In this article, we will take a look at the 10 best beginner stocks to buy in 2023. If you want to explore similar stocks, you can also take a look at 5 Best Stocks To Invest In 2023 For Beginners.
"One-and-Done Much More Likely, But Not Fully Baked In Just Yet"
On April 21 Roger Ferguson, former vice chairman of the Federal Reserve, appeared in an interview on CNBCwhere he talked about inflation, the Fed, and recession risks. Ferguson thinks that we are now in a "one-and-done" situation, which means that he expects the Fed to raise interest rates for the last time at the FOMC meeting in May. However, as inflation is still higher than the 2% target, Ferguson thinks that there may be a June hike as well. Here is what he said:
"I think a one-and-done is most likely, but the uniformity and the fact that inflation is still relatively high, it may leave the possibility for a June hike on the table. I would say, one-and-done much more likely but not fully baked in just yet."
The market is pricing in Fed cuts in the back half of 2023. Roger Ferguson spoke about adiscrepancy between the market's expectations and the Fed's expectations regarding interest rates in the latter part of 2023 and said that "the market is more optimistic about Fed cuts than the Fed themselves". However, economic data will be the determining factor for this as we move into the back half of 2023, noted Ferguson. According to Roger Ferguson, the Fed may keep interest rates elevated for longer than the market is expecting.
Roger Ferguson noted that sectors that are sensitive to interest rates, such as housing, are already experiencing challenges and pressures from rising rates. Ferguson thinks the Fed will keep interest rates higher for longer than the market is expecting because, though the labor market is showing signs of weakening, "it is still not soft", and there are certain parts of the economy that are still strong which will in turn keep inflation higher than 2%. According to Ferguson, "the Fed wants to really make sure that the disinflationary process is well advanced before it even starts talking about cutting rates".
Finally, Roger Ferguson talked about the risk of recession. Ferguson does not expect a severe recession, rather, he expects a shallow recession and he sees "some credit tightening in various places" as opposed to a credit crunch. Here are some comments from Roger Ferguson:
"A recession is more likely than not. I still think it's more likely to be a softer recession, as opposed to a hard one. But, the credit tightening that's certainly going on and being talked about in the Fed's Beige Book, does suggest that conditions are a little more fraught, and maybe a slightly harder recession. I'm not yet in the camp that says that we have a real credit crunch, I think we see some credit tightening in various places. Count me still in a sort of soft and shallow recession camp right now, but with the risk to the downside given the changing credit dynamics in the country."
The next FOMC meeting is nearby and a 89.1% of the market is pricing in a 25 basis point rate hike by the Fed, according to CME Group's FedWatch Tool. In times like these, investors can feel overwhelmed and confused about what stocks to pick. For risk averse investors, sticking with mature businesses that have stable revenue growth can be an approach to consider. Additionally, finding companies with stable revenue growth that are popular among institutional investors can help retail investors avoid major losses, since hedge fund sentiment is a good indicator of investor confidence in an organization. We have compiled a list of the best beginner stocks to buy in 2023 which includePepsiCo, Inc. (NYSE:PEP),UnitedHealth Group Inc. (NYSE:UNH), andMicrosoft Corporation (NASDAQ:MSFT). Let's now discuss these stocks, among others, in detail below.
Photo by Ruben Sukatendel on Unsplash
Our Methodology
To determine the best beginner stocks to buy now according to hedge funds, we scanned Insider Monkey's database of roughly 900 elite hedge funds and went through the most popular stocks among hedge funds. We narrowed down our selection to the 10 stocks that were the most widely held by money managers and had a year-over-year revenue growth rate, as well as a 3-year revenue growth rate, between 7% and 15%. The idea was to find stable companies with strong growth prospects. We have ranked these stocks in ascending order of the number of hedge funds that have stakes in them.
Best Stocks To Invest In 2023 For Beginners
10. The Sherwin-Williams Company (NYSE:SHW)
Revenue Growth (YoY): 11.05%
3-Year Revenue Growth: 7.36%
Number of Hedge Fund Holders: 64
The Sherwin-Williams Company (NYSE:SHW) is one of the best beginner stocks to buy in 2023. As of April 21, the stock has gained 9.93% over the past 6 months and is offering a forward dividend yield of 1.04%. For fiscal 2022, the company grew its revenue by 11.05% year over year. Moreover, the company has a 3-year revenue CAGR of 7.36%.
This April,Mizuho analyst Christopher Parkinson raised his price target on The Sherwin-Williams Company (NYSE:SHW) to $263 from $255 and reiterated a Buy rating on the shares.
The Sherwin-Williams Company (NYSE:SHW) was a part of 64 investors' portfolios at the end of Q4 2022. These funds held collective positions worth $2.4 billion in the company.As of December 31, Farallon Capitalis the top investor in the company and has a stake worth $328.8 million.
ClearBridge Investments made the following comment about The Sherwin-Williams Company (NYSE:SHW) in its Q4 2022 investor letter:
“A third approach to return generation is purchasing idiosyncratic businesses that largely control their own destiny. We saw mixed results from this group in the fourth quarter, with paint and coatings maker The Sherwin-Williams Company (NYSE:SHW) benefiting from significant pricing power that will allow it to grow earnings handsomely with only modest revenue increases. “
Some of the best-in-class companies with stable revenue growth include PepsiCo, Inc. (NYSE:PEP),UnitedHealth Group Inc. (NYSE:UNH), andMicrosoft Corporation (NASDAQ:MSFT).
9. Costco Wholesale Corporation (NASDAQ:COST)
Revenue Growth (YoY): 11.50%
3-Year Revenue Growth: 13.97%
Number of Hedge Fund Holders: 66
On March 2, Costco Wholesale Corporation (NASDAQ:COST) posted earnings for the fiscal second quarter of 2022. The company generated a revenue of $55.27 billion and reported an EPS of $3.30, outperforming EPS expectations by $0.10. Costco Wholesale Corporation (NASDAQ:COST) grew its revenue by 11.50% year over year in fiscal 2022, and the company has a 3-year revenue growth rate of 13.97%. The stock is placed ninth on our list of the best beginner stocks to invest in.
On April 6,Deutsche Bank analyst Krisztina Katai revised her price target on Costco Wholesale Corporation (NASDAQ:COST) to $574 from $575 and maintained a Buy rating on the shares.
At the end of the fourth quarter of 2022, 66 hedge funds were bullish on Costco Wholesale Corporation (NASDAQ:COST) and held stakes worth $3.4 billion in the company. Of those, Bridgewater Associateswas the leading shareholder and held a position worth $427.9 million.
Here is whatMadison Funds had to say about Costco Wholesale Corporation (NASDAQ:COST) in its fourth-quarter 2022 investor letter:
“Costco Wholesale Corporation (NASDAQ:COST) stock fell after November sales results showed a slowing consumer. The slower November sales were followed by a slight first quarter miss with lower-than-expected margins. Costco commented that they are not seeing trade-down but private label penetration has increased modestly. Traffic continues to be positive, and Costco remains well-positioned in a more challenging macro environment due to its strong value proposition.”
8. Humana Inc. (NYSE:HUM)
Revenue Growth (YoY): 10.31%
3-Year Revenue Growth: 12.69%
Number of Hedge Fund Holders: 67
Humana Inc. (NYSE:HUM) was held by 67 hedge funds at the end of Q4 2022. These funds held positions worth $3.9 billion in the company.As of December 31, GQG Partnersis the top shareholder in the company and has a stake worth $1 billion.
On April 11,Morgan Stanley analyst Michael Ha raised his price target on Humana Inc. (NYSE:HUM) to $637 from $620 and maintained an Overweight rating on the shares.
Humana Inc. (NYSE:HUM) has returned 11.25% to investors over the past 12 months, as of April 21. In fiscal 2022, the company grew its revenue by 10.31% year over year, and it has a 3-year revenue CAGR of 12.69%.Humana Inc. (NYSE:HUM)is one of the best beginner stocks to buy in 2023.
7. CVS Health Corporation (NYSE:CVS)
Revenue Growth (YoY): 10.56%
3-Year Revenue Growth: 7.94%
Number of Hedge Fund Holders: 70
This April,Cantor Fitzgerald took coverage of CVS Health Corporation (NYSE:CVS) with an Overweight rating and an $87 price target.
CVS Health Corporation (NYSE:CVS) grew its revenue by 10.56% year over year in fiscal 2022. The company has a 3-year revenue growth rate of 7.94%. CVS Health Corporation (NYSE:CVS)is placed seventh among the best beginner stocks to buy in 2023 and, as of April 23, is offering a forward dividend yield of 3.32%.
At the close of Q4 2022, 70 hedge funds were eager on CVS Health Corporation (NYSE:CVS) and disclosed stakes worth $2.1 billion in the company. Of those, AQR Capital Managementwas the dominant stockholder and disclosed a position worth $396 million.
In addition to CVS Health Corporation (NYSE:CVS), other blue chip stocks that are popular among elite hedge funds include PepsiCo, Inc. (NYSE:PEP),UnitedHealth Group Inc. (NYSE:UNH), andMicrosoft Corporation (NASDAQ:MSFT).
6. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Revenue Growth (YoY): 8.89%
3-Year Revenue Growth: 11.78%
Number of Hedge Fund Holders: 70
Intuitive Surgical, Inc. (NASDAQ:ISRG) reported strong earnings for the FQ1 2023 on April 18. The company reported an EPS of $1.23 and beat EPS expectations by $0.03. The company's revenue for the quarter amounted to $1.70 billion, up 14.01% year over year and ahead of Wall Street estimates by $103.41 million. Intuitive Surgical, Inc. (NASDAQ:ISRG) is one of the best beginner stocks to buy in 2023 and has a 3-year revenue CAGR of 11.78%.
On April 20,Bernstein raised its price target on Intuitive Surgical, Inc. (NASDAQ:ISRG) to $350 from $325 and reiterated an Outperform rating on the shares.
Intuitive Surgical, Inc. (NASDAQ:ISRG) was spotted on 70 hedge funds' portfolios at the end of Q4 2022. These funds disclosed collective stakes worth $3.6 billion in the company. As of December 31, Citadel Investment Group is the most prominent shareholder in the company and has a position worth $447.5 million.
ClearBridge Investments made the following comment about Intuitive Surgical, Inc. (NASDAQ:ISRG) in its Q4 2022 investor letter:
“A second way to generate alpha is through ownership of high-quality secular growth companies with countercyclical characteristics. These include several of the health care positions we have added in the last 18 months that were impacted by FX and supply chain headwinds earlier in the year but are now benefiting from the return of elective medical procedures. Advanced medical device makers Intuitive Surgical, Inc. (NASDAQ:ISRG) and Stryker (SYK) have rebounded strongly as hospitals and other payors fund the profitable surgical procedures where they supply robotics-assisted surgical tools and orthopedic implants.”
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Disclosure: None. 10 Best Stocks To Invest In 2023 For Beginnersis originally published on Insider Monkey.
It's fascinating to delve into the investment landscape for beginners in 2023. My expertise in finance and investment analysis aligns with the information provided in the article you shared.
The article emphasizes the significance of understanding market dynamics influenced by the Federal Reserve's potential actions, especially regarding interest rates. Roger Ferguson's insights about a potential "one-and-done" rate hike scenario at the FOMC meeting in May, with a possibility of another hike in June due to persistent inflation, indicate a cautious but proactive stance by the Fed.
Key takeaways from the article also highlight the discrepancy between market expectations and the Fed's stance on future interest rates. Ferguson's observations on sectors sensitive to interest rates, like housing, experiencing challenges due to rising rates, add depth to the discussion on the economic impact of these decisions.
The mention of sectors influenced by interest rates, such as housing, speaks volumes about the interconnectedness of fiscal policy and various industries. It underscores the importance of considering these factors when selecting beginner stocks. The article lists several companies based on hedge fund popularity and stable revenue growth, like PepsiCo, UnitedHealth Group, and Microsoft, indicating a focus on reliable and growth-oriented businesses for novice investors.
The methodology outlined for selecting these beginner stocks involves scanning hedge fund data to identify widely held stocks with consistent revenue growth over specific periods, showcasing a methodical approach to investment analysis. The detailed breakdown of each company's revenue growth, analyst ratings, and institutional investor sentiments offers a comprehensive view for potential investors to make informed decisions.
The listed companies like Sherwin-Williams, Costco, Humana, CVS Health, and Intuitive Surgical showcase varied sectors and financial performances, indicating diversification opportunities for beginner investors seeking stability and growth.
The article also emphasizes risk aversion by recommending mature businesses with stable revenue growth and popularity among institutional investors, considering hedge fund sentiment as a gauge for investor confidence in these organizations.
Overall, this article encapsulates a meticulous analysis of beginner stocks for 2023, blending macroeconomic insights with specific company data, offering valuable guidance for those venturing into the stock market.
