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 Eli Lilly and Company (NYSE:LLY) 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 array of pharmaceutical pills with the company’s logo on the bottle.
Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 100
5-year Beta (Monthly): 0.42
Eli Lilly and Company (NYSE:LLY) is a global pharmaceutical firm that focuses on discovering, developing, and marketing medications. It offers a range of diabetes and obesity treatments, oncology as well as medications for various conditions such as rheumatoid arthritis, migraine prevention, and erectile dysfunction.
The company also operates the Lilly Seaport Innovation Center in Boston, which focuses on RNA and DNA-based therapies and finding new drug targets for conditions like obesity and chronic pain. The company collaborates with several other pharmaceutical firms as well.
Eli Lilly’s (NYSE:LLY) third-quarter performance showed impressive revenue growth due to several factors. However, it missed expectations despite the growth. The surge was led by the success of new products, especially Mounjaro and Zepbound, the company’s diabetes and obesity drugs, accounting for $3 billion of the total $11.44 billion revenue (total revenue was up 20% year-over-year).
Nevertheless, their sales were still lower than expected as the company attributed this shortfall not to a lack of demand, but to wholesalers reducing their inventory of these medications. According to the company, it had successfully completed back orders in the previous quarter, which increased stock levels. Wholesalers then used that stock instead of ordering more, leading to lower sales for both drugs.
Due to these factors, Eli Lilly’s (NYSE:LLY) stock experienced a significant sell-off after its earnings report on October 30 and was down over 8% in a day. JPMorgan analyst Chris Schott sees the decline in its shares as a buying opportunity. The Fly reported on October 31 that the analyst maintained an Overweight rating on the stock with a price target of $1,100.
Schott noted that despite the company’s results falling short of expectations due to wholesaler destocking of Mounjaro and Zepbound, the underlying business volume trends remain strong. He anticipates a substantial increase in sales for the fourth quarter as capacity increases and demand-generating efforts are improved.
Eli Lilly (NYSE:LLY) also reported strong performance across its oncology, immunology, and neuroscience portfolios, with a 17% growth in non-hormonal medication revenue. Key pipeline milestones included U.S. approval of Ebglyss for atopic dermatitis and Kisunla for early symptomatic Alzheimer’s disease. The company plans to submit a supplemental application to the FDA for a modified dosing regimen for donanemab after positive results in reducing ARIA (amyloid-related imaging abnormalities) were observed in a Phase 3 trial.
Overall LLY ranks 3rd on our list of the best low volatility stocks to invest in now. While we acknowledge the potential of LLY 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 LLY 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.
