In this article, we take a look at the 5 best diversified stocks to buy now. If you want to check out our detailed analysis on diversification strategy, go instead to 10 Best Diversified Stocks to Buy Now.
5. Danaher Corporation (NYSE:DHR)
Number of Sectors: 4
Number of Hedge Fund Holders: 87
Danaher Corporation is a globally diversified conglomerate encompassing four sectors including industrials, healthcare, consumer staples and utilities. The company’s business lines are mostly concentrated on diagnostics, environmental solutions and life sciences. In that regard, the conglomerate operates 28 companies working within the sub sectors.
Fundamentally, Danaher Corporation looks very good. The company has enough to cover its short-term obligations with a current ratio of 1.68. The debt to equity ratio of 0.51 also indicates that the company relies twice as much on equity than debt to run its operations. On April 22, Baird analyst Catherine Schulte lowered the price target on Danaher Corporation to $319 from $334 and kept an ‘Outperform’ rating on the shares.
When it comes to the hedge fund sentiment, here is what Cooper Investors Global Equities Fund had to say about Danaher Corporation in their 2022’s first quarter investor letter:
“This combination of attributes was not in favor during a quarter where the market rotated into larger, more traditional index heavyweights that, while growing more slowly and generating lower returns on capital, typically trade on lower headline multiples. In Healthcare for example, we saw portfolio holdings Danaher fall 10-15% in the quarter. Given the relative business quality and growth prospects for a life sciences capital allocator champion like Danaher versus a large diversified pharma company, we think this period of underperformance is likely more a blip than a trend.”
In the same quarter, Fisher Asset Management was the leading shareholder in Danaher Corp with equity worth $1 billion. Third Point followed with shares worth $730 million.
4. Johnson & Johnson (NYSE:JNJ)
Number of Sectors: 3
Number of Hedge Fund Holders: 83
Johnson & Johnson (NYSE:JNJ) is a premier healthcare company representing the sectors of healthcare, consumer discretionary and consumer staples. Within these sectors, the company manufactures and designs meditech products like surgical instruments, beauty products, self-care products. Johnson & Johnson (NYSE:JNJ) also researches and develops therapeutic treatments and pharmaceuticals. Lately, it was also involved in developing a vaccine for Covid-19 through its subsidiary Janssen Pharmaceuticals. The vaccine had a 66% efficacy in clinical trials according to CDC.
In the last quarter of 2021, 83 hedge funds were invested in Johnson & Johnson with the total stake in equity at $7.3 billion. The leading stakeholder in the last quarter was Fundsmith LLP with equity worth $1.2 billion. Coming in the first quarter of 2022, Arrowstreet Capital is the biggest investor in the company with the stake amounting to $1 billion.
Citi analyst Joanne Wuensch lowered the price target on Johnson & Johnson (NYSE:JNJ) to $205 from $210 while keeping a ‘Buy’ rating on the shares. The company’s SEC filings show it beat analyst expectations on Earnings per Share by $0.10 at $2.67 in the first quarter of 2022.
3. The Walt Disney Company (NYSE:DIS)
Number of Sectors: 2
Number of Hedge Fund Holders: 111
The Walt Disney Company (NYSE:DIS) is one of the biggest entertainment companies in the world. It represents communication and consumer discretionary sectors in the stock market and captures numerous segments within these sectors through its subsidiaries. The Walt Disney Company (NYSE:DIS) operates several subsidiaries in the entertainment, news, travel & leisure markets.
Prominent among its assets include Disneyland Resort, Marvel Studios, 20th Century Studios, Pixar, ABC Entertainment Group, 73% equity in National Geographic Partners, 80% equity in ESPN, Disneyland Store Worldwide, Disney Cruise Line and Fox Networks Group. Through these assets, the company produces entertainment, educational, news and sports content, merchandise for retail as well as travel & leisure opportunities.
The Walt Disney Company (NYSE:DIS) is one of the hedge funds’ favorites given that 111 hedge funds were bullish on the company in the last quarter of 2021 with a total stake of $6.9 billion with over 70 funds in the first quarter of 2022. In the Q1 of 2022, Matrix Capital Management is the leading stakeholder in the company with equity worth over $868 million.
ClearBridge Investments published its “Sustainability Leaders Strategy” fourth quarter investor letter in 2021 and this is what the letter had to say about the entertainment giant.
“The communication services sector was a weak spot in both the benchmark and the portfolio in the fourth quarter. Disney announced lower than expected streaming subscriber growth to the company’s Disney+ offering, attributable primarily to the content release schedule. Disney has been ramping up content spending given strong global response to Disney+, although production capability was temporarily impacted by COVID-19. We still believe Disney is on track to reach the subscriber outlook outlined at its December 2020 analyst day, driven by a very robust slate of content releases, particularly in the 2022–2024 time period.”
2. Alphabet Inc. (NASDAQ:GOOG)
Number of Sectors: 4
Number of Hedge Fund Holders: 158
Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, is mainly an information technology company but represents three other sectors other than information technology, namely, consumer discretionary, consumer staples and healthcare.
Alphabet Inc. (NASDAQ:GOOG) owns several assets in the information technology sector. The prominent ones include Google search engine, Google Ads, Google Cloud, YouTube and DeepMind AI lab. Its consumer segments include Google Nest and Google Fiber, with the former providing smart thermostat and smoke detector solutions and the latter providing broadband services currently in 19 cities.
On the healthcare front, Alphabet Inc. (NASDAQ:GOOG) operates Verily, a subsidiary researching and developing healthcare solutions like baseline monitors, bioelectronic medicines, immune profilers etc. It is also one of the most profitable subsidiaries of Alphabet Inc. (NASDAQ:GOOG) apart from Google search engine.
When it comes to company fundamentals, Alphabet is in a relatively safe spot. Its current ratio is 2.87 with an impressive debt to equity ratio of 0.06 and a return on equity of 30% in the first quarter of 2022. On April 27, Wells Fargo analyst Brian Fitzgerald lowered the price target on Alphabet Inc. (NASDAQ:GOOG) to $3,400 from $3,600 to reflect declining sector valuations, but kept an ‘Overweight’ rating on the stock after the company’s Q1, 2022 SEC filings.
A segment of Farrer Wealth Advisors’ investor letter of Q1 in 2022 was devoted to Alphabet Inc. (NASDAQ:GOOG). The Following is what it had to say:
“Alphabet: We won’t waste much time trying to explain to our clients why Alphabet is such a phenomenal business, we believe that is quite self-evident. The better explanation is why we never bought Alphabet before. The reason was a personal bias we held based on three beliefs (which we now believe to be incorrect)
Growth in YouTube would stall as the increased ad-load would turn-off viewers (the double ad-load at the beginning of videos for example). Consumers will focus on discovery rather than search to purchase new items. For example – using Instagram/TikTok to decide what new clothes to buy instead of ‘googling’ for clothes. Other Bets: In general, we felt that capital spent on “Other Bets” has been a bit wasteful with the segment earning just around $3.1bn in revenue versus nearly $21bn in operating losses over the last five years…” (Click here to see the full text)
1. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Sectors: 11
Number of Hedge Fund Holders: 108
Berkshire Hathaway Inc. (NYSE:BRK-B) is the most diversified global conglomerate with 62 fully owned operational subsidiaries representing 10 stock market sectors and significant ownership of equity in additional companies representing all 11 market sectors.
The fully owned subsidiaries by Berkshire Hathaway Inc. (NYSE:BRK-B) cover sectors including industrials, materials, utilities, finance, healthcare, communication, consumer discretionary, consumer staples, energy and real estate with the exception of information technology. All 11 sectors however, are covered when you consider Berkshire Hathaway’s 5.6% equity ownership in Apple. The grade of diversification reflects Warren Buffett’s own philosophy of diversification.
The hedge fund sentiment for Berkshire Hathaway is overwhelmingly positive as evident from the number of hedge fund holders invested in the company in the last quarter of 2021. In the first quarter of 2022, we have Bill & Melinda Gates Foundation Trust as the leading holder of equity in Berkshire Hathaway with shares worth over $10 billion which makes up 51% of their investment portfolio. Gardner Russo & Gardner follows with a stake worth $1.48 billion.
You can also take a peek at 5 Companies on Investors’ Radar After Releasing Their Quarterly Results and 5 Best Sporting Goods Stocks To Invest In
