In this article, we will take a detailed look at the 12 Best Slow Growth Stocks To Buy According To Hedge Funds. For a quick overview of such stocks, read our article 5 Best Slow Growth Stocks To Buy According To Hedge Funds.
It would be interesting to see how markets react to the latest events after a statement from Federal Reserve Bank of New York President John Williams rained on investors’ parade. Williams said the Fed is not talking about rate cuts and it would be premature to discuss them. Some analysts are also saying that it would be overly optimistic to think that the Fed would cut rates in the first quarter. Most of the analysts believe rate cuts should be expected in the second half of 2024. Nonetheless, it seems the market’s worst fears are now in the rear view as sooner or later the Fed would start decreasing interest rates, assuming the inflation monster does not come back.
Valuations “Reasonable” Despite 2023 Rally
Talking to CNBC, Marta Norton, Morningstar Wealth CIO to the Americas, said that despite the stock market rally of 2023, valuations are still “pretty reasonable.” Norton said most of the stock market gains in 2023 were driven by AI, and she expects underperforming sectors of the year to post better returns next year. These include regional banks, utilities and small-cap stocks.
Methodology For this article we first used a stock screener to identify large-cap stocks with low but stable sales growth (under 10%) over the past five years. The intention was to find stable, blue-chip companies that offer certain, albeit slow, growth and stability to investors. From this dataset we picked 12 stocks with the highest number of hedge fund investors.
12. Walmart Inc (NYSE:WMT)
Number of Hedge Fund Investors: 80
Walmart Inc (NYSE:WMT) ranks 12th in our list of the best slow growth stocks to buy according to hedge funds. Recently, Goldman Sachs said in its retail outlook report for 2024 that deflation in 2024 could help Walmart Inc (NYSE:WMT), among other stocks.
“We would expect unit growth to improve, especially in discretionary categories,” Goldman Sachs’ analysts wrote.
A total of 80 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Walmart Inc (NYSE:WMT) as of the end of the third quarter of 2023.
11. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Investors: 84
Johnson & Johnson (NYSE:JNJ) is one of the healthcare behemoths enjoying slow but steady growth over the past several years. As a result Johnson & Johnson’s (NYSE:JNJ) shareholders get regular dividend payments. Johnson & Johnson (NYSE:JNJ) has upped its dividend consistently over the past six decades.
A total of 84 hedge funds in Insider Monkey’s database had stakes in Johnson & Johnson (NYSE:JNJ).
ClearBridge Large Cap Value Strategy made the following comment about Johnson & Johnson (NYSE:JNJ) in its Q3 2023 investor letter:
“The health care space provided some opportunities in the quarter, as we increased our exposure to medical device company Becton, Dickinson as well as large cap pharmaceutical company Johnson & Johnson (NYSE:JNJ). Johnson & Johnson recently spun out its consumer health care business, becoming a more focused yet broadly diversified pharmaceutical and medtech company.”
10. Merck & Co Inc (NYSE:MRK)
Number of Hedge Fund Investors: 85
Merck & Co Inc (NYSE:MRK) ranks 10th in our list of the best slow growth stocks to buy according to hedge funds. A total of 85 hedge funds in Insider Monkey’s database had stakes in Merck & Co Inc (NYSE:MRK). The biggest stakeholder of Merck & Co Inc (NYSE:MRK) during this period was Ken Fisher’s Fisher Asset Management which owns a $1.4 billion stake in Merck & Co Inc (NYSE:MRK).
Merck & Co Inc (NYSE:MRK) is also a dividend payer. Merck & Co Inc (NYSE:MRK) has been raising its dividend consistently over the past several years. In November, Merck increased its dividend by 5.5%.
Carillon Eagle Mid Cap Growth Fund made the following comment about Merck & Co., Inc. (NYSE:MRK) in its Q3 2023 investor letter:
“Merck & Co., Inc. (NYSE:MRK) underperformed in the third quarter, based on what we view as largely macroeconomic-related factors. The company continues to execute well, both clinically and fundamentally, but much of the biopharmaceutical industry has been weak as investors are gravitating to other, more cyclical sectors.”
9. Oracle Corp (NYSE:ORCL)
Number of Hedge Fund Investors: 88
Oracle Corp (NYSE:ORCL) shares jumped about 19% in 2023 through December 15. The stock is however wavering over the past few weeks amid signs of slowing growth in Cloud business.
Earlier this month, Oracle Corp (NYSE:ORCL) posted fiscal second quarter results. Adjusted EPS in the period came in at $1.34, surpassing estimates by $0.01. Revenue in the quarter jumped 5.4% year over year to $12.94 billion, missing estimates by $110 million.
In November, Edward Jones upgraded the stock, citing sales growth.
“While behind larger peers, the company has aggressively pushed into offering cloud services, providing another alternative to customers. The company’s transition from licensing its products to providing them on a subscription basis in the cloud will drive accelerated sales growth for the company,” Edward Jones said in a note.
Aristotle Atlantic Core Equity Strategy made the following comment about Oracle Corporation (NYSE:ORCL) in its third quarter 2023 investor letter:
“Oracle Corporation (NYSE:ORCL) provides products and services that address enterprise information technology (IT) environments. The company’s products and services include enterprise applications and infrastructure offerings that are delivered worldwide through a variety of flexible and interoperable IT deployment models. The company operates in three segments: cloud and license business, hardware, and services.
We believe Oracle’s cloud infrastructure product, OCI 2.0, continues to demonstrate strong revenue growth over several quarters. Additionally, we see the rapid growth of artificial intelligence (AI) computing needs as being a differentiated growth driver for Oracle. We believe that Oracle will continue to drive positive outcomes for the Cerner business through a better margin structure, as well as topline sales synergies.”
8. Bank of America Corp (NYSE:BAC)
Number of Hedge Fund Investors: 88
Bank of America Corp (NYSE:BAC) is another mature, stable and slow growing company in our list of the best slow growth stocks to buy according to hedge funds. After the Fed’s signal that it plans to start cutting interest rates in 2024, Odeon Capital analyst Dick Bove upgraded Bank of America Corp (NYSE:BAC), including several other bank stocks, as the analyst believes a decline in interest rates would increase these banks’ asset values and real equity. The analyst said that he was upgrading these stocks because of projected higher equity values and increasing price-to-book value multiples.
A total of 88 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Bank of America Corp (NYSE:BAC). The most significant stake in Bank of America Corp (NYSE:BAC) belongs to Warren Buffett’s fund.
Diamond Hill Select Strategy made the following comment about Bank of America Corporation (NYSE:BAC) in its Q2 2023 investor letter:
“Other bottom contributors included SunOpta, Bank of America Corporation (NYSE:BAC) and Texas Instruments. Bank of America (which we added to the portfolio in Q2) is among the US’s largest banks. Shares were pressured during the quarter against a still-challenging backdrop for banks, particularly as investors fret about rising deposit costs and the values of some longer-duration assets in a rising-rates environment.”
7. Walt Disney Co (NYSE:DIS)
Number of Hedge Fund Investors: 89
Walt Disney Co (NYSE:DIS) is not having a good time amid troubles in its business driven by rising competition. But some analysts believe Walt Disney Co (NYSE:DIS) can see a turnaround under the leadership of Bob Iger.
As of the end of the third quarter of 2023, 89 hedge funds had stakes in the entertainment giant. The biggest stakeholder of Walt Disney Co (NYSE:DIS) during this period was Nelson Peltz’s Trian Partners which owns a $2.6 billion stake in Walt Disney Co (NYSE:DIS). Trian recently said it was nominating two members to the board of Walt Disney (NYSE:DIS), including Trian founder Nelson Peltz.
In a letter dated December 14, the hedge fund said:
“Disney is one of the most iconic companies in the world with unrivaled scale, unparalleled customer loyalty, irreplaceable intellectual property (“IP”), and an enviable commercial flywheel. However, Disney has woefully underperformed its peers and its potential. Earnings per share (“EPS”) in the most recent fiscal year were lower than the EPS generated by Disney a decade ago and were over 50% lower than peak EPS despite over $100 billion of capital invested. Margins in both Disney’s Direct-to-Consumer business and its consolidated media operations significantly lag peers despite Disney having scale and superior IP. For shareholders, this subpar performance has destroyed value. Disney stock has underperformed the stocks of Disney’s self-selected proxy peers and the broader market over every relevant period during the last decade and during the tenure of each non-management director. Furthermore, it has underperformed since Bob Iger was first appointed CEO in 2005 – a period during which he has served as CEO or Executive Chairman (directing the Company’s creative endeavors in this role) for all but 11 months. Disney shareholders were once over $200 billion wealthier than they are now.”
Madison Sustainable Equity Fund made the following comment about The Walt Disney Company (NYSE:DIS) in its Q3 2023 investor letter:
“During the quarter, we sold our positions in Bristol-Myers Squibb and The Walt Disney Company (NYSE:DIS). The Walt Disney Company is facing a difficult and uncertain transition in its core media business assets including the ESPN business and other linear media assets. These media assets are cash generative but face secular decline as consumers are cutting their expensive cable subscriptions and moving to alternative streaming options. This has resulted in a decline in operating profits for the media division. The media business has long-term fixed costs related to its sports broadcasting agreement with multiple sports leagues which will further pressure profits during this transition.”
6. Union Pacific Corp (NYSE:UNP)
Number of Hedge Fund Investors: 90
Union Pacific Corp (NYSE:UNP) is one of the best slow growth stocks to buy according to hedge funds. In October, the railroad company’s stock was upgraded by Deutsche Bank to Buy from Hold. The bank cited increased rail volumes as a catalyst for the business. The bank also set a $235 price target on Union Pacific Corp (NYSE:UNP) stock.
As of the end of the third quarter of 2023, 90 hedge funds in Insider Monkey’s database of funds had stakes in Union Pacific Corp (NYSE:UNP).
Cooper Investors made the following comment about Union Pacific Corporation (NYSE:UNP) in its Q3 2023 investor letter:
“The major focus in Texas was spending a day visiting operations of Union Pacific Corporation (NYSE:UNP), a Stalwart investment made earlier this year.
Our investigations into the railroad industry have felt like a history lesson of the late 19th Century, a peek into the Gilded Age. At this time railroads became a transformative force that connected the East Coast to the Western frontier, pushing the economic potential of US industry and commerce to new heights. Over a century later and despite technological upheaval, the freight railroads of North America still feel just as relevant and a key part of the new industrial age.
To own, operate and invest in a railroad is to be a part of the lifeblood of North America. It is to witness the movement of grain, concrete, steel, wood, energy, autos, and shipping containers across vast distances. These are irreplaceable assets that could not be built today, and for the most part have very few substitutes – UNPs tagline “Building America” certainly rings true…” (Click here to read the full text)
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Disclosure. None. 12 Best Slow Growth Stocks To Buy According To Hedge Funds was initially published on Insider Monkey.
