In this article, we will take a look at 12 safe stocks to invest in for the long term in 2023. To see more such companies, go directly to 5 Safe Stocks To Invest In For The Long-Term in 2023.
Since the onset of the recession triggered by the coronavirus pandemic, the primary concern for investors across the board has been inflation. While elevated prices may benefit businesses by increasing their revenue, they also necessitate cost-cutting measures, leading to financial constraints. Simultaneously, a prudent central bank must respond swiftly to inflation to prevent it from becoming a lasting aspect of the economy. This entails the need to raise interest rates, which is a two-edged sword capable of imposing additional challenges on both businesses and consumers.
As the fourth quarter commences, American investors are grappling with a challenging start after a challenging September that cast a shadow over this year’s strong stock market performance. The S&P 500 saw a significant 5% dip in September, marking it as the poorest-performing month for the index throughout the year. In a similar vein, the Nasdaq Composite and Dow Jones Industrial Average also saw declines of 6% and 4%, respectively. As part of its efforts to control inflation, the Federal Reserve has implemented 11 interest rate hikes since March 2022, bringing its key rate to approximately 5.4%, the highest it has reached in 22 years. While inflation has decreased from its previous highs in the last year, there is still a distance to cover before it aligns with the Fed’s 2% inflation target. Achieving this target is likely to necessitate a slowdown in economic growth.
Raphael Bostic, President of the Atlanta Federal Reserve, pointed out advancements in managing inflation and a decelerating economy. In an interview with CNBC, the central bank official emphasized that there remains a significant amount of effort required before the Federal Reserve attains its annual inflation target of 2%:
“There’s still a lot of momentum in the economy. My outlook says that inflation is going to come down but it’s not going to like fall off a cliff. It’ll be sort of a progression that’s going to take some time. And so we’re going to have to be cautious, we’re going to have to be patient, but we’re going to have to be resolute.”
“I really do try to keep people focused on what inflation is, still at 3.7%. Our target is 2. They’re not the same, and we have to get a lot closer to the 2% before we’re going to consider … any kind of relaxation of our posture.”
With all that said, dedicated long-term investors pay little heed to the tumultuous short-term fluctuations in stock markets. Instead of being entangled in the uncertainties of such rapid changes, they opt to invest in shares of steadfast companies known for their consistent performance, which is evaluated over extended periods, often spanning years or even decades. Although the notion of investing in entirely risk-free stocks might be enticing to many, the reality is that there’s no stock that can guarantee 100% safety. Even the most reputable companies can encounter unforeseen challenges, and substantial fluctuations in stock prices are not uncommon, even for the most resilient corporations. This was evident in the initial stages of the COVID-19 pandemic when several robust companies witnessed steep declines in their stock values, and this trend has persisted into 2023. Nevertheless, it’s worth noting that certain stocks, which include household names like Costco Wholesale Corporation (NASDAQ:COST), Walmart Inc. (NYSE:WMT), and Berkshire Hathaway Inc. (NYSE:BRK-B), are notably more secure than others.
Photo by nick chong on Unsplash
Our Methodology:
For our list of the 12 safe stocks to invest in for the long term in 2023, we scanned Insider Monkey’s database of more than 910 hedge funds and picked 12 stocks that can provide financial stability to investors that are focused on long term investing. These stocks belong to defensive sectors like consumer staples, healthcare, and energy. Many of these companies have solid dividend histories and enjoy a stable market position. The list is arranged according to the number of hedge fund holders in each firm.
12. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 58
Colgate-Palmolive Company (NYSE:CL) is a multinational corporation headquartered in Midtown Manhattan, New York City, located on Park Avenue. The company specializes in the production, distribution, and sale of a wide range of household, healthcare, personal care, and veterinary products.
On October 16, Stifel raised its rating on Colgate-Palmolive (NYSE:CL) to a ‘buy,’ while also slightly lowering the price target by 5% to $81. This adjustment still suggests a potential 14% increase from the closing price of $70.95 on October 13. Mark Astrachan, an analyst at Stifel, provided several reasons for this upgrade. These factors encompass the anticipation of a strong performance from Hill’s pet food division, an expected enhancement in pricing power that could lead to an expansion of Q3 gross margins, and potential sales growth in 2023.
On September 14, the company announced a quarterly dividend of $0.48 per share, maintaining its consistent dividend policy. Impressively, Colgate-Palmolive (NYSE:CL) has increased its dividends for a remarkable streak of 61 consecutive years. As of October 24, the stock offered a dividend yield of 2.64%.
58 out of the 910 hedge funds part of Insider Monkey’s database had invested in the company as of Q2 2023. Out of these, Colgate-Palmolive Company (NYSE:CL)’s largest shareholder is Jean-Marie Eveillard’s First Eagle Investment Management due to its $854 million stake.
Much like Costco Wholesale Corporation (NASDAQ:COST), Walmart Inc. (NYSE:WMT), and Berkshire Hathaway Inc. (NYSE:BRK-B), Colgate-Palmolive Company (NYSE:CL) is one of the best safe stocks that long term investors should take note of.
11. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
NextEra Energy, Inc. (NYSE:NEE) is a U.S.-based energy corporation, holding an impressive 67 GW of generating capacity. The company has outlined substantial investment plans, targeting an estimated $85-$95 billion in renewable infrastructure within the United States by the year 2025. Established in 1984, NextEra Energy, Inc. (NYSE:NEE) is one of the largest electric utility holding company by market capitalization in the United States.
Guggenheim analysts, on October 9, adjusted the price target for NextEra Energy Inc. (NYSE:NEE) shares, reducing it from $73 to $65, while retaining their Buy rating for the stock. The analysts assert that the stock exhibited some vulnerability in September 2023 due to a surge in interest rates, but they emphasize that these risks are temporary. Following this period of fluctuation, the stock’s valuation has normalized, presenting an appealing investment opportunity.
NextEra Energy, Inc. (NYSE:NEE) was a part of 59 hedge fund portfolios, the same as in the previous quarter, as per Insider Monkey’s database. The collective value of stakes owned by these hedge funds is over $918.3 million.
10. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 61
Established in 1892, The Coca-Cola Company (NYSE: KO) is a well-regarded American multinational corporation recognized for its iconic beverage, Coca-Cola. Beyond its flagship product, the company plays a significant role in the production, distribution, and marketing of a wide range of non-alcoholic beverage concentrates, syrups, and notably, alcoholic beverages within the beverage industry. Arguably one of the best safe stocks to invest in, the company has been raising its dividends consistently for the past 61 years, currently offering a quarterly dividend of $0.46 per share with a dividend yield of 3.31%, as of October 24.
The Coca-Cola Company (NYSE:KO) exceeded expectations in the third quarter, surpassing estimates on both revenue and earnings despite implementing price increases. The beverage company reported a net income of $3.09 billion, equivalent to $0.74 per adjusted share, marking a 7% increase from the corresponding quarter the previous year and surpassing the consensus estimate of $0.69 cents per share. Revenue stood at just under $12 billion, reflecting an 8% growth compared to the prior year and exceeding the estimated $11.4 billion.
During Q2 2023, 61 out of the 910 hedge funds polled by Insider Monkey had held a stake in The Coca-Cola Company (NYSE:KO). Out of these, none other than Warren Buffett’s Berkshire Hathaway is the firm’s biggest shareholder since it owns a whopping 400 million shares for a $24 billion investment.
9. CVS Health Corporation (NYSE:CVS)
Number of Hedge Fund Holders: 66
CVS Health Corporation (NYSE:CVS) is a U.S.-based healthcare entity with its headquarters in the country, overseeing an extensive network of retail pharmacies and clinics nationwide. The company manages a variety of brands, including CVS Pharmacy, a retail pharmacy chain; CVS Caremark, a pharmacy benefits manager, and Aetna, a health insurance provider.
During the second quarter of 2023, CVS Health Corporation (NYSE:CVS) reported revenue of approximately $89 billion, representing a notable 10.3% increase compared to the corresponding period in the previous year. Year-to-date, it generated an operating cash flow of $13.3 billion and distributed $795 million to shareholders through dividends in the same quarter.
At the conclusion of the second quarter in 2023, Insider Monkey’s database, which tracks 943 hedge funds, reported that 66 hedge funds held stakes in CVS Health Corporation (NYSE:CVS). The primary stakeholder was John Overdeck and David Siegel’s Two Sigma Advisors, possessing a significant stake in the company valued at $398.9 million.
Coho Partners Relative Value Equity Fund made the following comment about CVS Health Corporation (NYSE:CVS) in its second quarter 2023 investor letter:
“In December of 2017, CVS Health Corporation (NYSE:CVS) agreed to buy Aetna, which broadened its offering by entering the managed care business. CVS has been moving its portfolio to a more value-based outcome model, and Aetna was a major move in that direction. We were willing to accept the leverage that came with the deal because CVS has a very cash generative model, and we anticipated the free cash flow would enable the company to de-lever fairly quickly.
By mid-2022, CVS was in a position to use the free cash flow that had been going to debt repayment to do bolt-on deals to further prepare for the value-based outcome model and/or return more cash to shareholders in the form of higher dividends or share repurchases. However, CVS lost a “star” in its largest Medicare plan in late 2022 and this will adversely impact earnings in 2024. This was a surprise and disappointment to us, but management should be able to regain the “star” in the back half of 2023, which will then give the company a nice tailwind in 2025…” (Click here to read the full text)
8. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 67
Costco Wholesale Corporation (NASDAQ:COST) operates an international chain of membership warehouses, mainly under the “Costco Wholesale” name, that carry quality, brand-name merchandise at substantially lower prices than are typically found at conventional wholesale or retail sources. On October 18, the company disclosed an unaltered quarterly dividend of $1.02 per share, maintaining its consistent dividend policy. This marks the 19th consecutive year of dividend increases, positioning Costco Wholesale Corporation (NASDAQ:COST) as one of the best long term stocks in our selection. As of October 24, the stock boasts a dividend yield of 0.74%.
According to Insider Monkey’s data, 67 hedge funds were long Costco Wholesale Corporation (NASDAQ:COST) at the end of Q2 2023, compared to 63 funds in the earlier quarter. Ray Dalio’s Bridgewater Associates is one of the most prominent stakeholders of the company, with 807,709 shares worth more than $434.8 million.
RiverPark Advisors mentioned Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2023 investor letter. Here is what the firm has to say:
“Costco Wholesale Corporation (NASDAQ:COST), founded in 1983, is the world’s third-largest retailer with 850 stores, $240 billion in revenue and 68 million members spread across North America, Europe, Asia, and the Southern Pacific Region. The company is known for its strong value proposition driven by high-quality low-cost offerings including a well-regarded private-label brand. Costco regularly ranks at the top of customer surveys related to brand trust, product price and quality, and all-around experience. Historically, 90% of the company’s shoppers renew their memberships, which generate more than 50% of operating income.
Through expanding market share, new store openings, increasing member productivity, and omnichannel expansion, we believe the company can grow revenues annually in the high single digit percentage range. This revenue growth should yield steadily growing margins and EPS growth in the low-to-mid-teens, which should drive shareholder returns in the same range.”
7. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 68
McDonald’s Corporation (NYSE:MCD) is a U.S.-based multinational fast-food chain. It was originally founded as a restaurant by Richard and Maurice McDonald in 1940. In 2022, the company experienced a 5% increase in its systemwide sales compared to the prior year, and its global comparable sales grew by an impressive 10.9% year-over-year.
Notably, the fast-food giant has maintained an impressive record of 46 consecutive years of increasing dividends, marking it as an ideal option for investors that are interested in safe stocks for the long term. On October 5, the company revealed a substantial 10% raise in its quarterly dividend, which now stands at $1.67 per share. With this adjustment, the company extended its streak of 47 consecutive years of dividend growth. As of October 24, the stock’s dividend yield is at an impressive 2.60%.
At the end of June 2023, 68 hedge funds in Insider Monkey’s database reported having stakes in McDonald’s Corporation (NYSE:MCD), up from 64 in the previous quarter. The consolidated value of these stakes is over $4.2 billion. Ken Griffin’s Citadel Investment Group is among the largest shareholders in McDonald’s Corporation (NYSE:MCD).
6. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 68
PepsiCo, Inc. (NASDAQ:PEP), headquartered in Purchase, a part of Harrison, New York, stands as a prominent American multinational corporation within the food, snack, and beverage sector. Widely regarded as one of the best safe stocks to invest in, the company’s enduring financial stability is highlighted by its 51-year streak of consistent dividend growth.
In its recently disclosed third-quarter earnings for 2023, PepsiCo, Inc. (NASDAQ:PEP) reported an operating cash flow of $7.6 billion, a notable increase from the $6.3 billion recorded during the same period the previous year. For the fiscal year 2023, the company anticipates distributing $6.7 billion to its shareholders through dividends.
As of the conclusion of Q2 2023, PepsiCo, Inc. (NASDAQ:PEP) was included in 68 hedge fund portfolios, according to data from Insider Monkey’s database. The most significant stakeholder was Fundsmith LLP, retaining 6.6 million shares of this New York-based beverage manufacturer, with a total value of $1.2 billion. Notably, over the past five years, the company’s shares have experienced an impressive surge of approximately 51%.
PepsiCo, Inc. (NASDAQ:PEP) has consistently ranked among the likes of Costco Wholesale Corporation (NASDAQ:COST), Walmart Inc. (NYSE:WMT), and Berkshire Hathaway Inc. (NYSE:BRK-B) as one of the best safe stocks for long term investors.
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Disclosure: None. 12 Safe Stocks To Invest In For The Long-term in 2023 is originally published on Insider Monkey.