In this article, we will take a look at the 16 best low risk investments in 2023. To see more such companies, go directly to 5 Best Low Risk Investments in 2023.
Investors are still in a wait and see mode after the latest inflation and retail sales report which give mixed signals. Some analysts are still of the view that the US economy could face a recession by the end of this year or in the first half of 2024. Recently, Morgan Stanley’s Michael Wilson, who has been one of the strongest bearish voices on the Wall Street, warned that the increased US government spending that injected a lot of optimism in the markets would not bode well for US stocks. The analyst said that US has not seen such a high deficit when unemployment is so low.
However, Wilson acknowledged that the recession predictions and bearish notes have hitherto been proven false. And Wilson does not think we would necessarily face a full-blown recession. He said that the central bank’s fiscal policies have already ushered in a “down cycle” and he is convinced that growth is slowing.
Wisdom Tree in its third quarter of 2023 report said that volatility has become a constant in the market. The firm believes inflation will keep cooling and the Federal Reserve might be near the end of its rate hike cycle. The firm said the central bank might go on an extended pause once it concludes its current rate hike cycle. Wisdom Tree rules out any possibility of rate cuts this year but believes that topic could gain more relevance in the first half of 2024. Wisdom Tree also talked about the AI rally that gave a huge boost to many stocks. The firm believes this hype could subside as investors’ excitement around AI abates slowly. Wisdom Tree is concerned that some parts of the market are trading on hype.
The Wisdom Tree report said that while the bull market started back in October 2022, stock valuations are still attractive.
“The value cycle turns out to be just a value trade—a shorter term run for dividend concepts that ended last autumn. Additionally, continued levitation from zero-yielding Silicon Valley giants would be troublesome. This year has been horrible for value-oriented mandates, along with most everything that was not mega cap growth. Stocks that can demonstrate durable profitability and reasonable valuations were the type that held up during the 2022 sell-off; we suspect they are opportune in 2023’s second half,” the report said.
Time and again successful investors have emphasized the importance of not losing money while investing in the stock market. When markets are volatile you have to find high conviction, low risk plays that are insulated from market crashes. David Einhorn of Greenlight Capital talked about the importance of finding high conviction plays and going all in in an interview in 2005. He said:
“We believe in constructing the portfolio so that we put our biggest amount of money in our highest-conviction idea, and then we view the other ideas relative to that. We find things that we think are exceptional only occasionally. So if we find some- thing that is really set up, where we think it’s mispriced, where we have a good understanding of why it’s mispriced, where we think the mispricing is very large and the overall risk is very small, we take an outsized position to make sure we give ourselves the chance to be well compensated for getting it right.”
Photo by Marga Santoso on Unsplash
Our Methodology
For this article we first used a stock screener to identify US stocks with beta values less than 1. Beta value of less than 1 shows low risk and low volatility. After applying this check we got a long list of stocks, from which we selected 17 stocks with the highest number of hedge fund investors. We gauged hedge fund sentiment for these stocks using Insider Monkey’s database of 910 hedge funds. These are the best low risk investments in the stock market in 2023 according to hedge funds. Almost all of these stocks are safe, and reliable and are not highly affected by market volatility.
Best Low Risk Investments in 2023
17. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 74
With consistent dividend increases and a defensive and recession-proof business, The Procter & Gamble Company (NYSE:PG) is one of the best low risk investments in the stock market in 2023.
Last month, Jefferies updated its ‘Uber Crowded’ portfolio which includes companies that are popular among Long Only & Hedge Fund investors. The Procter & Gamble Company (NYSE:PG) was one of the notable stocks in this portfolio. 74 hedge funds out of the 910 hedge funds in Insider Monkey’s database had stakes in The Procter & Gamble Company (NYSE:PG).
16. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 78
Merck ranks 16th in our list of the best low risk investments in 2023. With over a decade of consistent dividend hikes and a robust pipeline of drugs MRK has upside potential.
Last month, the company said the European Commission approved its anti-PD-1 therapy Keytruda as part of a combination regimen to treat gastric or gastroesophageal junction (GEJ) adenocarcinoma as a first-line option.
Carillon Eagle Growth & Income Fund made the following comment about Merck & Co., Inc. (NYSE:MRK) in its Q2 2023 investor letter:
Merck & Co., Inc. (NYSE:MRK) presented positive clinical data for a new drug in its oncology pipeline, announced an acquisition that was viewed favorably by investors, and reported strong first-quarter financial results while also increasing its earnings guidance for 2023.
15. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 78
Data monitoring and security platform company Datadog, Inc. (NASDAQ:DDOG) ranks 15th in our list of the best low risk investments in 2023. As of the end of the second quarter of 2023, 78 hedge funds tracked by Insider Monkey had stakes in Datadog, Inc. (NASDAQ:DDOG).
In August, T.D. Cowen started covering Datadog, Inc. (NASDAQ:DDOG) with an Outperform rating. The firm’s analyst Andrew Sherman set a $120 price target on Datadog, Inc. (NASDAQ:DDOG).
RiverPark Large Growth Fund made the following comment about Datadog, Inc. (NASDAQ:DDOG) in its Q1 2023 investor letter:
“Datadog, Inc. (NASDAQ:DDOG): DDOG was a top detractor in the quarter. The company reported strong 4Q results including 44% revenue growth and 30% earnings growth but gave cautious revenue guidance for 2023. Macroeconomic headwinds have caused clients to slow the transition of workloads to the cloud and instead to optimize current capacity. Despite this temporary slowdown, DDOG still expects revenue to grow nearly 25% in 2023.
As businesses have transitioned to cloud software infrastructure, much of which is in isolated data silos, it has become increasingly difficult for data engineers to monitor and analyze system performance. Datadog provides a SaaS software platform to monitor and analyze the system performance of software applications and IT infrastructure by giving users a single page view to observe their company’s technology stack. The company has quickly grown its revenue from $100 million in 2017 to $1.7 billion in 2022 and, we believe, should continue to grow revenue at more than 20% annually as it penetrates its $40 billion and fast-growing market. Less than 10% of software applications are currently monitored. The company’s dollar-based net retention rate has been 130%+ as existing customers continue to use an increasing number of products and the company continues to add new features. As of 4Q22, 81% of customers used 2+ products, while only 18% of customers used 6+ products (up from less than 1% two years ago). As an extremely capex light software business, DDOG already has significant free-cash-flow ($350m in 2022) and free-cash-flow margins (21% in 2022).”
14. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 81
The biggest retailer in the US, Walmart Inc. (NYSE:WMT) remains the dominant player in the industry despite consumer headwinds and inflation challenges. A recent survey conducted by Morgan Stanley showed Walmart Inc. (NYSE:WMT)’s subscription service Walmart+ continues to attract record number of customers. The survey showed that Walmart+ is estimated to have a whopping 20.8 million members from the US households.
As of the end of the second quarter of 2023, 81 hedge funds in Insider Monkey’s database of hedge funds had stakes in Walmart Inc. (NYSE:WMT). The biggest stakeholder of Walmart Inc. (NYSE:WMT) is DE Shaw with an $862 million stake in the company.
13. Elevance Health, Inc. (NYSE:ELV)
Number of Hedge Fund Holders: 82
Elevance Health, Inc. (NYSE:ELV) shares gained in July after the company upped its full-year guidance and posted strong Q2 results.
Vulcan Vaue Partners in an investor letter talked about some reasons why it added Elevance Health, Inc. (NYSE:ELV) shares to its portfolio. The letter said:
“Elevance Health, Inc. (NYSE:ELV) (formerly known as Anthem) is the largest healthcare insurance company in United States by medical membership, covering 47 million lives. Two thirds of its customers are covered under commercial and specialty arrangements, and the other third is covered under government programs such as Medicare and Medicaid. The managed care industry is large, with healthcare spending of $4 trillion annually, and we believe that scale and expertise are important for success in this industry. We think Elevance’s size and scale allows it to continue to invest in technology and benefit design to maintain its competitive position.”
Read the complete letter here.
12. T-Mobile US, Inc. (NYSE:TMUS)
Number of Hedge Fund Holders: 86
T-Mobile US, Inc. (NYSE:TMUS) is one of the low risk stocks to buy in 2023.
As of the end of the second quarter of 2023, 86 hedge funds in Insider Monkey’s database of 910 hedge funds had stakes in T-Mobile US, Inc. (NYSE:TMUS).
T-Mobile US, Inc. (NYSE:TMUS) in August said it will cut about 7% of its workforce.
11. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 87
JPMorgan recently said in a report that Eli Lilly and Company (NYSE:LLY) will be one of the leaders of the weight loss market, which it expects to generate $100 billion by 2030.
In its latest earnings call Eli Lilly and Company (NYSE:LLY) gave a lot of updates about its weight loss offerings. Eli Lilly and Company (NYSE:LLY)’s management said:
“When you look overall, there are 236 obesity-related health complications. To name a few, obesity increases the risk of type 2 diabetes by 243%, coronary heart disease by 69%, hypertension by 113%, dyslipidemia by 74%.
The overall cost of obesity-rated complications and comorbidities are massive, accounting for $370 billion in direct medical cost, over $1 trillion in indirect annual costs in the U.S. People living with obesity or overweight drive 2.7 greater health care costs than normal-weight individuals. The global health stakeholders really need to be moved beyond the debate and really move to action on the AOM class. With tirzepatide’s potential to provide over 20% weight loss, it should provide great value for payers. We have a comprehensive real-world evidence plan and clinical plan to demonstrate tirzepatide’s value, including our MMO OUTCOMES trial. Based on the SELECT trial results, we can’t wait to see the results of tirzepatide/MMO study. We do believe that additional weight loss will matter.”
Read the complete earnings call here.
10. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 88
The Charles Schwab Corporation (NYSE:SCHW) shares have retreated amid a broader banking crisis earlier this year but analysts believe the stock might be a good buy on the dip. In August The Charles Schwab Corporation (NYSE:SCHW) said it was planning on layoffs and cost cuts to streamline its operations.
ClearBridge Large Cap Value Strategy made the following comment about The Charles Schwab Corporation (NYSE:SCHW) in its Q2 2023 investor letter:
“We have done so recently with The Charles Schwab Corporation (NYSE:SCHW), which got caught up in investor concerns over regional banks, due to the perception of an asset/liability mismatch on Schwab’s balance sheet. While there are similarities with regional banks, Schwab has minimal credit risk and far higher organic growth than traditional banks. In addition, Schwab’s mostly retail customers are not pulling money out of its ecosystem. On the contrary, the company continues to grow client assets at a mid-single-digit percentage rate despite the banking selloff. Concerned over interest rate risk, we trimmed our position last year and earlier this year. As the stock pulled back this spring, we added back aggressively. It remains an exceptionally strong franchise in terms of asset gathering and customer loyalty and runs a unique business model that continues to attract client assets; we are pleased to have the opportunity to express our differentiated view.”
9. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 88
With decades of consistent dividend increases and a diversified business model, Johnson & Johnson is one of the low risk stocks to buy in 2023.
8. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 89
Danaher Corporation (NYSE:DHR) is a defensive stock that many hedge funds and investors like. The company’s adjusted EPS in the second quarter came in at $2.05, beating estimates by $0.03. Revenue in the period came in at $7.16 billion, beating estimates by $40 million.
Baron Durable Advantage Fund made the following comment about Danaher Corporation (NYSE:DHR) in its Q2 2023 investor letter:
“Danaher Corporation (NYSE:DHR) is a life sciences and diagnostics company. For life sciences, Danaher supplies instruments for lab research, genomics services, and bioproduction tools. For the diagnostics business, Danaher offers instruments to run clinical tests in large core labs, hospitals, and pathology labs and at the point of care. Shares declined 4.7% during the quarter after the company cut its fiscal year 2023 guidance due to headwinds within its bioprocessing segment, as biopharmaceutical customers burned through existing inventory and smaller biotechnology firms faced funding constraints. We remain positive on Danaher’s long-term trajectory. Danaher benefits from a market-leading position and broad portfolio within bioprocessing, which addresses a biologics market that is growing by double digits, and which we expect to benefit in the near and medium term from a wave of biosimilars entering the market after key patents expire. Danaher has a collection of high-quality assets, with targets of high single-digit core revenue growth and double-digit EPS growth.”
7. Thermo Fisher Scientific Inc. (NYSE:TMO)
Number of Hedge Fund Holders: 103
Medical equipment company Thermo Fisher Scientific Inc. (NYSE:TMO) is a low risk stock that has a positive hedge fund sentiment. In the second quarter the company’s adjusted EPS came in at $5.15, missing estimates by $0.28. Revenue in quarter fell 2.6% year over year to $10.69 billion, missing estimates by $310 million.
Weitz Partners III Opportunity Fund made the following comment about Thermo Fisher Scientific Inc. (NYSE:TMO) in its second quarter 2023 investor letter:
“Portfolio activity this quarter included opportunistically initiating a position in life sciences tool and equipment maker Thermo Fisher Scientific Inc. (NYSE:TMO), a long-time holding of other Weitz portfolios, at an attractive valuation.”
6. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 109
Investing in Berkshire Hathaway Inc. (NYSE:BRK-B) is low risk since the conglomerate is diversified across a variety of sectors. Its diversification makes it a hedge fund or ETF of sort for beginner investors who are looking for low risk investments.
Berkshire Hathaway Inc. (NYSE:BRK-B)’s operating earnings in the second quarter jumped 6.6% year over year, driven by the insurance segment.
A total of 109 hedge funds tracked by Insider Monkey had stakes in Berkshire Hathaway Inc. (NYSE:BRK-B) as of the end of the second quarter.
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Disclosure: None. 17 Best Low Risk Investments in 2023 is originally published on Insider Monkey.
