In this article, we will take a look at the 12 best low risk stocks to buy in 2023.
It is imperative to understand the risk appetite before making any major investment decisions. Risk appetite, simply defined as the degree of risk an investor is willing to be exposed to, to achieve certain financial goals, helps navigate the vast ocean of investment options. Investors with higher risk appetites typically opt for riskier investments with the goal of achieving higher rewards in relatively shorter time periods. On the other hand, investors with low risk appetites try to get stable returns at low risk to their principal amounts.
In an article recently published on Insider Monkey, we discussed the best high risk stocks to buy now. High risk stocks for the list were selected on the basis of their beta values, among other factors, based on the hypothesis that high beta stocks have higher chances of outperforming the market in times of market recovery. Over the last 3 years, the Invesco S&P 500® High Beta ETF which tracks the top 100 stocks from S&P 500 index with highest beta, has performed significantly better than the S&P 500 Index, evident from the total return generated by the fund which amounts to 20.15% compared to a measly 10.15% for the S&P 500 Index.
You can read more about this here: 12 Best High Beta Stocks to Buy Now
Our list of 12 best low risk stocks to buy in 2023 has also considered other factors, in addition to the beta values, of the selected stocks that can suggest positive prospects for these stocks in the future. These stocks have strong fundamentals as well as benefit from positive analyst and hedge fund sentiments. The list is heavily dominated by companies from the healthcare sector, including medical devices companies as well as drug manufacturers. Notable names on the list include Merck & Co., Inc., Pfizer Inc. (NYSE:PFE), Abbott Laboratories (NYSE:ABT), and NextEra Energy, Inc. (NYSE:NEE), among others.
There are several studies that show that investing in low volatile and low risk stocks can allow the investor to beat the market. This follows the old adage ‘slow and steady wins the race’. A research report by AllianceBernstein says that an active investing approach which focuses on low volatility and strong fundamentals actually end up beating the market and performs better than passive investing approach that only takes in low volatility into account.
You can read more about this here: 14 Best Low Risk High Growth Stocks to Buy Now
Methodology
We shortlisted stocks with a beta value of less than 1.0, strong fundamentals, positive analyst ratings, and positive analyst price targets, as of November 8. We further narrowed down our selection by removing midcap or lower companies and stocks without stable and resilient dividend payout programs. The remaining stocks were ranked based on Insider Monkey’s database of elite hedge funds, tracked as of the second quarter of 2023. The top 12 stocks based on hedge fund sentiment, ranked in the ascending order of hedge fund shareholders, have made onto our list of 12 best low risk stocks to buy in 2023.
12 Best Low Risk Stocks to Buy in 2023
12. Agnico Eagle Mines Limited (NYSE:AEM)
Number of Hedge Fund Holders: 42
Beta Value: 0.88
Agnico Eagle Mines Limited (NYSE:AEM) is a gold mining company based in Toronto, Ontario. With a history dating back to 1957, Agnico Eagle Mines Limited operates mines in Canada, Australia, Finland, and Mexico.
On October 25, Agnico Eagle Mines Limited released its financial results for Q3 2023. Its total revenues increased by 13% y-o-y to $1.6 billion, while net income surged by 167% y-o-y to $179 million. Agnico Eagle Mines Limited declared a quarterly cash dividend of $0.40 per share. The mining company has declared cash dividends every year since 1983.
As of Q2 2023, 42 out of the 910 hedge funds tracked by Insider Monkey were bullish on Agnico Eagle Mines Limited and held its shares valued at $718 million. Jean-Marie Eveillard’s First Eagle Investment Management was the largest hedge fund shareholder holding 6.3 million shares valued at $313 million.
11. Air Products & Chemicals, Inc. (NYSE:APD)
Number of Hedge Fund Holders: 43
Beta Value: 0.84
Lehigh Valley, Pennsylvania-based Air Products & Chemicals, Inc. is a leading industrial gases company with a focus on providing essential industrial gases, related equipment, and applications expertise to customers in dozens of industries. It also develops, engineers, builds, owns, and operates some of the largest industrial gas and carbon-capture projects.
On May 22, Air Products & Chemicals, Inc. announced that NEOM Green Hydrogen Company, an equal joint venture between ACWA Power, Air Products, and NEOM, has achieved financial close on the world’s largest green hydrogen production facility at a total investment value of $8.4 billion. The project, located at Oxagon, in Saudi Arabia’s region of NEOM, is being financed with $6.1 billion non-recourse financing from 23 local, regional, and international banks and financial institutions.
Air Products & Chemicals, Inc. has entered into an exclusive 30-year off-take agreement for all the produced green ammonia. The company is also the nominated contractor and system integrator for the entire facility.
Air Products & Chemicals, Inc. has steadily grown dividends over the course of its history, with more than 40 consecutive years of dividend increases. The latest increase came in January this year, with an 8% increase in quarterly dividends to $1.75 per common share.
10. Lamb Weston Holdings, Inc. (NYSE:LW)
Number of Hedge Fund Holders: 47
Beta Value: 0.65
Eagle, Idaho-based, Lamb Weston Holdings, Inc. (NYSE:LW) is a leading supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers around the world. Its products are sold in more than 100 countries worldwide.
On October 5, Lamb Weston Holdings, Inc. released the financial results for the quarter ended August 27. Its revenue increased by 48% y-o-y to $1.7 billion while net income increased by 1% y-o-y to $235 million. At $1.63, the normalized EPS for the quarter surpassed the consensus estimates by a whopping $0.55.
As of June 30, Lamb Weston Holdings, Inc. shares featured in the portfolios of 47 of the 910 hedge funds tracked by Insider Monkey with the total value of shares held by these hedge funds amounting to $2.4 billion. Sharlyn C. Heslam’s Stockbridge Partners was at the top of this list with ownership of 3.0 million shares valued at $345 million.
9. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 54
Beta Value: 0.80
Stamford, Connecticut-based Philip Morris International Inc. (NYSE:PM) is a leading international tobacco company with a current product portfolio primarily consisting of cigarettes and smoke-free products. Its products are sold in more than 180 markets around the world.
On October 19, Philip Morris International Inc. released the financial results for the third quarter of 2023. Its net revenues increased by 14% y-o-y to $9.1 billion, while it generated a net income of $2.2 billion. The normalized EPS for the quarter was recorded at $1.67, which exceeded the consensus estimates by $0.06.
Philip Morris International Inc. has a long history of regular dividend payments with 16 years of consecutive dividend increases. On September 13, the Board of Directors of the company increased the regular quarterly dividend by 2.4% to $1.30 per share. The shares of the company currently has a dividend yield of 5.76% based on the share price on November 8.
8. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
Beta Value: 0.53
Juno Beach, Florida-based NextEra Energy, Inc., is a leading electric power and energy infrastructure company with operations in US and Canada. It has two major business segments: FPL, the largest electric utility company in Florida focused on generation, transmission and distribution of electricity to more than 5.8 million customer accounts; and NEER, one of the largest wholesale generators of electric power in the US with 24.1 GW of net generating capacity.
NextEra Energy, Inc. has steadily grown dividends over the course of its history. The latest increase came in February 2023, with a 10% increase in regular quarterly dividends to $0.4675 per share. The company intends to further increase its dividends by 10% annually, compared to its 2022 dividend, at least through 2024.
On October 25, Morgan Stanley analyst David Arcaro maintained an ‘Overweight’ rating for NextEra Energy, Inc. shares and lowered the target price from $91 to $79. The target price represents a potential upside of 38.99% based on the share price on November 8.
As of Q2 2023, 59 hedge funds tracked by Insider Monkey held shares of NextEra Energy, Inc.. Ken Fisher’s Fisher Asset Management was its largest hedge fund shareholder with ownership of 9.7 million shares valued at $717 million.
7. Abbott Laboratories (NYSE:ABT)
Number of Hedge Fund Holders: 62
Beta Value: 0.67
Abbott Laboratories is a leading global healthcare company with a portfolio of products and services that spans healthcare, diagnostics, medical devices, nutritional, and branded generic medicines.
On September 22, Abbott Laboratories announced the acquisition of Bigfoot Biomedical, a leader in developing insulin management systems, as part of the company’s efforts to develop connected solutions for making diabetes management even more personal and precise. The terms of the transaction were not disclosed.
On October 19, Wells Fargo analyst Lawrence Biegelsen lowered the price target for Abbott Laboratories shares to $116 from $136 and maintained a ‘Buy’ rating. This followed the Q3 earnings release by the company, which managed to exceed the consensus estimates for both the revenue as well as normalized EPS.
As of Q2 2023, 62 of the 910 hedge funds tracked by Insider Monkey owned shares of Abbott Laboratories. Its leading hedge fund shareholder was Ric Dillon’s Diamond Hill Capital with ownership of 5.1 million shares valued at $553 million.
6. Medtronic plc (NYSE:MDT)
Number of Hedge Fund Holders: 63
Beta Value: 0.72
Based in Dublin, Ireland, Medtronic plc (NYSE:MDT) is a leading healthcare technology company with a focus on providing technologies and therapies including cardiac devices, surgical robotics, insulin pumps, surgical tools, and patient monitoring systems, among others.
Medtronic plc (NYSE:MDT) is a part of the S&P 500 Dividend Aristocrats and has increased its dividend per share amounts for 46 consecutive years. The company currently pays a quarterly cash dividend of $0.69 which represents a dividend per share CAGR of 9% during the last 10 years.
On August 23, Mizuho analyst Anthony Petrone raised the price target on Medtronic plc (NYSE:MDT) shares to $100 from $95 and retained a ‘Buy’ rating on the shares. The target price represents a potential upside of 39.96% based on the share price on November 8.
According to the Insider Monkey data tracking 910 leading hedge funds, 63 hedge funds were long Medtronic plc (NYSE:MDT) as of Q2 2023, holding shares with total value of $1.9 billion. Its largest shareholder was Arrowstreet Capital with ownership of 5.8 million shares valued at $507 million.
5. Zoetis Inc. (NYSE:ZTS)
Number of Hedge Fund Holders: 65
Beta Value: 0.83
Parsippany, New Jersey-based Zoetis Inc. (NYSE:ZTS) is a leading animal health company with a portfolio and pipeline of medicines, vaccines, diagnostics, and technologies offered in over 100 countries. Formerly a subsidiary of Pfizer Inc., the company became independent through a spinoff in 2013.
Zoetis Inc. has been continuously making efforts to increase its product franchises in major markets. During the third quarter, the company received approvals for Simparica Trio, the company’s triple combination oral parasiticide for dogs, in Australia and Canada. The company launched Librela (bedinvetmab injection for osteoarthritis pain) and Apoquel Chewable (oclacitinib chewable tablet) in the U.S. in October.
Zoetis Inc. has paid regular dividends since its spinoff from Pfizer Inc. with consecutive dividend increases for several years. The board of directors of the company increased the dividend rate by 15% in December 2022 to bring the quarterly dividend payment to $0.375. Its dividends have grown at a CAGR of 22.63% during the last 10 years.
4. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 66
Beta Value: 0.56
CVS Health Corporation (NYSE:CVS) is a health solutions company based in Woonsocket, Rhode Island and a history dating back to 1963. It has more than 9,900 retail locations, nearly 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 110 million plan members, and more than 68,000 retail network pharmacies under its pharmacy services.
On November 1, CVS Health Corporation released its financial results for Q3 2023. Its revenues increased by 11% y-o-y to $89.8 billion, while it generated a net income of $2.3 billion, compared to a net loss of $3.4 billion last year. CVS Health Corporation also declared a dividend of $0.605 per share for the quarter.
Following the earnings release, Morgan Stanley analyst Erin Wright lowered the price target on CVS Health Corporation shares to $100 from $110 but maintained an ‘Overweight’ rating. The price target represents a potential upside of 43.78% based on the share price on November 8.
This is what Harris Associates, advisor to Oakmark Funds, had to say about CVS Health Corporation in Oakmark Fund’s Q3 2023 investor letter:
“Managed care and pharmacy benefits management have proven to be good businesses over time, characterized by healthy underlying growth and excellent free cash flow generation. CVS has underperformed the S&P 500 by more than 40 percentage points over the past 12 months, impacted by a cloud of company specific and legislative concerns. While we are not dismissive of these potential risks and headwinds, we believe the market has become overly pessimistic. This created an attractive opportunity to invest in what we view as a durable, competitively advantaged and well-managed enterprise at a high-single-digit multiple of earnings.”
3. Bristol-Myers Squibb Company (NYSE:BMY)
Number of Hedge Fund Holders: 66
Beta Value: 0.37
Based in New Jersey, Bristol-Myers Squibb Company (NYSE:BMY) is a biotechnology company focused on the discovery, development, and delivery of innovative medicines for serious diseases across oncology, hematology, immunology, cardiovascular disease, and fibrosis.
On October 8, Bristol-Myers Squibb Company announced that it had entered into a definitive merger agreement to acquire Mirati Therapeutics, Inc. (NASDAQ:MRTX), in an all-cash transaction which values the target company at $4.8 billion. The acquisition is expected to strengthen and diversify the oncology portfolio of the company.
After a quarterly performance report released on October 26 which showed an in-line topline and an adjusted EPS of $2.00 which beat consensus by $0.23, Goldman Sachs analyst Chris Shibutani lowered the price target on Bristol-Myers Squibb Company shares to $69 from $81s, while maintaining a ‘Buy’ rating for the shares.
2. Pfizer Inc. (NYSE:PFE)
Number of Hedge Fund Holders: 73
Beta Value: 0.61
Founded in 1849, New York-based, Pfizer Inc. is a leading research-based biopharmaceutical company. Its product portfolio and pipeline includes several pharmaceutical therapies for primary care, specialty care, and oncology, including mRNA-based COVID-19 vaccine – COMIRNATY, and covid-19 treatment – PAXLOVID.
On October 31, Pfizer Inc. released its financial results for the third quarter of 2023. Its revenues declined by 42% y-o-y to $13.2 billion, while it reported a net loss of $2.4 billion. The drastic drop resulted from a decline in the company’s revenue from Comirnaty and Paxlovid. On the other hand, the revenues for non-covid products of the company increased 10% operationally.
As of Q2 2023, 73 of the 910 hedge funds tracked by Insider Monkey were long Pfizer Inc., holding shares worth $1.5 billion. Prominent hedge funds such as Citadel Investment Group, Renaissance Technologies, and Diamond Hill Capital, among others, held the most shares of the company.
1. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 78
Beta Value: 0.37
Merck & Co., Inc. is a biopharmaceutical company with a focus on delivering solutions for oncology, vaccines, infectious diseases, Cardio-metabolic disorders, and Discovery & development. Its product pipeline comprises 83 programs in Phase 2, 30 programs in Phase 3, and 3 programs Under Review, including COVID19 vaccines.
On November 9, Deutsche Bank analyst James Shin initiated coverage of Merck & Co., Inc. shares with a target price of $115 with a ‘Buy’ rating for the stock. Earlier in November, the company announced that it had received FDA approval for KEYTRUDA, in combination with gemcitabine and cisplatin, for the treatment of patients with locally advanced unresectable or metastatic biliary tract cancer.
Merck & Co., Inc. is the best low risk stock to buy in 2023 based on hedge fund sentiment and low beta value according to the methodology used by us for preparing this list. Its shares were held by 78 hedge funds with total value of $2.7 billion, as of June 30. Cliff Asness’ AQR Capital Management was the largest hedge fund shareholder with ownership of 2.9 million shares valued at $332 million.
You may also like to read Top 11 Extreme Value Stocks To Buy and 11 Best S&P 500 Stocks To Buy According to Ray Dalio’s Bridgewater Associates
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This article is originally published at Insider Monkey.
