The market has shown strong performance overall, with the S&P 500 up nearly 26% year to date. However, in the past thirty days, it has experienced a slight decline of 1%. A notable sell-off occurred between December 17 and 19, which contributed to some volatility. Since then, the market has been fluctuating, with prices rising and falling as investors continue to navigate the uncertainty.
Optimism for High Growth Despite High Rates and Debt
In a CNBC interview, Alan Rechtschaffen, Senior Portfolio Manager at UBS Global Wealth, stressed that he maintains a positive outlook on market growth, emphasizing that the current market sell-off is driven by a lack of faith rather than fundamental issues. He noted that the positivity surrounding the market will improve as President Trump’s policies take effect.
Rechtschaffen acknowledged concerns over high interest rates and high debt levels but argued that the Fed’s goal of lowering rates, combined with efforts to reduce spending and increase efficiency, will lead to high growth. He is particularly optimistic about sectors like technology, utilities, and financials, which he believes will benefit from a focus on new energy sources and deregulation. Although valuations are higher than usual, Rechtschaffen believes that with the right efficiencies in place, the market could see a 10% rise, offering opportunities for investors willing to take risks in this promising period.
Fed’s Shifting Rate Path Sparks Concerns in the Market
The path of rate cuts in 2025 is creating uncertainty for Wall Street as the Fed’s outlook shifted last week, now forecasting two cuts instead of four. The possibility of a rate hike has not been ruled out if inflation re-accelerates. San Francisco Fed President Mary Daly told Yahoo Finance’s Brian Sozzi that adjustments could be made depending on data, but she doesn’t see inflationary pressures at the moment. However, she isn’t ruling out anything.
On Yahoo Finance’s Catalysts, Max Wasserman of Miramar Capital said that he believes the economy is stronger than anticipated, with GDP growth around 3% and inflation at 2.7%, which reduces the need for aggressive rate cuts. He also suggested that a rate hike could become more likely in the second half of 2025 if inflation remains persistent.
Wasserman advised a more cautious approach in portfolio management, favoring de-risking strategies, such as taking profits from top-performing stocks and focusing on dividend stocks. He also recommended staying short-term on bonds, as rising interest rates could pressure longer-duration bonds. Additionally, he expressed concerns about potential inflationary policies from the incoming administration, such as changes to immigration or tariffs, which could further strain the economy and complicate the Fed’s path forward.
8 Best Low Risk Stocks To Buy
Our Methodology
For this article, we used the Yahoo Finance stocks screener to identify 30 companies with the largest market cap and a 5-year beta (monthly) between 0.2 and 0.8. Next, we narrowed our list to 8 stocks most widely held by institutional investors. The 8 best low-risk stocks to buy are listed in ascending order of their hedge fund sentiment.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Low Volatility Stocks To Buy Right Now
8. Philip Morris International Inc. (NYSE:PM)
5-year Beta (Monthly): 0.56
Number of Hedge Fund Holders: 75
Philip Morris International Inc. (NYSE:PM) is a leading tobacco company that has significantly diversified its portfolio beyond traditional cigarettes. Through internal investments and strategic acquisitions, the company has expanded into next-generation products such as heat-not-burn tobacco, electronic vapor, and nicotine pouches. A key move in this direction was the 2022 acquisition of Swedish Match, which brought the Zyn brand under its ownership.
Additionally, Philip Morris (NYSE:PM) gained the rights to sell IQOS products in the U.S. from Altria, positioning itself well in the rapidly growing market for next-generation tobacco products. This shift aligns with the broader growth potential of the sector, as the next-generation tobacco products market is projected to expand at a compound annual growth rate of 10% from 2021 to 2028, according to Data Bridge Market Research.
IQOS, which was launched in Japan over a decade ago, has become a significant revenue driver for Philip Morris (NYSE:PM). The product now generates more than $10 billion in annual net revenues for the company and is available in over 70 markets worldwide, with 30.8 million adult users. Furthermore, in the third quarter, the company’s smoke-free business contributed 38% of total revenue and 40% of gross profit, with its share continuing to grow.
7. Johnson & Johnson (NYSE:JNJ)
5-year Beta (Monthly): 0.52
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) is a leading healthcare company engaged in the research, development, manufacturing, and sale of a broad range of healthcare products. While the company continues to navigate ongoing talc-related litigation, which has been an issue for several years, the outcome of these cases remains uncertain.
Despite these challenges, Johnson & Johnson (NYSE:JNJ) has leveraged its strong financial position and excess free cash flow to pursue acquisitions. This year, the company allocated $18 billion to acquire Shockwave Medical, V-Wave, and several drug development companies. These acquisitions have strengthened its MedTech and Innovative Medicines platforms, complementing its ongoing investments in research and development.
In the third quarter, Johnson & Johnson (NYSE:JNJ) posted its second consecutive quarter of sales exceeding $14 billion, with 11 key brands showing double-digit growth. In the MedTech space, the company has secured a leadership position in four of the fastest-growing cardiovascular intervention markets.
6. Merck & Co., Inc. (NYSE:MRK)
5-year Beta (Monthly): 0.41
Number of Hedge Fund Holders: 86
Merck & Co., Inc. (NYSE:MRK) is a prominent global healthcare company that focuses on the research, development, and commercialization of a wide range of pharmaceutical products. With a strong product pipeline, the company is particularly well-known for Keytruda, a leading immuno-oncology treatment that has achieved significant success in treating various cancers.
Keytruda remains a key driver of the company’s growth, although the U.S. patent exclusivity for the drug is set to expire in 2028. To address this challenge, Merck (NYSE:MRK) is working on a subcutaneous formulation of Keytruda, aimed at targeting an estimated 50% of the patient population projected for the drug by 2028.
In addition to its efforts with Keytruda, it is taking proactive steps to strengthen its pipeline. Merck (NYSE:MRK) recently partnered with LaNova Medicines, a privately held Chinese biopharma firm, to develop LM-299, a bispecific antibody. LM-299 is an experimental drug that targets two important proteins: PD-1 and VEGF. By blocking these proteins, it aims to boost the immune system and prevent the growth of new blood vessels, which can support cancer growth.
Furthermore, on December 16, the company announced a licensing agreement with Hansoh Pharma, a Chinese biopharma company. Under the terms of this deal, it has acquired exclusive worldwide rights to develop and commercialize HS-10535, a preclinical-stage candidate with potential applications in treating cardiometabolic disorders such as obesity and possibly type 2 diabetes.
5. Walmart Inc. (NYSE:WMT)
5-year Beta (Monthly): 0.52
Number of Hedge Fund Holders: 88
Walmart Inc. (NYSE:WMT) is a major player in the retail industry, known for offering a broad range of products that meet the varied needs of consumers. Despite the challenges posed by an inflationary environment, the company has performed well, thanks in large part to its strength in the grocery sector and its ability to take advantage of economies of scale.
As its business model evolves, the company has been able to improve its margins by diversifying its offerings. In the third quarter, the company saw its global e-commerce losses continue to narrow, with notable progress in Walmart U.S. The company’s improved business mix contributed to this positive trend, and there has been significant progress in enhancing core e-commerce margins.
Over the past year, Walmart (NYSE:WMT) stock has experienced a remarkable increase, rising by more than 75%. A key factor behind this growth has been the company’s focus on expanding its digital capabilities. E-commerce, which is becoming an increasingly crucial part of Walmart’s business, has allowed the company to tap into higher-margin opportunities. In the third quarter, the company saw a 27% increase in e-commerce sales, further supporting its ongoing success.
Walmart (NYSE:WMT) has also made notable progress in enhancing its delivery services, giving it a competitive edge. In the third quarter, U.S. delivery sales outpaced in-store sales growth. Store-fulfilled deliveries rose nearly 50%, surpassing a $2.5 billion monthly run rate. The company has now achieved 12 consecutive months with deliveries exceeding $2 billion.
4. Thermo Fisher Scientific Inc. (NYSE:TMO)
5-year Beta (Monthly): 0.79
Number of Hedge Fund Holders: 98
Thermo Fisher Scientific Inc. (NYSE:TMO) provides a wide range of products and services for life sciences, diagnostics, and laboratory research. It offers tools for biological research, drug production, disease diagnosis, and clinical testing. Scotiabank maintains a positive long-term outlook for the life science tools sector, considering it “bullish,” and regards three stocks, including Thermo Fisher, as “some of the highest-quality stocks to own.”
However, in the short term, the firm adopts a more neutral stance on these large-cap stocks due to ongoing uncertainties in key markets, particularly biopharma, and China, as well as potential political risks heading into 2024, according to the analyst. On 23 December, as reported by TipRanks, Scotiabank started coverage of Thermo Fisher (NYSE:TMO) with a Sector Perform rating and a price target of $605, while BofA has a price target of $660 on the stock and a Buy rating as reported on December 13.
Thermo Fisher’s (NYSE:TMO) acquisitions are delivering strong results. The company’s recent acquisition of Olink Holdings for $3.1 billion, which was finalized in the third quarter, is helping to improve its capabilities in the rapidly growing proteomics market. The acquisition is expected to deliver synergies, with the company projecting $125 million in adjusted operating income synergies by the fifth year.
The Binding Site, which is now the company’s protein diagnostics business and was acquired in 2023, continues to perform well. In the third quarter, the company secured an IVDR claim extension in the European Union for its Optilite Freelite Mx, enabling it to assist in diagnosing neurological diseases like multiple sclerosis.
3. Eli Lilly and Company (NYSE:LLY)
5-year Beta (Monthly): 0.43
Number of Hedge Fund Holders: 106
Eli Lilly and Company (NYSE:LLY) is a prominent global pharmaceutical company with a strong presence in the healthcare sector, particularly recognized for its range of treatments for diabetes and obesity. The company has been making waves with its breakthrough medications, such as Mounjaro, a diabetes treatment, and Zepbound, a companion drug for chronic weight management. Both of these products have become significant contributors to the company’s revenue.
In the third quarter, Mounjaro contributed 27.3% of total revenue, showing a 121% growth from the previous year, while Zepbound accounted for over 11% of the revenue. This growing demand for these treatments has positioned Eli Lilly well in the market, especially with the recent FDA approval of Zepbound for the treatment of obstructive sleep apnea, a common sleep disorder.
This approval is particularly noteworthy as it marks Zepbound as the first drug authorized to directly treat patients suffering from this condition. Additionally, Eli Lilly (NYSE:LLY) announced a substantial $4.5 billion investment in October for the construction of the Lilly Medicine Foundry in Lebanon, Indiana, scheduled to open in 2027. This facility will focus on research and development as well as production for clinical trials, further reinforcing Eli Lilly’s (NYSE:LLY) commitment to advancing healthcare solutions.
2. UnitedHealth Group Incorporated (NYSE:UNH)
5-year Beta (Monthly): 0.59
Number of Hedge Fund Holders: 112
UnitedHealth Group Incorporated (NYSE:UNH) is a large, diversified healthcare company offering a wide range of services and products across multiple segments. The company operates primarily through two key divisions: UnitedHealthcare and Optum. UnitedHealthcare provides health insurance and benefits to millions of individuals in the United States, while also extending services to over 2 million people in South America.
Optum, on the other hand, delivers healthcare services and pharmacy solutions to more than 100 million people and supports hospitals and healthcare providers with advanced technology services. The company has grown significantly over the years through various ways, including organic growth. By the end of 2024, the company is expected to have expanded its consumer base by more than 2 million people, primarily through its commercial offerings.
Additionally, Optum Rx will fulfill over 1.6 billion prescriptions, and UnitedHealth will be caring for 4.7 million people in value-based care arrangements. UnitedHealthcare, in particular, is projected to have more than 50 million medical care plan customers, including approximately 7.8 million people enrolled in its Medicare Advantage plans.
Looking ahead to 2025, UnitedHealth’s (NYSE:UNH) outlook remains optimistic. The company anticipates revenue between $450 billion and $455 billion and adjusted net earnings are expected to fall between $29.50 and $30.00 per share. Cash flows from operations are forecasted to be between $32 billion and $33 billion. For 2024, the company’s adjusted net earnings are expected to be between $27.50 and $27.75 per share.
1. Alibaba Group Holding Limited (NYSE:BABA)
5-year Beta (Monthly): 0.35
Number of Hedge Fund Holders: 115
Alibaba Group Holding Limited (NYSE:BABA), China’s largest e-commerce company and cloud infrastructure provider, offers a broad range of services, from e-commerce platforms to technology infrastructure and marketing services. However, its growth trajectory has become increasingly complicated in recent years. The company faces challenges from government unpredictability and U.S.-China tensions, which are slowing China’s economy.
Its net income has stagnated since 2022, signaling growth concerns. Hopes for a government stimulus briefly lifted the stock, but the gains were short-lived. The company’s e-commerce business, which once led the market, is facing increasing competition both domestically and internationally. As competitors offer lower-cost alternatives, the company’s platforms are under pressure, causing the company to adapt its strategy.
In late November, Alibaba (NYSE:BABA) announced plans to merge its domestic Chinese and international e-commerce operations into a single business unit. This new unit, known as the Alibaba E-Commerce Business Group, will combine the Taobao and Tmall Group with Alibaba International Digital Commerce (AIDC). The AIDC group encompasses a variety of international platforms, including AliExpress, Alibaba.com (its B2B wholesale site), and other regional platforms operating globally, from Southeast Asia to Turkey.
On the cloud infrastructure front, the company is making significant investments, particularly to accommodate the growing demand for AI. In the third quarter, Alibaba Cloud saw a 7% increase in revenue, driven by strong growth in the public cloud sector. Notably, revenue from AI-related products continued to soar, maintaining triple-digit growth for the fifth consecutive quarter, and AI now accounts for a larger share of public cloud revenue.
Management has indicated that, given the sustained demand for AI, Alibaba (NYSE:BABA) will continue to invest heavily in AI infrastructure to meet future needs. It is noteworthy that there was a 70% decrease in free cash flow due to these ongoing investments in its cloud infrastructure.
While we acknowledge the potential of Alibaba (NYSE:BABA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BABA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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