We recently published a list of 8 Best Low Volatility Stocks To Buy Right Now. In this article, we are going to take a look at where Alibaba Group Holding Limited (NYSE:BABA) stands against other best low volatility stocks to buy right now.
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.
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).
An e-commerce platform displaying a wide range of products to customers online.
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.
Overall, BABA ranks first on our list of best low volatility stocks to buy right 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 time frame. 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.
