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In this article, we discuss 14 best beginner stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Beginner Stocks to Buy Now.
As per Goldman Sachs, the stock market will experience relatively less pain next year compared to 2022 but there will be no gains, as enterprises post slow earnings growth through the rest of 2023. Assuming the Federal Reserve can manage a soft landing, Wall Street analysts forecast that earnings per share in the S&P 500 would be flat at $224 in 2023, and the index would drop by 2% to 3,900 over the next six months. However, a hard economic landing is entirely possible, with analysts expecting that earnings per share would decline 11% to $200 in that scenario, and the S&P 500 would plummet 21% to 3150.
In an economic backdrop consisting of slow growth, reduced inflation, and new monetary policies, Morgan Stanley predicts that 2023 will bring upside for bonds, defensive equities, and emerging markets. Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley Research, said on November 22:
“For markets, this presents a very different backdrop than 2022, which was marked by resilient growth, high inflation and hawkish policy. Overall, 2023 will be a good year for income investing.”
People who are just starting out their investment journeys are often unsure where to put their money in such a volatile environment. Some of the best beginner stocks to monitor include PayPal Holdings, Inc. (NASDAQ:PYPL), Amazon.com, Inc. (NASDAQ:AMZN), and UnitedHealth Group Incorporated (NYSE:UNH).
Our Methodology
The best stocks for beginner investors are usually safer stocks that pay dividends so that these investors aren't discouraged by large losses that are experienced more frequently by smaller-cap risky stocks that also offer potentially higher returns. Every investor's dream is to uncover safe stocks that can deliver large returns. At Insider Monkey we focus on the stocks that are favored by hedge funds and our monthly newsletter's stock picks managed to outperform the S&P 500 Index funds by 74 percentage points over the last 5.5 years. Beginner investors can subscribe to our free daily newsletter to read about some of the stocks hedge funds are piling into.
For this article we selected stocks which are defensive in nature, offer strong market visibility, can thrive in the rising rates environment, have resilient dividend profiles, and display a longstanding history of surviving turbulent market environments. We have also considered some stocks priced under $100 for beginner investors with limited money. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.
Photo by Adam Nowakowski on Unsplash
Best Beginner Stocks to Buy Now
14. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 37
Archer-Daniels-Midland Company (NYSE:ADM) is an Illinois-based company that procures, transports, processes, and commercializes agricultural commodities, products, and ingredients in the United States, Switzerland, Cayman Islands, Brazil, Mexico, the United Kingdom, and internationally. On November 2, Archer-Daniels-Midland Company (NYSE:ADM) declared a quarterly dividend of $0.40 per share, in line with previous. The dividend is payable on December 7, to shareholders of record on November 16.
Baird analyst Ben Kallo on October 26 raised the price target on Archer-Daniels-Midland Company (NYSE:ADM) to $98 from $94 and maintained an Outperform rating on the shares. The analyst said he remains a buyer as underlying demand continues to be resilient while Archer-Daniels-Midland Company (NYSE:ADM) navigates a mixed supply chain and exchange rate environment. He also said management continues to add value to shareholders through share repurchases and strategic M&A, setting up a robust long-term outlook.
According to Insider Monkey’s data, 37 hedge funds were bullish on Archer-Daniels-Midland Company (NYSE:ADM) at the end of September 2022, compared to 42 funds in the prior quarter. Tom Gayner’s Markel Gayner Asset Management is the largest position holder in the company, with 1.4 million shares worth $117.7 million.
Like PayPal Holdings, Inc. (NASDAQ:PYPL), Amazon.com, Inc. (NASDAQ:AMZN), and UnitedHealth Group Incorporated (NYSE:UNH), Archer-Daniels-Midland Company (NYSE:ADM) is one of the best stocks for a beginner investment portfolio.
Here is what Diamond Hill Long-Short Fund has to say about Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter:
“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
13. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 39
Shell plc (NYSE:SHEL), the British energy and petrochemical company, is one of the best beginner stocks to invest in. On November 28, Shell plc (NYSE:SHEL) announced that it has agreed to acquire Danish biogas producer Nature Energy Biogas from Davidson Kempner Capital Management for approximately $2 billion. After acquiring Europe's biggest producer of renewable natural gas, Shell plc (NYSE:SHEL) will expand its established customer base across several sectors and boost its transition to net-zero emissions.
On November 11, Piper Sandler analyst Ryan Todd raised the price target on Shell plc (NYSE:SHEL) to $71 from $65 and kept an Overweight rating on the shares. The Q3 results were incrementally bullish for the integrated oil 2023 macro outlook, the analyst wrote in a research note.
Among the hedge funds tracked by Insider Monkey, Shell plc (NYSE:SHEL) was part of 39 public stock portfolios at the end of September 2022, and Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 20.7 million shares worth $1 billion.
Here is what Harding Loevner International Equity Fund has to say about Shell plc (NYSE:SHEL) in its Q1 2022 investor letter:
“While risks of unforeseen consequences arising from the Ukraine conflict are high, on this front we are cautiously optimistic that China will work hard to maintain its neutrality in a credible way, as it is a huge beneficiary of trade with the rest of the world, especially the rich developed nations. We think it likely that China, along with India, will continue to buy oil and gas from Russia (just as Europe, at least for now, plans to keep its gas pipelines open), and do not expect that fact to alter China’s trade relations with the West much. Nevertheless, we must contemplate that our optimism is misplaced on the importance of membership in the global network of exchange. If our central and optimistic case—admittedly an educated guess—is wrong, then we’d need to greatly modify our views of which companies in our opportunity set will face new barriers to profitable growth, and which might stand to benefit, relatively, from a further receding of globalization. (Global trade, after all, has never matched the peak share of GDP it reached in 2008, before the Global Financial Crisis.) We’d expect such a world to be less efficient, as the cold logic of comparative advantage is demoted as a determinant of which goods or services are produced and where. That would lead to a less prosperous world, since exploiting comparative advantage is a cornerstone of wealth creation. If regional blocs began to raise limits on the movement of capital as well as goods, we’d need to parse which of our multinational companies were at risk of declining sales from increasingly hostile, siloed countries. Royal Dutch Shell (NYSE:SHEL) has found its Siberian oil and gas joint venture assets stranded by the combination of sanctions and the public opprobrium of Russia’s actions.”
12. Morgan Stanley (NYSE:MS)
Number of Hedge Fund Holders: 52
Morgan Stanley (NYSE:MS) is a New York-based financial holding company that provides financial products and services to enterprises, governments, financial institutions, and individuals in the Americas, Europe, the Middle East, Africa, and Asia. On November 9, Morgan Stanley (NYSE:MS) ventured back into the global exchange traded fund marketplace with the launch of the Innovator Equity Managed Floor ETF (NYSE:SFLR). SFLR is a new fund that offers a 0.89% expense ratio, 256 portfolio holdings, and seeks to provide actively managed floors that attempt to limit losses to 10% each year.
On October 17, Citi analyst Keith Horowitz maintained a Buy recommendation on Morgan Stanley (NYSE:MS) but trimmed the price target on the shares to $90 from $97. The bank had a "slight miss" in Q3 2022 as the business model works best in upward trending markets, but posting a 15% ROTCE in tight market conditions "speaks to the durability of the revenue stream," the analyst told investors in a research note.
According to Insider Monkey’s data, 52 hedge funds were bullish on Morgan Stanley (NYSE:MS) at the end of Q3 2022, compared to 58 funds in the last quarter. Boykin Curry’s Eagle Capital Management is a significant stakeholder of the company, with 12.6 million shares worth $996.4 million.
Here is what Madison Dividend Income Fund has to say about Morgan Stanley (NYSE:MS) in its Q3 2022 investor letter:
“This quarter we are highlighting Morgan Stanley (NYSE:MS) as a relative yield example in the Financial sector. MS is a leading investment bank and wealth management firm with approximately $5 trillion of client assets under management. It merged Citigroup’s Smith Barney business into its own wealth management business after the 2008 recession/financial crisis, which resulted in a more stable business model. Recent acquisitions of asset manager Eaton Vance and E-Trade provide additional stability and higher returns on capital. We believe MS has a sustainable competitive advantage due to its size and scale, global reach, strong reputation, and financial distribution capabilities. Importantly for a financial institution, it is in good financial health as key leverage ratios including common equity Tier 1 ratio, Tier 1 capital ratio, Tier 1 leverage ratio, and supplementary leverage ratio were all well above required minimums at the end of 2021.
Our thesis on MS is that its wealth management business will continue to become a larger part of the overall company, which will increase overall margins and return on equity (ROE). Wealth management and asset management are less cyclical than investment banking, and often generate higher margins and provide better stability of financial results. For example, the addition of Smith Barney added significant scale and boosted wealth management operating margins from below 10% into the mid-20%s over the past several years while also increasing returns on equity. Looking ahead, we believe the company will benefit from rising asset prices and higher interest rates, should they happen over time…” (Click here to see the full text)
11. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 54
Starbucks Corporation (NASDAQ:SBUX), the American coffee giant, is one of the best stocks for beginners to invest in. On November 4, Starbucks Corporation (NASDAQ:SBUX) reported a FQ4 non-GAAP EPS of $0.81 and a revenue of $8.41 billion, outperforming Wall Street estimates by $0.09 and $90 million, respectively. Comparable store sales climbed 7% globally, with sales increasing 11% in the U.S. and double digits internationally, excluding China.
On November 4, Evercore ISI analyst David Palmer raised the price target on Starbucks Corporation (NASDAQ:SBUX) to $97 from $95 and reiterated an Outperform rating on the shares, telling investors that he is "less worried" about FY23 sales and earnings after the company's FQ4 results. He lifted his FY23 EPS estimate to $3.39 from $3.25, which now reflects U.S. same-store sales growth of 8.5%, up from 7.5%.
Among the hedge funds tracked by Insider Monkey, 54 funds reported owning stakes worth $2.26 billion in Starbucks Corporation (NASDAQ:SBUX) at the end of Q3 2022, compared to 55 funds in the prior quarter worth $1.4 billion. Ray Dalio’s Bridgewater Associates is one of the leading stakeholders of the company, with approximately 3 million shares valued at $252.5 million.
Here is what Polen Global Growth has to say about Starbucks Corporation (NASDAQ:SBUX) in its Q2 2022 investor letter:
“Starbucks, which garners a lower weighting in the Portfolio, had slightly better than average three-month performance. Same Store sales were up double-digits in the U.S. and International exChina, with solid revenue growth across those regions. The company is experiencing cost pressures from wages and input costs though, and China same-store sales were down 23% due to zero-COVID policy restrictions and lockdowns.”
10. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 59
The Coca-Cola Company (NYSE:KO) is one of the most stable and resilient dividend stocks to monitor, with a history of consistently increasing payouts for 60 years. The Coca-Cola Company (NYSE:KO) is one of the top stocks for beginners to consider for a safe portfolio. On October 20, the company declared a quarterly dividend of $0.44 per share, in line with previous. The dividend is distributable on December 15, to shareholders of record on December 1. The Coca-Cola Company (NYSE:KO) also posted market-beating Q3 results.
UBS analyst Peter Grom raised the price target on The Coca-Cola Company (NYSE:KO) to $68 from $63 and kept a Buy rating on the shares on October 26. The company's Q3 earnings beat was "impressive" as its organic growth sufficiently offset the currency headwinds, the analyst told investors.
According to the third quarter database of Insider Monkey, 59 hedge funds were bullish on The Coca-Cola Company (NYSE:KO), compared to 60 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 400 million shares worth $22.40 billion.
Carillon Tower Advisers made the following comment about The Coca-Cola Company (NYSE:KO) in its Q3 2022 investor letter:
“Shares of The Coca-Cola Company (NYSE:KO) sold off with consumer staples even as the company reported strong pricing for the second quarter. On average, product prices rose with management hinting at further momentum.”
9. The Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 69
The Goldman Sachs Group, Inc. (NYSE:GS) is a New York-based financial institution that operates through four segments – Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management. On October 18, The Goldman Sachs Group, Inc. (NYSE:GS) reported a Q3 GAAP EPS of $8.25 and a revenue of $11.98 billion, topping analysts’ estimates by $0.57 and $450 million, respectively.
On October 19, BMO Capital analyst James Fotheringham maintained an Outperform rating on The Goldman Sachs Group, Inc. (NYSE:GS) but lowered the price target on the shares to $469 from $470 after its Q3 results. The company should be able to maintain a mid-teens RoTCE in the medium term on the back of ongoing tailwinds from share gains in core Global Banking and Markets, along with improved profitability from higher growth adjacencies of Transaction Banking and Consumer businesses, the analyst told investors in a research note.
According to Insider Monkey’s Q3 data, 69 hedge funds held bullish positions in The Goldman Sachs Group, Inc. (NYSE:GS), with combined stakes worth $4.5 billion. Edgar Wachenheim’s Greenhaven Associates is one of the largest stakeholders of the company, with 2.20 million shares valued at $647.3 million.
Manole Capital Management made the following comment about The Goldman Sachs Group, Inc. (NYSE:GS) in its Q3 2022 investor letter:
“Back in 2019, The Goldman Sachs Group, Inc. (NYSE:GS) made a splash in the card industry by working with Apple and MasterCard on a credit card. The actual card is fairly sleek (as you can see below), as customers' names are etched into an Apple titanium card. The no-fee card generated a lot of hype, as many early users were quick to post their latest card on various social media sites.
The initial goal of Marcus (back in 2016) was to leverage Goldman’s wonderful name brand and build a full-service digital bank. This card was a large piece of GS’s ambitions to grow its retail banking franchise called Marcus. After 5 years, Marcus now has 14 million customers and $16 billion in loan balances. Surprisingly, Marcus now represents nearly 20% of the firm’s total revenue.
We thought it would be interesting to look at how the Apple Card is doing in terms of loans and exposures. With over $100 billion in assets, this has been a successful source of cheap deposits for GS. Despite having an institutional / “white shoe” brand in the investment banking and trading world, GS’s Apple Card has been a disappointment.” (Click here to read the full text)
8. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 69
Next on our list of the best beginner stocks is Costco Wholesale Corporation (NASDAQ:COST), an American general merchandise retailer. Costco Wholesale Corporation (NASDAQ:COST) is an appropriate investment for beginners given its defensive nature, strong financials, and robust dividend.
On November 28, Deutsche Bank analyst Krisztina Katai maintained a Buy rating on Costco Wholesale Corporation (NASDAQ:COST) but trimmed the price target on the shares to $578 from $581. The analyst told investors to stick with the "winners" in retail.
According to Insider Monkey’s data, 69 hedge funds were bullish on Costco Wholesale Corporation (NASDAQ:COST) at the end of Q3 2022, compared to 64 funds in the prior quarter. D E Shaw is a prominent stakeholder of the company, with 1.10 million shares worth $521.7 million.
Here is what Cooper Investors Global Equities Fund has to say about Costco Wholesale Corporation (NASDAQ:COST) in its Q3 2022 investor letter:
“The US economy continues to run hot – the labor market is extremely tight and a number of executives we spoke to described their challenges in retaining staff and preventing competitors from poaching talent. Industrial companies in particular continue to see record backlogs, with the easing of logistics and supply chain constraints only just starting to have an impact on deliveries and lead times.
In terms of inflationary pressures, the vast majority of our holdings have been able to leverage strong market positions and stakeholder relationships to push pricing through in 2022 such that minimal impact to earnings has occurred. Clearly this is not a lever than can be pulled indefinitely but the more experienced management teams have kept some of their powder dry. Our meeting with management at Costco in Seattle was memorable for several reasons but one was their latent ability to increase member pricing which they have not done in over 5 years (and thus likely to do in 2023)…
…To conclude we’ll return to our meeting with Costco mentioned earlier. The business quality is no secret after decades of incredible execution, but the meeting gave us renewed conviction around Value Latencies in terms of the runway for growth, the focus on enhancing customer value, Costco’s vast buying power (it purchases 30% of the world’s jumbo cashews as one example) and management’s feral focus on the business model and cost discipline.”
7. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) is a Florida-based company that generates, transmits, and distributes electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, coal, and natural gas facilities. NextEra Energy, Inc. (NYSE:NEE) on October 14 declared a $0.425 per share quarterly dividend, in line with previous. The dividend is payable on December 15, to shareholders of record on November 25.
On October 24, Guggenheim analyst Shahriar Pourreza maintained a Buy rating on NextEra Energy, Inc. (NYSE:NEE) but lowered the price target on the shares to $99 from $108. The analyst updated select estimates ahead of Q3 earnings season from the Power and Utilities group to reflect "known and measurable year-over-year items," to adjust for seasonality, and to re-mark to the latest commodity curves.
According to the third quarter database of Insider Monkey, 73 hedge funds were long NextEra Energy, Inc. (NYSE:NEE), up from 59 funds in the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is one of the biggest stakeholders of the company, with 2 million shares worth $157 million.
ClearBridge Investments made the following comment about NextEra Energy, Inc. (NYSE:NEE) in its Q3 2022 investor letter:
“NextEra Energy, Inc. (NYSE:NEE) is an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. NextEra’s regulated business includes Florida Power & Light, which serves nine million people in Florida. NextEra’s share price rose along with the passage of the U.S. Inflation Reduction Act, which considerably expands support for renewable energy.”
6. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 104
Berkshire Hathaway Inc. (NYSE:BRK-B), an American holding company engaged in the insurance, freight rail transportation, and utility businesses, is one of the best stocks that beginners should closely monitor. Although Berkshire does not pay a dividend, it is managed by legendary financier Warren Buffett, who is known to lead profitable businesses despite turbulent economic environments. In Q3 2022, the company reported financials that outperformed market estimates.
In mid-October, Berkshire Hathaway Inc. (NYSE:BRK-B) announced that it has received all regulatory approvals needed for the proposed acquisition of Alleghany for a total equity value of nearly $11.60 billion.
According to Insider Monkey’s Q3 data, 104 hedge funds were bullish on Berkshire Hathaway Inc. (NYSE:BRK-B), compared to 109 funds in the last quarter. Bill & Melinda Gates Foundation Trust is the leading stakeholder of the company, with approximately 30 million shares worth about $8 billion.
In addition to PayPal Holdings, Inc. (NASDAQ:PYPL), Amazon.com, Inc. (NASDAQ:AMZN), and UnitedHealth Group Incorporated (NYSE:UNH), Berkshire Hathaway Inc. (NYSE:BRK-B) is one of the top stocks favored by elite hedge funds.
Here is what Black Bear Value Fund has to say about Berkshire Hathaway Inc. (NYSE:BRK-B) in its Q3 2022 investor letter:
“Going forward I expect Berkshire to compound at above average returns from this price. BRK is a collection of high-quality businesses, excellent management, and a good amount of optionality in their cash position. If the cash were to be deployed accretively, the true value would be greater than an 8% premium (as mentioned above). The combination of a pie that is growing, an increasing share of said pie due to stock buybacks, upside optionality from cash and a tight range of likely business outcomes that span a variety of economic futures gives me comfort in continuing to own Berkshire.”
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Disclosure: None. 14 Best Beginner Stocks to Buy Now is originally published on Insider Monkey.
