5 Best Stocks To Invest In For Financial Stability

In this article, we discuss the 5 best stocks to invest in for financial stability. If you want to read about some more stocks in this selection, go directly to the 10 Best Stocks To Invest In For Financial Stability.

5. PepsiCo, Inc. (NASDAQ:PEP)

Number of Hedge Fund Holders: 70

PepsiCo, Inc. (NASDAQ:PEP) is an American multinational food, snack, and beverage corporation headquartered in Harrison, New York, in the hamlet of Purchase. A household name when it comes to financial safety, the company expects its North America beverage and convenient foods businesses to remain resilient and its international markets to perform well despite greater foreign exchange volatility in many markets.

Earlier this December, Argus analyst John Staszak raised his price target on PepsiCo, Inc. (NASDAQ:PEP) to $206 from $195 and kept a Buy rating on the shares. According to the analyst, the company is well-managed, offers a valuable brand portfolio, and continues to generate solid growth amid weak demand for many consumer staples.

PepsiCo, Inc. (NASDAQ:PEP) is a popular dividend stock among hedge funds, as 70 funds in Insider Monkey’s database owned stakes in the company in Q4 2022. These stakes are valued at over $4.42 billion collectively.

Lindsell Train mentioned PepsiCo, Inc. (NASDAQ:PEP) in its Q3 2022 investor letter. Here is what the firm has to say:

“At this point, it may help to give a further example of these self-reinforcing moats to illustrate the idea, drawing from the consumer franchises side of our portfolio. In our view, strong consumer brands can similarly exhibit Lindycompatible anti-ageing properties. Consider, that the longer a company invests in its brands through advertising and R&D, the stronger and more resonant they may get. When successful, a self-sustaining feedback loop is established, whereby it becomes ever harder to recreate a heritage-rich brand from scratch, raising barriers to entry, and proportionately increasing its likely lifespan. There are plenty of long-lived portfolio franchises I could reference here, but I’ve gone with PepsiCo (NYSE:PEP); partly because we have good time-series stats on it (beware data bias!) but also, as I hope will become evident, because Pepsi over its 129 years has succeeded in creating some wonderfully deep moats.

With Pepsi Cola you get the flagship soft drinks brand, which is both global and generational, but you also get the Frito-Lay salty snacks portfolio assembled alongside it, claiming nearly 40% of the global market. That’s ten-times greater than the nearest competitor and likely higher than the next 65 competitors combined. These are exceptionally strong global bands with market shares to match; the long-term empirical result being Pepsi’s dividend record which over the past 66 years (as far back as we’ve been able to go) has compounded at an annualised rate of 10%. Pepsi is no ‘in at the ground floor’ start-up today, but it wasn’t six decades ago either. Early growth investor Philip Fisher put it well when in 1958 (two years into Pepsi’s current winning streak) he wrote of “companies which in spite of outstanding prospects of major further growth are so financially strong, with roots going so deep into the economic soil, that they qualify under the general classification of ‘institutional stocks’”. PepsiCo fits this description well…” (Click here to see the full text)

4. The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 74

The Procter & Gamble Company (NYSE:PG) is an American multinational corporation that operates through five segments – Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. The FMCG giant has remained consistently profitable for decades and has raised its dividends for 66 years consecutively.

This past December, Deutsche Bank analyst Steve Powers raised the price target on The Procter & Gamble Company (NYSE:PG) to $162 from $156 and kept a Buy rating on the shares. Although the analyst stated that data points are “choppy,” he believes that there have been several positive developments for the markets over the past weeks, including lower-than-expected inflation in November, the Federal Reserve signaling a move to a more deliberate pace of hikes, and signs of progress away from China’s Zero COVID policy.

According to Insider Monkey’s data, 74 hedge funds were bullish on The Procter & Gamble Company (NYSE:PG) at the end of December 2022, compared to 69 funds in the prior quarter. Ray Dalio’s Bridgewater Associates is a prominent stakeholder of the company, with 4.99 million shares as of the fourth quarter.

Rowan Street Capital mentioned The Procter & Gamble Company (NYSE:PG) in its Q4 2022 investor letter. Here is what the firm has to say:

“Let’s look at The Procter & Gamble Company (NYSE:PG). Dividend yield is 2.4%. Earnings are forecasted to grow at 5.9%, and its current earnings multiple is at 25x. Now, lets say over the next 3-5 years the market loses interest in the “safe”, mature companies that grow at anemic rates and gets an appetite for growth again. It’s very unlikely that Mr. Market will be paying 25x for 5.9% earnings growth. Lets assume that multiple declines to the market average of 18x — that would be ~6.9% drag per year on the total expected return over next 3-5 years. If we get 2.4% (dividend) + 5.9% (earnings growth) – 6.9% (decrease in earnings multiple) = 1.4% (annual return we can expect on average from this stock).”

3. Johnson & Johnson (NYSE:JNJ)

Number of Hedge Fund Holders: 84

Johnson & Johnson (NYSE:JNJ) is an American multinational corporation founded in 1886 that develops medical devices, pharmaceuticals, and consumer packaged goods. The company has been raising its dividend payouts for 61 years and the stock has a 5-year dividend CAGR of 6.03%.

Earlier this December, Citi analyst Joanne Wuensch raised her price target on Johnson & Johnson (NYSE:JNJ) to $205 from $198 and maintained a Buy rating on the shares. The analyst states that “many headwinds remain” for the North America medical supplies and technology group in 2023, but these should ease in the second half of next year, alleviating operating margin pressures

At the end of Q4 2022, 84 hedge funds in Insider Monkey’s database owned stakes in Johnson & Johnson (NYSE:JNJ), down from 85 in the previous quarter. The collective value of these stakes is over $5.57 billion. Among these hedge funds, John Overdeck and David Siegel’s Two Sigma Advisors is a prominent stakeholder in Q4.

Here’s what Distillate Capital Partners LLC said about Johnson & Johnson (NYSE:JNJ) in its Q2 2022 investor letter:

“Johnson & Johnson was among the 2 largest trims at around 1% each. Each stock was up 1% in the quarter compared to the 16% price decline for the S&P 500 and the positions were reduced as the valuations became somewhat less appealing, though still attractive enough to warrant inclusion.”

2. Intuit Inc. (NASDAQ:INTU)

Number of Hedge Fund Holders: 92

Intuit Inc. (NASDAQ:INTU) is an American software company specializing in business and financial management software. The firm provides its customers with a platform that allows them to keep up to date with compliance requirements and manage their financial operations.

On February 24, BMO Capital analyst Daniel Jester raised the price target on Intuit Inc. (NASDAQ:INTU) to $462 from $448 and maintained an Outperform rating on the shares. The company’s Q2 results were “solid” despite a “tough backdrop” as it benefited from an early tax season thus far. The firm added that the strength of Intuit’s core platform and the stock’s reasonably attractive valuation causes him to maintain a favorable view on the company.

As of the end of the fourth quarter of 2022, 92 hedge funds reported owning stakes in Intuit Inc. (NASDAQ:INTU), up from 86 hedge funds in the previous quarter. This shows that hedge fund sentiment for Intuit Inc. (NASDAQ:INTU) is positive. Henry Ellenbogen’s Durable Capital Partners is the leading shareholder for the quarter.

Here is what Fundsmith had to say about Intuit Inc. (NASDAQ:INTU) in its 2022 yearly investor letter:

“Take the example of Microsoft and Intuit Inc. (NASDAQ:INTU). Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.

Many investors and analysts, including us, look to cash flow metrics more than accrual profits. Unfortunately, share-based compensation may cause distortions in cash flow metrics as well, even when they follow GAAP. Under GAAP, share-based compensation is added back in the cash flow from operating activities, which in turn is used in the computation of free cash flow.  ..” (Click here to read the full text)

1. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Hedge Fund Holders: 110

UnitedHealth Group Incorporated (NYSE:UNH) is a for-profit American multinational managed healthcare and insurance company based in Minnetonka, Minnesota. It operates through four segments – UnitedHealthcare, Optum Health, Optum Insight, and Optum Rx. Arguably one of the stable stocks, the company announced guidance for 2023, with revenue forecasted to be between $357 billion to $360 billion.

Earlier this January, Loop Capital analyst Joseph France raised the price target on UnitedHealth Group Incorporated (NYSE:UNH) to $590 from $575 and kept a Buy rating on the shares. The analyst cited the company’s “strong” Q4 results and 2023 outlook. While the management’s guidance is unchanged, France believes it to be “no less remarkable” given last year’s tough comparison.

According to Insider Monkey’s fourth quarter database, 110 hedge funds were long UnitedHealth Group Incorporated (NYSE:UNH), the same as the last quarter. Rajiv Jain’s GQG Partners is the leading position holder in the company, with 3.96 million shares worth $2.1 billion.

Here is what Stewart Asset Management has to say about UnitedHealth Group Incorporated (NYSE:UNH) in its Q3 2022 investor letter:

“Looking at the Great Recession which began at year-end 2007 and lasted to mid-year 2009 is helpful too. Our four largest current holdings in the portfolio weathered that period well. UnitedHealth’s (NYSE:UNH) earnings were resilient. While it reported modestly down earnings in 2008, its earnings rebounded quickly to record highs in 2010 and the shares responded strongly in anticipation of this.”

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