We recently compiled a list of the 10 Best Low Volatility Stocks to Invest in Now. In this article, we are going to take a look at where Merck & Co., Inc. (NYSE:MRK) stands against the other low volatility stocks. We will also discuss the latest updates around the market and political situation of the US.
Market Begins November on a Dynamic Note
The first week of November has been quite eventful so far. Presidential candidate Donald Trump won the election and President Joe Biden, speaking from the Rose Garden after the election, pledged a peaceful transition of power on January 20.
Moreover, Federal Reserve Chair Jerome Powell announced a quarter-point rate cut on November 7, aimed at supporting strong employment and steady inflation. Economic indicators show solid growth, with GDP rising by 2.8% in the third quarter and consumer spending remaining strong. While the housing sector remains weak, other areas like equipment investment have strengthened.
The labor market shows resilience despite a slowdown in job gains and an uptick in the unemployment rate to 4.1%. Inflation has cooled significantly, nearing the Fed’s 2% target. However, core inflation remains slightly above that level.
In response to questions, Chair Powell noted that the U.S. election isn’t expected to influence near-term Fed policy, as future policy changes and their economic effects remain uncertain. He acknowledged that higher Treasury yields likely reflect expectations of stronger economic growth rather than inflation concerns.
Looking ahead to December, Powell stated that the Fed will assess data on inflation, employment, and economic growth to determine if further policy recalibration is needed. He emphasized the Fed’s effort to balance rate adjustments to avoid moving too quickly or too slowly, aiming to sustain a strong labor market while bringing inflation closer to the 2% target.
The market is taking the news well and all three major market indices closed at all-time highs on November 7. While things seem to be on track, it is important to note that such events sometimes also bring volatility and uncertainty.
Read Also: 10 Best Stocks Under $100 To Invest In and 10 Best Stocks to Buy and Hold For 5 Years.
Economic Outlook in an Era of Unpredictable Policies
In a recent interview on CNBC’s Squawk Box, Former Federal Reserve Vice Chairman Roger Ferguson discussed the complexities surrounding recent economic and policy changes. Ferguson noted that the Federal Reserve’s approach remains cautious, taking a “wait-and-see” stance to assess how policies impact the economy.
He mentioned Fed Chair Powell’s resistance to providing overly specific future guidance and instead emphasized data-based decisions. Additionally, Ferguson highlighted that external factors such as tariffs and changes in the energy market could create varied inflationary pressures. While deregulation might counterbalance some inflation risks, tariffs could still add complexity.
The conversation touched on the “neutral rate,” with Ferguson indicating that it will play a crucial role moving forward, especially given shifts in bond yields and their impact on inflation expectations. Ferguson conveyed that uncertainty in policy directions requires flexibility in economic responses, with ongoing adjustments as more details unfold.
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify around 250 large to mega-cap stocks with a 5-year beta (monthly) between 0.2 and 0.8. We narrowed our list to 10 stocks most widely held by institutional investors and listed them in ascending order of their hedge fund sentiment. The hedge fund sentiment was taken from Insider Monkey’s Q2 database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a person’s hand holding a bottle of pharmaceuticals.
Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 96
5-year Beta (Monthly): 0.41
Merck & Co., Inc. (NYSE:MRK) is a global healthcare company divided into two main segments: Pharmaceutical and Animal Health. The Pharmaceutical segment offers a wide range of human health products, including treatments for oncology, immunology, neuroscience, and more, with notable brands such as Keytruda, Gardasil, Winrevair, and Bravecto, with Keytruda standing out as a major success in immuno-oncology for treating various cancers.
Concerns about Keytruda’s (the company’s most successful drug) U.S. patent expiration in 2028 have led to discounted stock prices and also made it to our list of the worst performing dow stocks. However, the company still currently has a strong product pipeline, and its late-stage clinical development programs include 80 programs in Phase 2, over 30 in Phase 3, and 10 programs under review.
Although Keytruda’s patent expiration remains a cause for concern among investors, Merck (NYSE:MRK) still has a few years left for it. In the third quarter, the company’s total worldwide sales were up 4% year-over-year at $16.7 billion and Keytruda sales grew 17% (21% excluding the impact of foreign exchange) to $7.4 billion.
Moreover, analysts see the company’s new product launches such as Winrevair, and the company’s fundamentals in a positive light. On November 1, TipRanks reported that BMO Capital maintained a Buy rating on the company stock with a price target of $136. Despite a decline in Gardasil (the company’s HPV vaccine) revenues in China, leading to reduced revenue projections for 2024 and 2025, Seigerman believes Merck’s (NYSE:MRK) business fundamentals remain strong.
The analyst views the company’s share price drop since Q2 2024 as an overreaction. He highlighted the growth potential in Winrevair, driven by increasing demand and upcoming trials in 2025.
Overall MRK ranks 4th on our list of the best low volatility stocks to invest in now. While we acknowledge the potential of MRK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MRK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.