In this article, we will discuss the 14 Best Low-Risk Stocks to Buy Right Now. You can skip our detailed discussion of today's financial markets and the importance of hedging against risk and go to 5 Best Low-Risk Stocks to Buy Right Now.
Given the uncertainty in financial markets, a raging pandemic and joblessness, investors are becoming extremely risk-averse. Low-risk stocks present a great opportunity in such situations. A low-risk stock is defined as a stock with a small possibility of losing a portion or all of your investments. However, most of these stocks have a low amount of upside potential and might not provide an investor with the growth needed to meet long-term goals. But the fact remains that no stock is ever 100% risk-free. This is why investing in these stocks can be tricky. If an investor chooses to invest at the right time, these stocks have the ability to post strong rewards.
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During the COVID-19 pandemic, many companies were forced to shut down resulting in an increased number of unemployed individuals. Nearly 500,000 individuals lost their jobs due to the coronavirus crisis. Most investors considered low-risk stocks that offer dividends to compensate for the loss. Dividend stocks are considered fixed-income assets where investors are paid regularly; monthly, quarterly, annually. (Please also see 15 Best Dividend Stocks with Upside Potential). Dividends still provide a steady stream of income for millions of Americans, especially those who are retired. Dividend stocks are usually less risky, as dividend-paying companies are mature, with low uncertainty and flux.
The pandemic further elevated the importance of adding some low-risk stocks to a portfolio. A good investor knows the balance of risk and rewards mostly during these times. Consider a company in a good financial shape that is essential even during an economic recession. Brian Belski, BMO’s chief investment strategist, recommends buying low-risk stocks as he foresees a sudden drop in equities in the next few months. Belki said in a note,
“We believe the heightened levels of volatility that investors were forced to contend with last month will likely return in the coming months, and is one of the reasons we do not see U.S. stocks breaking out of their range and making a sustained move higher before the year is done,”
Today’s market has become more volatile than ever. In order to identify the 14 Best Low-Risk Stocks to Buy Right Now, we started with 100 holdings in the SPLV – Invesco S&P 500 Low Volatility ETF as of February 3, 2021. We excluded the holdings that declined more than 20% during the March 2020 stock market crash and considered the stocks that declined less than 20%. We were able to narrow down our list to 14 stocks by using the hedge fund sentiment scores. By hedge fund sentiment, we mean the number of hedge funds that are bullish on a specific stock. We use Insider Monkey's database of over 800 hedge funds to evaluate hedge fund sentiment for stocks.
Our in-house research showed that by using the hedge fund sentiment data, we can identify a small group of stocks that can outperform the S&P 500 index on average by double digits annually. For instance, the portfolio for stock picks for our monthly newsletter has beaten the market by over 88 percentage points since March 2017 (see details here). Some of the portfolio choices for our monthly newsletter were also publicly shared on our website. In October, we posted this real estate stock and since then it’s been up more than 50 percent.
Based on our hedge fund sentiment data, we present to you the 14 Best Low-Risk Stocks to Buy Right Now.
14. Hormel Foods Corp (NYSE:HRL)
No of HFs: 30
Total Value of HF Holdings: $555 Million
We start the list of best low-risk stocks to buy now with HRL. The stock lost 12.9% since March 2020. The top hedge fund holder of this stock is Cliff Asness’ AQR Capital Management which had $177 million invested in the stock at the end of September. An insider recently purchased 4,909 shares at around $46 in December 2020. The stock is up 6% since then. HRL was mentioned as one of the 10 Best Food Stocks to Buy Now. Mairs and Power said the following about HRL in their Q1 2020 investor letter:
“Hormel (HRL) was a strong contributor to the Fund’s first quarter performance. Since people were dining out less and buying more at the supermarket, this should come as no surprise. It’s well positioned for this downturn.”
13. JM Smucker Co (NYSE:SJM)
No of HFs: 31
Total Value of HF Holdings: $763 Million
SJM lost 19.4% in Mach 2020. The top hedge fund holder of this stock is Jim Simons’ Renaissance Technologies which had $175 million invested in the stock at the end of September. An insider purchased 1,000 shares at around $103 in August 2019. The stock is up 10% since then. SJM was mentioned as one of the 15 Best Gourmet Coffee Brands In The World. They recently completed the divestiture of their Natural Balance Business to Nexus Capital Management LP for $50 million.
12. Kroger Co (NYSE:KR)
No of HFs: 35
Total Value of HF Holdings: $2.47 Billion
KR lost 9.1% in March 2020. At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock. An insider recently purchased 3,200 shares at around $31 in December 2020. The stock is up 6% since then. KR is also in our list of 10 Dividend Stocks Warren Buffett Likes The Most. KR is known for being one of the world’s largest traditional grocers. Recently, the company announced to shut down of two long beach stores following the city-mandated pandemic pay increase.
11. Clorox Co. (NYSE:CLX)
No of HFs: 39
Total Value of HF Holdings: $1.89 Billion
CLX lost 14.0% during March 2020 and ranks 11th in our list of best low risk stock to buy right now. The company recently said its fiscal 2021 organic sales are expected to rise in the range of 10% to 13%, compared to its previous guidance of 5% to 9% increase. The company, however, expects back-half sales to be about flat amid weaknesses in comparable sales. For the full year, EPS is expected to come in between $8.05 and $8.25 versus the previous guidance of $7.70 to $7.95 and the Wall Street’s estimate of $8.12.
Amana Mutual Fund mentioned the stock in its Q1 2020 investor letter:
“With a double-digit return, Clorox was a true outlier in the first quarter as demand for its cleaning products, including disinfecting wipes and bleach, soared in the wake of the coronavirus pandemic. Whether this continues depends on a persistent increase in the use of these products, which we would not rule out.”
10. Akamai Technologies (NASDAQ:AKAM)
No of HFs: 40
Total Value of HF Holdings: $4.41 Billion
AKAM lost 16.6% in March 2020. At the end of September, a total of 40 hedge funds tracked by Insider Monkey were long this stock. AKAM is known for its cloud technologies for web and internet security services. They recently announced their acquisition of Inverse, Inc. The Massachusetts-based company posted a non-GAAP EPS of $1.31 for the third quarter, above the Wall Street estimates by $0.08. Revenue in the quarter jumped over 11% to $793 million, beating the consensus by $17.85 million.
9. Dollar General Corp (NYSE:DG)
No of HFs: 56
Total Value of HF Holdings: $1.82 Billion
DG lost 16.2% in March 2020. The stock was mentioned in Insider Monkey's Top 10 Retail Stocks to Buy Now and Top 5 Stocks That Could Massively Grow Dividends in 2021 and Beyond. DG has been widely known for its hassle-free shopping with over 16,000 stores in the continental United States. To help stop the spread of COVID-19, DG offered to pay its 157,000 employees four hours of pay if they get the COVID-19 vaccine. Dollar General CRO Todd Vasos told “the journal”, “We felt the right thing to do was to break down these barriers to vaccination”
8. Eli Lilly and Co. (NYSE:LLY)
No of HFs: 60
Total Value of HF Holdings: $2.52 Billion
LLY lost 18.8% in March 2020 and ranks 8th on our list of 14 best low-risk stocks to buy right now. The top hedge fund holder of this stock is Ken Fisher’s Fisher Asset Management which had $692 million invested in the stock at the end of September. An insider recently purchased 1,000 shares at around $108 in October 2019. The stock is up 86% since then. LLY was mentioned as one of the 10 Best Healthcare Dividend Stocks. Amana Mutual Funds mentioned LLY in its Q1 2020 investor letter:
“Even so, Lilly stood out as one, among a handful, of companies that registered a positive return for the first quarter. In January, Lilly reported excellent fourth quarter results, with revenue growing at a faster clip than over the first three quarters of the year. Lilly is also financially strong with debt equivalent to only two times EBITDA3 and 12% of market capitalization. Johnson & Johnson, while trailing Lilly, shares many of the same characteristics and also outperformed.”
7. Gilead Sciences, Inc. (NASDAQ:GILD)
No of HFs: 61
Total Value of HF Holdings: $1.98 Billion
GILD lost 8.6% in March 2020. Earlier in February, Gilead Sciences declared a quarterly dividend of $0.71 per share, a 4.4% increase from prior dividend of $0.68. Forward yield of the stock stands at 4.31%. Nelson Roberts Investment Advisors mentioned the stock in its 3Q 2020 investor letter:
“In the healthcare sector, we sold our position in Gilead (NASDAQ: GILD) as there are no near or medium-term growth drivers for the company. Its popular HIV drug, Truvada, is going off patent this year. Additionally, UnitedHealth Group said it would not cover Gilead’s other HIV drug, Descovy. Lastly, the multiple acquisitions that Gilead has made recently are not ready for prime time, and it will likely be two years or more before any of Gilead’s new drugs have a meaningful impact on revenue.”
6. Electronic Arts, Inc. (NASDAQ:EA)
No of HFs: 62
Total Value of HF Holdings: $1.37 Billion
EA lost 15.9% in March 2020. Earlier in February, Electronic Arts (NASDAQ:EA) posted fiscal Q3 results according to which bookings narrowly met expectations but profit guidance was below estimates. Net income fell to $211 million in the period, compared to $346 million posted in the same quarter a year earlier.
In Generation PMCA’s Q3 2020 investor letter, they mentioned EA:
“Electronic Arts is one of the largest video game developers and publishers with a collection of premium franchises. The stock recently sold off due to mixed results in several titles, even though strong growth was evident in other core franchises. We expect video game utilization to remain high, and the new console cycle should provide a near and medium-term boost. Several new titles are expected to be released next year, with incremental growth from cross-platform integration. The company is transitioning towards a higher margin digital-first model, supported by emerging sources of value in cloud gaming and eSports—a vertical that has become professionalized with a huge expanding global audience. Its strong market shares and depth of IP place Electronic Arts at the centre of this growth. The emergence of 5G and modern gaming consoles should take cloud gaming into the mainstream while competition and regulatory scrutiny are ongoing risks. Our FMV is $170. The company obviously believes its shares are undervalued too, recently authorizing a new $2.6 billion share repurchase program.”
To see the rest of the stocks in this list please click 5 Best Low-Risk Stocks to Buy Right Now.
Disclosure: None. 14 Best Low-Risk Stocks to Buy Right Now is originally published at Insider Monkey.