In this article, we will be taking a look at a conservative stock portfolio with the 10 best stocks to buy. To skip our detailed analysis of conservative investing in the current market, you can go directly to see the Conservative Stock Portfolio: 5 Best Stocks To Buy.
Markets are jittery again amid analyst firms downgrading banks and some circles still warning about recession despite inflation showing some signs of cooling. At the same time, the US is going through a rough patch in terms of its debt rating, what with the Fitch Ratings downgrading US debt from AAA to AA+, a move that was claimed to be influenced by deteriorating governance standards. The US financial sector is also facing yet another challenge, with Moody's this time downgrading about 11 US banks while taking 16 other negative rating actions on other regional banks in the country. All of these moves have come about in close succession to one another in July and August, putting the everyday investor in a frantic state of mind when it comes to figuring out where they can put their money and be able to rest easy.
What Is Conservative Investing?
Considering the above, there are many investors today who are looking for safe and reliable stock options to beef up their portfolios and ensure they aren't hit too hard by worrying market conditions. Because of this, conservative investing is a strategy that is coming to the forefront. This strategy entails a defensive investment style with a focus on low-risk investments. The aim of the strategy is to achieve capital security while providing investors with steady and reliable income and protection for their invested capital. Many investors look at reliable dividend stocks as part of this strategy since these stocks offer steady passive income that can tide them by in volatile markets. Blue chip stocks, or generally renowned companies with solid balance sheets and financial strength, are also top picks for conservative stock portfolios.
While building a conservative stock portfolio in the second half of 2023, investors can take a look at several sectors that have been performing well and are expected to continue this level of performance later in the year as well. These include the tech and consumer staples sectors and even the healthcare sector, among others. On August 14, Paul Meeks, a tech investor and portfolio manager at Independent Solutions Wealth Management, was invited to CNBC's TechCheck, and he said the following about the tech sector in particular:
"What I've seen is that there were a number of tech stocks that deserved to have big 2023 ramps, and there were a number of tech stocks that probably were frauds that didn't deserve it. And so unfortunately, the whole sector got grossly overbought, and now we're starting to see some reality, we're starting to see some consolidation, and I actually think that consolidation might continue a bit further."
Buying Opportunities In Tech
Meeks' insights on the tech sector can prove valuable to any conservative investors looking to buy into this sector today since he clearly lays out the ground reality of the sector by stating that stocks within this area have been overbought by eager investors. Despite this, Meeks stated that while tech weakness is expected to continue, he does see a "buying opportunity" in some tech names. The mega-cap stocks Meeks is favoring so far include Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and NVIDIA Corporation (NASDAQ:NVDA). He sees further upside for these stocks and several others in the tech sector today.
However, conservative investors should keep in mind that tech is not the only sector they can invest in at this point. While it has been overwhelmingly dominating market discourse so far this year, other sectors, such as healthcare and consumer staples, are also equally good conservative plays because of their historical performance and reliability, especially in times of recession. Considering these factors, we have compiled a list of some of the best conservative stocks to buy today. By following lists like these, investors can build up conservative stock portfolios full of some of the best stocks to buy for long-term gains as well. Additionally, these names can also be considered some of the top safe stocks to buy for beginner investors today.
Conservative Stock Portfolio: 5 Best Stocks To Buy
Pixabay/Public Domain
Our Methodology
For this article we scanned Insider Monkey's database of 943 hedge funds and picked 10 conservative (safe, reliable and defensive) stocks with the highest number of hedge fund investors. These stocks are the top conservative choices of hedge funds. The list is ranked in ascending order of the number of hedge fund investors in these stocks.
The Home Depot, Inc. (NYSE:HD) is a home improvement retail company based in Atlanta, Georgia. The company sells building materials, home improvement products, and garden products, among more. It also offers installation services for flooring, water heaters, baths, garage doors, and more.
An Outperform rating was reiterated on shares of The Home Depot, Inc. (NYSE:HD) by Timothy Horan, an analyst at Oppenheimer, on August 9. The analyst also maintains a price target of $360 on the stock.
We saw 65 hedge funds holding stakes in The Home Depot, Inc. (NYSE:HD) at the end of the first quarter. Their total stake value in the company was $2.1 billion.
Madison Investments mentioned The Home Depot, Inc. (NYSE:HD) in its second-quarter 2023 investor letter:
“The Home Depot, Inc. (NYSE:HD) celebrates 30 years of giving back. Team Depot was created in 1993 as a way of organizing associates who were eager to volunteer in their communities. For 30 years, Team Depot associates have worked side by side with non-profits around the United States. Focus areas include spending time with the elderly and activities with at risk youth. Team Depot also improves the homes and lives of veterans and helps communities impacted by natural disasters.
Like Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD) is a reliable stock for conservative investors this year.
Christopher Raymond, an analyst at Piper Sandler, maintains an Overweight rating on shares of AbbVie Inc. (NYSE:ABBV) as of July 28. The analyst also raised his price target on the stock from $163 to $170.
Based in North Chicago, Illinois, AbbVie Inc. (NYSE:ABBV) is a healthcare and biotechnology company. It offers treatments and therapies for autoimmune, intestinal Behçet's diseases, psoriasis, arthritis, dermatitis, and many more illnesses.
AbbVie Inc. (NYSE:ABBV) was spotted in the 13F holdings of 75 hedge funds in the first quarter, with a total stake value of $2.1 billion.
Adage Capital Management was the most prominent shareholder in AbbVie Inc. (NYSE:ABBV), holding 1.5 million shares in the company at the end of the first quarter.
This is what Baron Funds said about AbbVie Inc. (NYSE:ABBV) in its second-quarter 2023 investor letter:
“Apart from stock selection, the Fund also benefited from its lower exposure to AbbVie Inc. (NYSE:ABBV), whose shares were down almost 15% in the Benchmark due to concerns about the company’s growth profile after the loss of exclusivity for lead drug Humira. We exited our position during the quarter. We sold AbbVie Inc. due to our less optimistic view of the company’s pipeline and long-term growth profile.”
Fundsmith LLP was the most prominent shareholder in The Procter & Gamble Company (NYSE:PG) at the end of the first quarter, holding 4.8 million shares in the company.
The Procter & Gamble Company (NYSE:PG) is a consumer staples company. It is based in Cincinnati, Ohio. The company offers branded consumer packaged goods under several renowned brands, including Pantene, Head & Shoulders, Olay, and Old Spice. It operates through its Beauty, Grooming, Healthcare, Fabric & Home Care, and Baby, Feminine & Family Care segments.
As of August 1, Dara Mohsenian, an analyst at Morgan Stanley, holds an Overweight rating on shares of The Procter & Gamble Company (NYSE:PG). The analyst also maintains a price target of $174 on the stock.
There were 75 hedge funds long The Procter & Gamble Company (NYSE:PG) in the first quarter. Their total stake value in the company was $4.7 billion.
A total of 75 hedge funds held stakes in Merck & Co., Inc. (NYSE:MRK) in the first quarter, with a total stake value of $3.7 billion.
Merck & Co., Inc. (NYSE:MRK) is a healthcare and pharmaceutical company based in Rahway, New Jersey. The company operates through its Pharmaceutical and Animal Health segments. It offers treatments and pharmaceutical products in the areas of oncology, hospital acute care, immunology, vaccinations, and more.
Robyn Karnauskas, an analyst at Truist Securities, maintains a Buy rating on shares of Merck & Co., Inc. (NYSE:MRK) as of August 2. The analyst also raised the firm's price target on the stock from $116 to $122.
Holding 2.9 million shares in the company, Adage Capital Management was the largest shareholder in Merck & Co., Inc. (NYSE:MRK) at the end of the first quarter.
Baron Funds said the following about Merck & Co., Inc. (NYSE:MRK) in its second-quarter 2023 investor letter:
“During the second quarter, Merck & Co., Inc. (NYSE:MRK) filed the first lawsuit (followed by the filing of additional lawsuits by other parties) against the federal government challenging the constitutionality of the Medicare Drug Price Negotiation Program (the Program) that Congress established as part of the Inflation Reduction Act. In Merck’s complaint, Merck argues that the Program violates the Fifth Amendment because it allows the federal government to take Merck’s innovative drugs without providing just compensation for them. In addition, Merck argues the Program violates the First Amendment because it forces them to sign an agreement saying the government mandated prices are fair and the result of a negotiation when in fact, Merck argues, prices are not negotiated or fair. These lawsuits will take time to work their way through the legal process and in the meantime, the Program moves ahead on its scheduled path. The consensus view is that these lawsuits will not be successful, and the Program will remain in place. We suspect Merck’s arguments may convince at least a few U.S. Supreme Court Justices when the case reaches the U.S. Supreme Court, but the ultimate outcome is impossible to predict. For now, we assume the Program will remain in place and invest with that framework in mind.”
Walmart Inc. (NYSE:WMT) is another consumer staples company on our list. Based in Bentonville, Arkansas, the company operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores across the globe. It offers groceries and consumables, among more, at its stores.
Walmart Inc. (NYSE:WMT) was seen in the portfolios of 91 hedge funds at the end of the first quarter. Their total stake value in the company was $5.7 billion.
On August 14, Robert Drbul, an analyst at Guggenheim, maintained a Buy rating on shares of Walmart Inc. (NYSE:WMT). The analyst also raised his price target on the stock from $170 to $180.
Like Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and NVIDIA Corporation (NASDAQ:NVDA), Walmart Inc. (NYSE:WMT) is a top-tier pick for a conservative stock portfolio.
