We recently compiled a list of the 10 Best Low Risk Stocks To Buy in 2025. In this article, we are going to take a look at where Philip Morris International Inc. (NYSE:PM) stands against the other low risk stocks.
Risk is a key consideration in investing and portfolio management, as investors generally aim to achieve the maximum return per minimum unit of risk. The true risk of a stock is impossible to measure or quantify, but there are several metrics, such as the volatility of returns or equity beta, that can gauge the magnitude of risk relative to other companies. The equity beta of a stock represents the sensitivity, or correlation, between the returns of the stock and the returns of the broad market. An equity beta below one means that the stock does not respond as much as the broad market to different events, such as macroeconomic developments, monetary policy changes, etc. When a stock with low risk (low beta) is introduced into a portfolio, the overall expected risk of the portfolio is significantly reduced, while the expected return is usually not significantly compromised, leading to a better risk/return profile.
READ ALSO: 12 Best Long Term Low Risk Stocks to Buy Right Now
There are times when the risk profile of a portfolio becomes a more important consideration than maximizing returns, such as during periods of economic uncertainty, market downturns, or when an investor nears retirement and prioritizes capital preservation over growth. In these situations, investors often shift their focus from aggressive returns, such as growth stocks, to minimizing potential losses, adjusting their portfolios to include more low-beta stocks, bonds, or other defensive assets.
Market volatility, geopolitical tensions, and changes in monetary policy can also drive investors toward safer investments to protect their capital. Understanding and managing risk, particularly through measures like equity beta, allows investors to navigate uncertain times without exposing themselves to unnecessary losses. While low beta stocks are usually more mature and low growth businesses, they can deliver strong returns during bear markets, as capital actively starts flowing into them and inflates their market valuation. Consequently, by rotating into low risk stocks at the right time, investors can achieve two goals at once – not only reduce the risk of the portfolio, but also significantly improve the potential return profile.
We believe the broad stock market is currently at a crossroads and has just entered a new “Trump 2.0 regime,” which will be dominated by unprecedented actions and measures. Not only does the new US administration employ tools such as tariffs that were not used on a large scale for decades, but it has also started some strategic political shifts that could threaten decade-long alliances (such as the US-Europe alliance). All of this, coupled with aggressive cost-cutting in federal budgets and spending, has introduced a lot of uncertainty and difficult-to-digest news for investors.
The US stock market is also in correction mode since the inauguration date, and there is no certainty about when this will stop. With many surveys showing deteriorating spending and business outlooks, a slowdown in GDP growth with a potential bear market becomes a probable scenario for the following quarters. These are the times when buying low risk stocks could significantly improve the risk profile of one’s portfolio without compromising the potential return. Low risk stocks, as gauged by the equity beta, are usually found in sectors like consumer defensive, healthcare, as well as some financials and energy, which tend to have more predictable and stable business models. Given this, we will take a look at some of the best low risk stocks to buy now.
Our Methodology
To compile our list of low risk stocks, we used Finviz to filter the companies that have an equity beta below 1.0x. Then we compared them with Insider Monkey’s proprietary Q4 2024 database of hedge funds ownership and included in the article the top 10 names with the highest number of hedge funds that own the stock.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A man exhaling smoke from a cigarette indicating the use of tobacco products.
Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 102
Equity Beta: 0.51x
Philip Morris International Inc. (NYSE:PM) is a global tobacco company that manufactures and sells cigarettes and smoke-free products outside the United States. Its leading brand, Marlboro, is one of the most recognized in the industry. The company is shifting towards reduced-risk alternatives, including its IQOS heated tobacco system and nicotine pouches, as part of its long-term strategy to transition away from traditional cigarettes. PM operates through a global distribution network, serving markets across Europe, Asia, Latin America, and the Middle East. A key strategic focus of the company is innovation and adaptation as its legacy tobacco business has been pressured by regulatory and other exogenous threats.
Philip Morris International Inc. (NYSE:PM) has achieved significant milestones in its smoke-free transformation, with smoke-free business now generating 40% of revenues and over 40% of gross profits. The company has expanded its smoke-free product presence to 100 markets, with the category approaching $15 billion in revenue and becoming self-financing through its own profitability. IQOS has surpassed Marlboro’s revenues, reaching over $11 billion in just 10 years compared to the 60-70 years it took Marlboro to reach that level. The company has successfully transitioned from volume declines to sustainable 2% volume growth since 2020, marking a significant shift in its business model.
In terms of financial performance, Philip Morris International Inc. (NYSE:PM) has lifted its revenue growth from 4-6% to 6-8% while maintaining strong pricing power and adding volume growth. The company’s smoke-free portfolio now demonstrates higher gross margins than the combustible business, with smoke-free margins almost 3 points higher than combustible products. Looking ahead, PM has set an aspirational target of achieving two-thirds of revenues from smoke-free products by 2030, with progress already evident as the top 5 operating income markets are at the 60% mark. With an equity beta of only 0.51x, PM is one of the best low risk stocks to buy now.
Overall PM ranks 6th on our list of the best low risk stocks to buy in 2025. While we acknowledge the potential of PM 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 PM but that 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.
