems, Inc. (NASDAQ:CSCO)
Beta Value: 0.79
Dividend Yield: 2.56%
Number of Hedge Fund Holders: 84
Cisco Systems Inc. (NASDAQ:CSCO) is a well-known technology company that offers networking and IT solutions, leveraging artificial intelligence to increase network performance, security, and automation. The company focuses on developing and delivering networking hardware, software, and telecommunications equipment.
Cisco Systems Inc. (NASDAQ:CSCO) posted great results in fiscal Q1 2025, with revenues of $13.8 billion. Despite the reduction from the previous year, Cisco exceeded experts’ estimates by $70.5 million. In addition, the corporation posted a net income of $2.7 billion for the quarter, indicating that its financial condition is robust.
On February 13, Rosenblatt Securities upgraded Cisco Systems Inc (NASDAQ:CSCO) to Buy and boosted its price target to $80 citing solid subscriber growth, rising AI-driven orders, and stable recurring revenues. Rosenblatt also reported “triple-digit growth” in web-scale orders and over 20% growth in telecom orders, as security revenues and orders more than doubled year-over-year.
4. Merck & Co., Inc. (NYSE:MRK)
Beta Value: 0.36
Dividend Yield: 3.62%
Number of Hedge Fund Holders: 91
Merck & Co., Inc. (NYSE:MRK) is a prominent American multinational pharmaceutical corporation that is historically tied to the original Merck Group, which was founded in Germany in 1668. Internationally known as Merck Sharp & Dohme (MSD), the company provides prescription pharmaceuticals, vaccines, biologic treatments, and animal health products.
On February 12, Guggenheim maintained a Buy rating on Merck & Co., Inc. (NYSE:MRK) but decreased its price target to $115 from $122. The change comes after Guggenheim hosted Merck’s executive team for a webinar where they discussed the company’s fourth-quarter performance and strategic plans. With a strong gross profit margin of 80.85% and sales increase of 6.74%, they highlighted Gardasil and Keytruda, two significant drugs in Merck’s portfolio, as well as prospective chances that investors may be overlooking.
3. Pfizer Inc. (NYSE:PFE)
Beta Value: 0.58
Dividend Yield: 6.54%
Number of Hedge Fund Holders: 92
Pfizer Inc. (NYSE:PFE) is a leading global pharmaceutical company that develops, produces, and sells biopharmaceutical medicines worldwide.
Pfizer Inc. (NYSE:PFE) announced full-year 2024 revenues of $63.6 billion, representing a 7% year-over-year operational rise; removing contributions from Paxlovid and Comirnaty, revenues increased 12% operationally.
On February 11, Jefferies analyst Akash Tewari increased Pfizer Inc.’s (NYSE:PFE) price objective from $33 to $34, while keeping a Buy rating on the stock. The shift occurred following the release of Pfizer’s abstract on mevrometostat (EZH2i) at the American Society of Clinical Oncology Genitourinary conference. Tewari added that the new findings might have a positive impact on Pfizer’s ongoing Phase 3 studies in both post-abiraterone and first-line metastatic castration-resistant prostate cancer (mCRPC) circumstances.
2. Johnson & Johnson (NYSE:JNJ)
Beta Value: 0.48
Dividend Yield: 3.06%
Number of Hedge Fund Holders: 98
Johnson & Johnson (NYSE:JNJ) is a leading participant in the healthcare industry, which includes sub-sectors including medications, Medtech equipment, and consumer health products. The firm is well-known for developing pharmaceuticals to treat a wide range of conditions and diseases, including cancer, diabetes, and HIV/AIDS.
The corporation has increased its dividends for 62 consecutive years and presently pays a quarterly dividend of $1.24 per share. As of February 22, the stock’s dividend yield stood at 3.06%.
On February 3, Guggenheim boosted its price objective for Johnson & Johnson (NYSE:JNJ) from $162 to $166, maintaining a Neutral rating on the stock. The change came after the company’s Q4 2024 results, where JNJ reported $22.5 billion in revenue and $2.04 in EPS. Guggenheim complimented Johnson & Johnson’s performance, including its first 2025 forecast, despite rising competition from Stelara biosimilars in the US market.
1. UnitedHealth Group Incorporated (NYSE:UNH)
Beta Value: 0.61
Dividend Yield: 1.80%
Number of Hedge Fund Holders: 150
UnitedHealth Group Incorporated (NYSE:UNH), headquartered in Minnetonka, Minnesota, is a major US multinational company that specializes in managed healthcare and insurance services. The company is a for-profit entity with four primary segments: UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. UNH began paying yearly dividends back in 1990 and transitioned to quarterly distributions in 2010, with the dividend steadily growing since then. Last year, it returned more than $16 billion to stockholders in dividends and share repurchases.
On February 21, RBC Capital Markets maintained an Outperform rating on UnitedHealth Group Incorporated (NYSE:UNH) with a $655 price target. UnitedHealth Group’s stock has been under examination since the release of an unsubstantiated report, which sparked a significant pre-market reaction among investors. Despite this, RBC Capital’s analysts believe that the consequences of this investigation will take longer to emerge, comparable to the DOJ’s antitrust investigation last year.’
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)
While we acknowledge the potential of UNH as an investment, 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 UNH 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.
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