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 Northrop Grumman Corporation (NYSE:NOC) 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 aeronautics engineer inspecting a model aircraft engine in a factory setting.
Northrop Grumman Corporation (NYSE:NOC)
5-year Beta (monthly): 0.34
Number of Hedge Fund Holders: 49
Northrop Grumman Corporation (NYSE:NOC) is a global aerospace and defense technology company that provides innovative systems, products, and solutions for a wide range of customers, including the U.S. government, the Department of Defense, the intelligence community, and commercial customers worldwide. The company operates in four main business sectors: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems.
It is widely recognized for its advanced aircraft development, particularly the B-2 Spirit stealth bomber, which is unique in its ability to carry both nuclear and conventional munitions. Additionally, it excels in unmanned aerial systems, represented by the RQ-4 Global Hawk surveillance aircraft used by the U.S. Air Force.
Recent contracts point to the company’s ongoing strength, including a $197.5 million U.S. Navy contract awarded in September for the production of Bomb Tactical Electronic Fuze systems, and a $1.5 billion contract from July for nine E-2D Advanced Hawkeye aircraft for the U.S. Navy and Japan, expected to be completed by 2029.
On September 3, The Fly reported that Seaport Research increased its price target for Northrop Grumman (NYSE:NOC) to $599 from $530 and maintained a Buy rating on the company stock. The firm made its price target revision after discussions with the current and upcoming CFO of the company. The firm feels optimistic about the company’s future and believes that, while overall sentiment about the company is good, investors are still not as confident as they could be.
Northrop Grumman (NYSE:NOC) is the 4th best low beta stock on our list. The company stock was held by 49 hedge funds with stakes worth nearly $1.8 billion in Q2. As of the second quarter, D E Shaw is the company’s most prominent shareholder. It increased its stake in Q2 by 830% to 642,609 shares worth $280.145 million. Citadel Investment Group is its second-largest shareholder after the firm increased its stake in the company by 1218% to 451,800 shares, valued at $196.962 million.
Overall NOC ranks 4th on our list of the best low beta stocks to buy. While we acknowledge the potential of NOC 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.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
