10 Boring Stocks That Make Money
In this article we present the list of 10 Boring Stocks That Make Money. Click to skip ahead and see the 5 Boring Stocks That Make Money.
Lowe’s Companies, Inc. (NYSE:LOW), Philip Morris International Inc. (NYSE:PM), and Costco Wholesale Corporation (NASDAQ:COST) are a few of the most boring stocks in the world that should nonetheless entice investors thanks to their penchant for making money.
Finding boring and dull stocks to invest in may not be the most exciting proposition in the world, but it’s integral to building a balanced portfolio that will perform well during even the most challenging market conditions. Such a scenario is upon us now, with investors increasingly turning to stable, boring stocks to fill out their portfolios as opposed to ones with greater long-term growth potential.
What constitutes a boring stock is likely different for every investor, but some of the most common criteria include stocks that have a low beta, or volatility, which means they tend to avoid wild valuation swings. While that may be boring for day traders looking to profit from such swings with well-timed trades, investors looking to build a portfolio with an eye on steady long-term growth could do a lot worse than filling it with boring stocks.
Low growth rates are another element of boring stocks that can make them unappealing to the masses. Barring some incredible fortune, there’s simply no means by which most boring stocks will ever compound at a significant rate over the long-term. Many of these companies have stable cash generating businesses, but their prospects for growth are minimal.
Nonetheless, low volatility stocks frequently outperform their higher volatility brethren over the long-term, as they did between 1990 and 2011. Interestingly, the research that uncovered those results pointed to money managers as being one of the culprits. In their drive to beat market benchmarks, money managers frequently load up on riskier stocks that they hope will outperform, driving up their valuations. Likewise, the avoidance of low-growth, boring companies by those same money managers somewhat suppresses their own valuations.
In the following list, we’ll take a look at ten boring stocks, all of which have generated at least $100 million in trailing twelve month net income, and many of which have generated billions. We’ll analyze why these stocks are boring, but why that also makes them intriguing long-term investments.
The following boring, money-making stocks are ranked based on hedge fund sentiment. We follow a select group of hedge funds because Insider Monkey’s research has uncovered that their consensus stock picks can deliver outstanding returns.
All hedge fund data is based on the exclusive group of 900+ funds tracked by Insider Monkey that filed 13Fs for the Q2 2022 reporting period.
10 Boring Stocks That Make Money
10. American Water Works Company, Inc. (NYSE:AWK)
Number of Hedge Fund Shareholders: 29
Trailing 12 Month Net Income: $1.3 billion
Costco Wholesale Corporation (NASDAQ:COST), Lowe’s Companies, Inc. (NYSE:LOW), and Philip Morris International Inc. (NYSE:PM) are some of the most boring stocks on the market that also happen to make a lot of money. Another is American Water Works Company, Inc. (NYSE:AWK), which pulled in $1.3 billion in net income over the trailing 12-month period.
With a beta of 0.5 and relatively slow revenue and income growth, American Water Works Company, Inc. (NYSE:AWK) is a pretty boring stock compared to some of the high-flying stocks out there. The utilities company did surge its EPS by more than $3.00 in 2021 however, hitting $6.96. Also of note is the company’s acquisition spree, with 30 agreements in place as of the end of Q2, which comes hot on the heels of 23 acquisitions being completed last year.
Hedge funds have largely been maintaining their stakes in American Water Works Company, Inc. (NYSE:AWK) for the past five years, with little overall movement in ownership of the stock. Ian SImm’s Impax Asset Management owns by far the largest stake in the company among the fund’s tracked by Insider Monkey’s database, holding 4.91 million shares of AWK as of June 30.
9. Public Storage (NYSE:PSA)
Number of Hedge Fund Shareholders: 33
Trailing 12 Month Net Income: $2.07 billion
If a company that leases public storage units sounds likely to be a boring stock, well it is. But Public Storage (NYSE:PSA) is a boring stock that’s earned an impressive $2.07 billion in net income over the trailing 12 month period. With a 0.38 beta, it’s a stock that’s not likely to do a whole lot one way or the other barring major news, but the company did have a strong 2021 after multiple years of slower growth. Revenue grew by more than 17% to $3.42 billion, while EPS grew by more than 50% to $9.91.
Public Storage (NYSE:PSA) has become a lot more popular among hedge funds over the past year, with the stock hovering around all-time highs in terms of smart money ownership. The company boasts several major industry players as bulls, including Cliff Asness’ AQR Capital Management and Jeffrey Furber’s AEW Capital Management.
The Baron Real Estate Income Fund is bullish on Public Storage (NYSE:PSA)’s leading position in many of its top markets, as revealed in the fund’s Q2 2022 investor letter:
“Following strong performance in the first quarter of 2022, the shares of Public Storage Incorporated, a REIT that is the world’s largest owner, operator, and developer of self-storage facilities, declined 21% in the second quarter (a similar decline to most other REITs). We remain optimistic about the company’s long-term prospects. Public Storage’s nearly 2,500 self-storage facilities across the U.S. serve more than one million customers. The company has achieved the #1 market position in 14 of its top 15 markets.
We are encouraged about the company’s prospects due to our expectations for the continuation of strong occupancy and rent trends, limited new supply, mid-teens organic cash flow growth, the potential for mergers and acquisitions activity in part due to the company’s well-capitalized and low leverage balance sheet, and the ability to increase rents monthly to combat inflation headwinds. We believe Public Storage’s shares are currently valued at a discount to private market self-storage values and offer prospects for mid-teens total returns in the next few years.”
8. Performance Food Group Company (NYSE:PFGC)
Number of Hedge Fund Shareholders: 37
Trailing 12 Month Net Income: $113 million
Food distributors like Performance Food Group Company (NYSE:PFGC) aren’t going to set the world on fire, but the company’s on a nice little run right now, with $113 million in trailing 12 month net income and exceptional revenue growth of 67% during its latest fiscal year ended June 30, hitting $50.9 billion thanks to a strong year-over-year rebound for restaurants. That trend appears to have continued in Q3, though the company’s FY23 revenue growth is expected to be no greater than 13.9% against the tougher comps.
Hedge fund ownership of Performance Food Group Company (NYSE:PFGC) jumped by 28% during the second quarter as several hedge funds took notice of the company. Ken Griffin’s Citadel Investment Group owns 3.58 million PFGC shares as of June 30, adding a net total of 90,946 shares to its portfolio during Q2.
The ClearBridge Investments Select Strategy, which owns 5.42 million Performance Food Group Company (NYSE:PFGC) shares as of June 30, discussed the company’s aggressive acquisition strategy in the fund’s Q4 2021 investor letter:
“Performance Food Group is another example of a quality franchise bought during a depressing period for the foodservice industry that has flexed its balance sheet to make acquisitions of weaker players and continues to consolidate its leading market share.”
7. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Shareholders: 39
Trailing 12 Month Net Income: $264 million
Lithium company Albemarle Corporation (NYSE:ALB) has some strong secular tailwinds at its back that make for a somewhat exciting stock, though its past few years of results have been dull at best. The company’s revenue fell slightly between 2018 and 2021, while its EPS crated from more than $6 to just above $1. Those metrics are improving substantially this year however, with the company trending towards record figures across the board.
Albemarle Corporation (NYSE:ALB) hit an all-time high in hedge fund ownership at the end of 2021, but there was a 20% drop in ownership during the first half of this year. Jay Chen’s Himension Capital owned 383,348 ALB shares on June 30, giving its 8.95% 13F exposure to the stock.
Carillon Tower Advisers is bullish on Albemarle Corporation (NYSE:ALB)’s opportunity in the electric vehicle space, as the fund discussed in its Q3 2022 investor letter:
“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The company’s shares outperformed meaningfully in the quarter, driven largely by robust demand for lithium used to manufacture electric vehicle batteries. Albemarle is well-positioned for the accelerating adoption of electric vehicles and could benefit from the Inflation Reduction Act.”
6. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Shareholders: 45
Trailing 12 Month Net Income: $6.76 billion
Caterpillar Inc. (NYSE:CAT) has been about as stable and boring as a stock can get, with trailing 12 month revenue that’s essentially flat from 2018 levels and operating income that’s declined during that time. But the company makes boatloads of money, with more than $6 billion in net income in 2018, 2019, and 2021. It’s also in the midst of a banner year, with Q3 revenue jumping by 21% year-over-year and EPS surging by 46% and crushing estimates. Heck, with growth rates like that, Caterpillar might just be capable of creeping off the most boring stocks list some day.
There was a 16% dip in hedge fund ownership of Caterpillar Inc. (NYSE:CAT) during Q2, as hedge funds timed their exits from the stock near its peak. CAT shares would subsequently fall by 29% between June 8 and September 27, but have railed over the last month. Ric Dillon’s Diamond Hill Capital owns over 1.9 million shares of Caterpillar as of June 30.
The Diamond Hill Large Cap Concentrated Fund added Caterpillar Inc. (NYSE:CAT) to its portfolio during Q1, laying out some of the reasons why in its Q1 2022 investor letter:
“We also initiated a position in Caterpillar (NYSE:CAT), one of the world’s leading manufacturers of construction and mining equipment. It’s a company we know well, as we have owned it in our large cap portfolio for quite some time. Recent share price weakness provided an opportunity for us to add it to our large cap concentrated portfolio at an attractive discount to our estimate of intrinsic value. We believe Caterpillar stands to benefit from increased capital investment supported by a healthier/recovering end market environment, particularly in construction and mining.”
Philip Morris International Inc. (NYSE:PM), Costco Wholesale Corporation (NASDAQ:COST), and Lowe’s Companies, Inc. (NYSE:LOW) are more yawn-inducing stocks that make lots of money. Check them out at the link below.
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Disclosure: None. 10 Boring Stocks That Make Money is originally published at Insider Monkey.