In this article, we will be taking a look at 12 safe stocks to invest in now. To skip our detailed analysis of current stock market news, you can go directly to see the Starter Stock Portfolio: 5 Safe Stocks To Invest In Now.
Safe Investing For Beginner Investors
Investing in defensive sectors has always been a go-to strategy for investors who like to play it safe, which is why many new investors in particular are heavily drawn to these areas in the market. Traditionally, the main defensive sectors in the market are healthcare, utilities, and consumer staples. Over the past year, some financial professionals saw a trend of most investors avoiding defensive stocks, but this may come to an end in 2024, as John Mowrey, NFJ Investment Group’s executive managing director and CIO, noted on CNBC’s “Squawk Box” on January 30:
“You’ve been paid to avoid some of the more defensive areas because of higher interest rates. So if you look at utilities, if you look at staples, if you look at healthcare, all of these higher-yielding areas have been hollowed out because you’ve been paid to avoid them. Everyone’s been chasing the Mag 7 and the AI trend and then they’re clipping coupons in fixed income. That’s created a real opportunity in the more defensive areas. So should you get a bumpier period in the market, I think you’ll get paid to be in those areas. So I like some of the more defensive areas.”
Mowrey believes that investors would be well-served to start moving into defensive areas as they are offering more attractive valuations, healthy dividends, and dividend growth, the last of which is a strong barrier against inflation. Considering these factors, many believe that defensive stocks are among the best beginner stocks to buy at present.
Considering the above, major fund managers are gravitating towards defensive investments. For instance, on February 21, Thomas Taw, the BlackRock APAC iShares Investment Strategy Head, joined “Bloomberg Markets: Asia” to discuss his recent moves. Taw noted that he is now positioning “more defensively in equity portfolios” instead of pursuing higher valuation companies and that he is particularly looking into more “dividend type of investing.”
Tech-Driven Growth in Defensive Sectors
Investments in defensive sectors have been driving growth exponentially. For instance, JPMorgan Chase & Co.’s healthcare sector outlook report for 2024 noted that the onset of the COVID-19 pandemic propelled venture capitalists and investors to provide financial backing to the healthcare sector, resulting in investments in healthcare startups reaching all-time highs in 2021. The focus on tech in healthcare has also resulted in investors committing significant capital to medical technologies. Additionally, Deloitte’s 2024 outlook on the utilities sector noted that the US Inflation Reduction Act’s one-year anniversary marked the moment when investments worth at least $122 billion in clean-energy generation projects were confirmed. Like healthcare, the utilities sector is also increasingly turning to technology in its operations and goals for electrification, with Deloitte stating that 2024 will see power and utilities companies turning to artificial intelligence and other digital solutions as they work to transform the grid.
Our discussion above highlights the key role that tech has been playing in recent times, not just in the markets but also in terms of contributing to the growth of other sectors. Tech’s contributions till date have resulted in many financial professionals beginning to consider it as a defensive sector as well, making stocks like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META) good options for those looking to buy into some of the best beginner stocks. In our list below, we have highlighted several defensive stocks, including some of the best tech stocks and best consumer staples stocks to buy, among others.
A trader working diligently at her desk, evaluating stocks of multiple industries.
Our Methodology
To compile our list of the best beginner stocks to buy, we screened for stocks in defensive sectors such as healthcare, utilities, consumer staples, and technology. We then shortlisted and ranked the stocks based on the number of hedge funds holding stakes in them by using Insider Monkey’s hedge fund data for the fourth quarter. The stocks are ranked from the lowest to the highest number of hedge funds holding stakes in them. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by over 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Starter Stock Portfolio: Safe Stocks To Invest In Now
12. Vistra Corp. (NYSE:VST)
Number of Hedge Fund Holders: 56
Vistra Corp. (NYSE:VST) is an independent power producer and energy trader corporation in the utilities sector. It retails electricity and natural gas to residential, commercial, and industrial customers and is based in Irving, Texas.
An Overweight rating and a $78 price target were maintained on Vistra Corp. (NYSE:VST) on March 26 by Morgan Stanley analysts.
A total of 56 hedge funds were long Vistra Corp. (NYSE:VST) in the fourth quarter, with a total stake value of $1.3 billion.
Sound Shore Management said the following about Vistra Corp. (NYSE:VST) in its fourth-quarter 2023 investor letter:
“For the year, we had a number of stocks up 50% or more and the list includes a diverse set of industries such as homebuilding, heavy truck manufacturing, and semiconductor capital equipment. We would like to highlight one outstanding contributor for the year, electricity generator and marketer Vistra Corp. (NYSE:VST), a low-cost provider with a healthy balance between generation and retail. Demand for electricity is growing and notably, load peaks are changing as well. As the country brings on more renewables and adjusts to greater demand later in the day due to increased use of electric heat pumps and electric car charging, reliable clean power is at a premium. Vistra is well positioned with diversified fuel sources including solar, natural gas, coal, nuclear and battery power storage facilities, along with a marketing division to manage price volatility. The company will soon be closing its accretive acquisition of merchant power generator, Energy Harbor, and the deal will make Vistra the second largest carbon free, nuclear electricity provider behind Constellation Energy, another portfolio holding. Vistra CEO Jim Burke, leads a veteran utility management team that is committed to transitioning the company’s portfolio to a sustainable footprint by closing older fossil fuel plants and increasing the renewables portfolio. They have also been an important voice to advocate for changes that will accelerate the global transition to a clean, renewable energy future, while maintaining adequate near-term supply. Vistra has a strong balance sheet that allows the company to invest in innovation and operational improvements. Additionally, management is using excess cash flow to buy 40% of the outstanding shares over a five year period and they are more than half way through that process. Currently valued at 9 times earnings with a 17% free cash flow yield and a 2.3% dividend, the stock remains a full position. As you can see from the chart below, Vistra’s performance was quite different than many other electricity providers and provides further evidence of the disparate performance that can often be found within a sector.”
Like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META), Vistra Corp. (NYSE:VST) is among the best beginner stocks to buy this year.
11. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 58
Third Point was the most prominent shareholder in PG&E Corporation (NYSE:PCG) at the end of the fourth quarter, holding 57.9 million shares in the company.
PG&E Corporation (NYSE:PCG) is another utility company on our list of the best beginner stocks. It is based in Oakland, California, and engages in the sale and delivery of electricity and natural gas. The company uses nuclear, hydroelectric, fossil fuels, fuel cells, and photovoltaic sources to generate electricity.
On January 22, Barclays analysts maintained an Overweight rating and a $19 price target on PG&E Corporation (NYSE:PCG).
PG&E Corporation (NYSE:PCG) was spotted in the 13F holdings of 58 hedge funds in the fourth quarter, with a total stake value of $2.9 billion.
10. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 65
Wells Fargo analysts maintained an Overweight rating and $85 price target on NextEra Energy, Inc. (NYSE:NEE) on March 19.
NextEra Energy, Inc. (NYSE:NEE) is among the best beginner stocks to buy now. It generates, transmits, distributes, and sells electric power to retail and wholesale customers. The company is based in Juno Beach, Florida.
Our hedge fund data for the fourth quarter shows 65 hedge funds long NextEra Energy, Inc. (NYSE:NEE), with a total stake value of $959.2 million.
ClearBridge Investments mentioned NextEra Energy, Inc. (NYSE:NEE) in its fourth-quarter 2023 investor letter:
“We added a new position in NextEra Energy, Inc. (NYSE:NEE), in the utilities sector, which acquires, owns and manages contracted clean energy projects in the U.S. The company was at the center of the defensive stock storm when it slowed its renewable growth outlook modestly in late September, and the stock collapsed almost 30% in less than two weeks. We saw this as an opportunity to invest in arguably the best combination of a regulated utility and an experienced renewable operator with good long-term growth options. Even at a much-reduced estimated growth rate from higher financing costs, which will likely prove to be conservative, our estimate of intrinsic business value is materially higher.”
9. Philip Morris International Inc. (NYSE:PM)
Number of Hedge Fund Holders: 68
Holding over 15 million shares in the company, Fundsmith LLP was the largest shareholder in Philip Morris International Inc. (NYSE:PM) at the end of the fourth quarter.
As of February 13, Societe Generale analysts maintain a Hold rating and $87.5 price target on Philip Morris International Inc. (NYSE:PM).
Based in Stamford, Connecticut, Philip Morris International Inc. (NYSE:PM) is a consumer staples company in the tobacco industry. It offers cigarettes and smoke-free products such as heat-not-burn, vapor, and oral nicotine products under the IQOS and ZYN brands. It is among the best beginner stocks to buy now.
Philip Morris International Inc. (NYSE:PM) was seen in the portfolios of 68 hedge funds in the fourth quarter, with a total stake value of $5.5 billion.
8. The Procter & Gamble Company (NYSE:PG)
Number of Hedge Fund Holders: 71
For the fourth quarter, 71 hedge funds were long The Procter & Gamble Company (NYSE:PG), with a total stake value of $5.9 billion.
The Procter & Gamble Company (NYSE:PG) is another consumer staples company on our list of the best beginner stocks, operating in the household products industry. It provides branded consumer packaged goods and is based in Cincinnati, Ohio.
Truist Securities analysts upgraded The Procter & Gamble Company (NYSE:PG) from Hold to Buy on March 11 and placed a $175 price target on the stock.
7. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 85
Fisher Asset Management was the largest shareholder in Walmart Inc. (NYSE:WMT) at the end of the fourth quarter, holding 28.6 million shares in the company.
Walmart Inc. (NYSE:WMT) had 85 hedge funds long its stock in the fourth quarter, with a total stake value of $6.2 billion.
Based in Bentonville, Arizona, Walmart Inc. (NYSE:WMT) is a consumer staples merchandise retail company on our list of the best beginner stocks. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores.
An Outperform rating and a $68 price target were maintained on Walmart Inc. (NYSE:WMT) on March 27 by Telsey Advisory Group analysts.
6. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 102
Eli Lilly and Company (NYSE:LLY) is a pharmaceutical company based in Indianapolis, Indiana. It offers human and animal pharmaceuticals and oncology products, among more.
For the fourth quarter, we saw 102 hedge funds long Eli Lilly and Company (NYSE:LLY), with a total stake value of $11.2 billion.
An $850 price target and a Buy rating were maintained on Eli Lilly and Company (NYSE:LLY) on March 22 by Truist Securities analysts.
Like Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META), Eli Lilly and Company (NYSE:LLY) is among the best beginner stocks to invest in today.
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Disclosure: None. Starter Stock Portfolio: 12 Safe Stocks To Invest In Now is originally published on Insider Monkey.