We recently compiled a list of the 10 Best Low Beta Stocks To Buy. In this article, we are going to take a look at where General Dynamics Corporation (NYSE:GD) stands against the other low beta stocks.
After a rough few years, the market is coming together and is on a healthy trajectory. The recent Fed rate cuts triggered a lot of bullish sentiment toward the broader market. For example, on September 20, Business Insider reported that Brian Belski from BMO raised his S&P 500 price target for 2024 to 6,100 from 5,600, followed by the Fed’s recent rate cut and strong seasonal market data.
Moreover, Belski talked about broadening stock market gains and the increased likelihood of a soft landing for the U.S. economy. He finds current elevated valuations justified as he compared the situation to the mid-1990s when the market sustained high multiples.
In addition, Tom Lee of Fundstrat is bullish on the market for several upcoming years and expects the broader market to nearly triple to 15,000 by 2030. His bullish sentiment is driven by demographic shifts, millennial spending, and technology advancements. He mentioned the prime earning years of millennials and Gen Z, which mirror previous periods of high stock market returns. Furthermore, he also highlighted the role of technology in addressing global labor shortages and projects significant spending on AI and tech solutions.
Broadening Market Participation and the Outlook for Recession Risks
On September 24, Prashant Bhayani of BNP Paribas Wealth Management joined CNBC to discuss the current market conditions. He discussed the improving liquidity and noted the tight credit spreads, near-record equities, and steady lending. While U.S. hiring is slowing, he explained that rising unemployment is partly due to labor force growth, not just layoffs, which makes it different from past cycles. Bhayani stressed that employment data, like jobless claims, will be important in determining market outlooks.
On market valuations, Bhayani acknowledged some sectors are overvalued but sees broader market participation beyond AI-related stocks. He suggested that stocks could outperform bonds if a soft landing or no recession occurs.
Addressing concerns about potential triggers for volatility, Bhayani said that a credit event, similar to those seen in 2000 or 2007, could lead to significant market declines. However, current credit spreads and a healthy banking system support the soft landing view.
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify over 30 mid to mega-cap stocks with a 5-year beta (monthly) between 0.2 to 0.8. Next, we narrowed the list to 10 stocks most widely held by institutional investors. The 10 best low-beta stocks to buy are listed in ascending order of their hedge fund sentiment and we used the beta as a tie-breaker as well.
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 aircraft maintenance team in a hanger working on a modern business jet.
General Dynamics Corporation (NYSE:GD)
5-year Beta (monthly): 0.61
Number of Hedge Fund Holders: 48
General Dynamics Corporation (NYSE:GD) is a prominent American aerospace and defense corporation headquartered in Reston, Virginia. It is one of the largest defense contractors in the world.
Its product portfolio includes advanced military and civilian aircraft, submarines, and armored vehicles, featuring items such as Gulfstream business jets, Virginia and Columbia-class nuclear-powered submarines, Arleigh Burke-class guided-missile destroyers, M1 Abrams tanks, and Stryker armored fighting vehicles.
General Dynamics (NYSE:GD) was a part of 48 hedge fund portfolios in Q2, at a combined value of $9.114 billion. As of the second quarter, Longview Asset Management owns 28.1 million shares of the company, worth $8.152 billion, making it the company’s most significant shareholder.
In 2024, General Dynamics (NYSE:GD) has been actively involved in significant partnerships and contracts that highlight its ongoing focus on innovation and collaboration within the defense sector. In August, the company announced a partnership with Lockheed Martin for the manufacturing of solid rocket motors, improving its capabilities in missile technology.
The company was awarded several contracts in September, starting with a $491.6 million contract from the Space Development Agency to undertake design, analysis, engineering studies, and technical support for the Ground Management and Integration program’s integrated ground system.
On September 12, General Dynamics (NYSE:GD) received a $99 million cost-plus-fixed-fee contract to provide engineering, technical support, design agent services, and planning yard assistance for operational strategic and attack submarines.
Later on September 13, The Fly reported that it secured a block-buy contract from the U.S. Navy for the construction of up to eight additional John Lewis-class fleet replenishment oilers. The initial ship under this contract has been awarded for $780 million. If all eight ships are built, the total contract value, including incentives and other options, could exceed $6.7 billion.
Moreover, The Fly reported two additional government and army contracts for the company worth $299 million and $103.62 million.
Overall GD ranks 6th on our list of the best low beta stocks to buy. While we acknowledge the potential of GD 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 promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.