The U.S. GDP increased at a 2.9% annualized pace in the fourth quarter of last year, exceeding the Dow Jones analysts' estimate of 2.8%, aided by government spending and private investment.
Furthermore, slowing inflation for the sixth consecutive month in December and the Fed slowing the pace of its rate hikes have boosted market confidence.
However, recessionary concerns remain as Fed Chair Jerome Powell warned that rate hikes would continue until the 2% inflation objective was met. Sustained rate hikes could tip the economy into recession.
Despite acknowledging lower inflation, the Fed signaled another rate hike in March. Fed Chair Jerome Powell said, "It would be very premature to declare victory or think that we got this."
Therefore, investors could consider buying fundamentally stable dividend-paying stocks Novartis AG (NVS) and Takeda Pharmaceutical Company Limited (TAK) to shield their portfolios from market uncertainties. These stocks are trading under $100. Healthcare stocks help investors hedge against recession risks.
Novartis AG (NVS)
Headquartered in Basel, Switzerland, NVS researches, develops, manufactures, and markets healthcare products worldwide. The company operates through two segments, Innovative Medicines and Sandoz.
On January 24, 2023, Sandoz, a division of NVS and the global leader in off-patent medicines, struck a deal with Astellas to acquire worldwide product rights to the leading systemic antifungal drug Mycamine®. This agreement should significantly improve Sandoz's hospital services globally and enhance its position in generic antibiotics.
In terms of forward EV/EBITDA, NVS is currently trading at 10.42x, 24% lower than the industry average of 13.69x. Its forward Price/Sales of 3.41x is 28.5% lower than the industry average of 4.86x.
NVS has paid dividends for 25 consecutive years. Over the last three years, NVS' dividend payouts have grown at a 5.5% CAGR. While NVS' four-year average dividend yield is 3.58%, and its current dividend translates to a 4.04% yield.
NVS' core operating income came in at $4.03 billion for the fourth quarter that ended December 31, 2022, up 5.5% year-over-year. Its core net income increased 3.7% year-over-year to $3.25 billion. In addition, its core EPS increased 8.6% year-over-year to $1.52.
NVS' revenue is expected to increase 3.8% year-over-year to $52.15 billion in 2023, while its EPS is expected to increase 6.5% year-over-year to $6.52. It surpassed EPS estimates in three of all four trailing quarters. The stock has gained 6.8% over three months to close the last trading session at $85.85. It has a beta of 0.47.
NVS's POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NVS has an A grade for Stability and a B for Growth, Sentiment, Value, and Quality. Within the Medical - Pharmaceuticals industry, it is ranked #3 out of 171 stocks. Click here to access the additional POWR Ratings for NVS (Momentum).
Takeda Pharmaceutical Company Limited (TAK)
Headquartered in Japan, TAK researches, develops, manufactures, and sells pharmaceutical, general medical, quasi-drugs, and healthcare products globally. Its offerings are concentrated in gastroenterology, oncology, neuroscience, rare diseases, and plasma-derived therapies and vaccines.
On February 3, 2023, TAK announced that the FDA had accepted the supplemental Biologics License Application (sBLA) for the expanded use of TAKHZYRO® (lanadelumab-flyo) for prophylaxis to prevent attacks of hereditary angioedema (HAE) in paediatric patients aged 2 to 12 years. This approval should be a significant boost to TAK's portfolio.
In terms of forward EV/EBITDA, TAK is currently trading at 7.68x, 43.9% lower than the industry average of 13.69x. Its forward Price/Sales of 1.69x is 66.1% lower than the industry average of 4.86x.
Over the last three years, TAK's dividend payouts have grown at a 17.1% CAGR. While TAK's four-year average dividend yield is 4.26%, its current dividend translates to a 4.13% yield.
TAK's revenue increased 13.9% year-over-year to ¥3.07 trillion ($23.24 billion) for the nine months ended December 31, 2022. The company's net profit came in at ¥285.90 billion ($2.16 billion), up 18.4% year-over-year, while its EPS came in at ¥182.65, representing a 19.4% year-over-year rise.
TAK's revenue is expected to increase 410.6% year-over-year to $30.03 billion in the current fiscal year ending March 2023. Its EPS is to increase 31.13% year-over-year to $0.74. Over three months, the stock has gained 21.8% to close the last trading session at $15.97. TAK has a beta of 0.70.
It's no surprise that TAK has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and Stability. It is ranked #19 in the same industry.
Beyond what is stated above, we've also rated TAK for Growth, Momentum, Sentiment, and Quality. Get all TAK ratings here.
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NVS shares were trading at $85.26 per share on Monday afternoon, down $0.59 (-0.69%). Year-to-date, NVS has declined -6.02%, versus a 7.05% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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