We recently compiled a list of the 10 Best Low Volatility Stocks to Invest in Now. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against the other low volatility stocks. We will also discuss the latest updates around the market and political situation of the US.
Market Begins November on a Dynamic Note
The first week of November has been quite eventful so far. Presidential candidate Donald Trump won the election and President Joe Biden, speaking from the Rose Garden after the election, pledged a peaceful transition of power on January 20.
Moreover, Federal Reserve Chair Jerome Powell announced a quarter-point rate cut on November 7, aimed at supporting strong employment and steady inflation. Economic indicators show solid growth, with GDP rising by 2.8% in the third quarter and consumer spending remaining strong. While the housing sector remains weak, other areas like equipment investment have strengthened.
The labor market shows resilience despite a slowdown in job gains and an uptick in the unemployment rate to 4.1%. Inflation has cooled significantly, nearing the Fed’s 2% target. However, core inflation remains slightly above that level.
In response to questions, Chair Powell noted that the U.S. election isn’t expected to influence near-term Fed policy, as future policy changes and their economic effects remain uncertain. He acknowledged that higher Treasury yields likely reflect expectations of stronger economic growth rather than inflation concerns.
Looking ahead to December, Powell stated that the Fed will assess data on inflation, employment, and economic growth to determine if further policy recalibration is needed. He emphasized the Fed’s effort to balance rate adjustments to avoid moving too quickly or too slowly, aiming to sustain a strong labor market while bringing inflation closer to the 2% target.
The market is taking the news well and all three major market indices closed at all-time highs on November 7. While things seem to be on track, it is important to note that such events sometimes also bring volatility and uncertainty.
Read Also: 10 Best Stocks Under $100 To Invest In and 10 Best Stocks to Buy and Hold For 5 Years.
Economic Outlook in an Era of Unpredictable Policies
In a recent interview on CNBC’s Squawk Box, Former Federal Reserve Vice Chairman Roger Ferguson discussed the complexities surrounding recent economic and policy changes. Ferguson noted that the Federal Reserve’s approach remains cautious, taking a “wait-and-see” stance to assess how policies impact the economy.
He mentioned Fed Chair Powell’s resistance to providing overly specific future guidance and instead emphasized data-based decisions. Additionally, Ferguson highlighted that external factors such as tariffs and changes in the energy market could create varied inflationary pressures. While deregulation might counterbalance some inflation risks, tariffs could still add complexity.
The conversation touched on the “neutral rate,” with Ferguson indicating that it will play a crucial role moving forward, especially given shifts in bond yields and their impact on inflation expectations. Ferguson conveyed that uncertainty in policy directions requires flexibility in economic responses, with ongoing adjustments as more details unfold.
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify around 250 large to mega-cap stocks with a 5-year beta (monthly) between 0.2 and 0.8. We narrowed our list to 10 stocks most widely held by institutional investors and listed them in ascending order of their hedge fund sentiment. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of over 900 elite hedge funds.
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).
An e-commerce platform displaying a wide range of products to customers online.
Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 91
5-year Beta (Monthly): 0.34
Alibaba Group Holding Limited (NYSE:BABA) provides technology infrastructure and marketing services to support merchants, brands, and retailers in China and globally. The company operates across several key segments. The company also offers cloud solutions, digital mapping, and productivity tools, plus a range of e-commerce and marketing services across various global platforms.
Two main themes are affecting Chinese stocks such as Alibaba (NYSE:BABA). First, investor wariness stems from the Chinese government’s unpredictable interventions, as seen when Alibaba’s (NYSE:BABA) stock dropped from around $350 to under $100 after regulatory actions three years ago. Second, U.S.-China tensions add pressure, with tariffs and tech restrictions slowing China’s economy, casting doubt on reported growth rates.
Since 2022, its net income has stagnated, suggesting either economic slowdown or competitive challenges. In September, hopes rose for major Chinese government stimulus, briefly lifting Chinese stocks, but gains faded due to limited follow-through.
Between November 4 to 8, China’s National People’s Congress (NPC) Standing Committee is meeting in Beijing, where it unveiled a five-year, 10 trillion yuan ($1.4 trillion) package to address local government debt, with additional economic support anticipated next year. Normally, China’s fiscal budget is submitted by the finance ministry to the NPC in March for approval, but the NPC Standing Committee can authorize mid-year adjustments, including changes to the fiscal deficit, special treasury bond quotas, and local government debt limits.
In a September 26 interview with CNBC, David Tepper of Appaloosa Management shared his views on global markets, highlighting China’s aggressive fiscal and monetary stimulus, which includes measures to encourage consumption, stock buybacks, and offering low-risk borrowing for stock purchases. He sees these efforts as a strong boost for Chinese equities, which he views as undervalued compared to U.S. stocks. He sees China’s aggressive stimulus and undervalued equities as significant investment opportunities, while still remaining a little cautious.
Alibaba (NYSE:BABA) also seems to be one of the cheap undervalued Chinese stocks as it is trading at a forward PE ratio of 10.91x, a 37.76% discount to its sector median.
Overall BABA ranks 6th on our list of the best low volatility stocks to invest in now. While we acknowledge the potential of 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.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.