Warren Buffett, also known as the Oracle of Omaha, is considered one of history’s most successful investors. He is the Chairman and CEO of the multinational holding company Berkshire Hathaway Inc. (BRK.A) (BRK.B). Buffett’s investment strategy involves picking up stocks consistent with his focus on fundamental strength, pricing power, attractive dividend record, and long-term growth.
The Federal Reserve recently announced its third consecutive interest rate hike of 75 basis points, indicating that its hawkish stance might persist until inflation is under control. With a soft landing for the economy increasingly seeming like an improbable scenario, markets are expected to witness heightened volatility in the coming months.
With the markets unlikely to return to stability anytime soon, it could be wise for investors to follow Buffett’s portfolio as an ultimate guide for high returns due to his impressive track record.
Hence, it could be wise to buy fundamentally solid Warren Buffett holdings Johnson & Johnson (JNJ) and United Parcel Service, Inc. (UPS) and hold them forever.
Johnson & Johnson (JNJ)
JNJ is a worldwide researcher, developer, manufacturer, and seller of various healthcare products. The company operates through three segments: Consumer Health; Pharmaceuticals; and MedTech.
On September 15, JNJ announced that its Board of Directors had authorized the repurchase of up to $5 billion of its common stock. The repurchases may be made at management’s discretion on the open market or through privately negotiated transactions. This move demonstrates the company’s confidence in its business prospects and would increase the value of the holdings for existing shareholders.
On September 6, Biosense Webster, Inc., a subsidiary of JNJ MedTech, announced the launch of the OCTARAY™ Mapping Catheter with TRUEref™ Technology. The catheter has eight splines with improved electrode spacing options to provide shorter and more efficient mapping times of cardiac arrhythmias, including atrial fibrillation (AFib).
On the same day, JNJ paid its quarterly dividend of $1.13. The company pays $4.52 annually, which translates to a yield of 2.72% at the current price. This compares to a 4-year average yield of 2.60%. The payout ratio is 43.14%. The company has been growing its dividends for the past 59 years.
JNJ’s sales increased 3% year-over-year to $24.02 billion in the fiscal 2022 second quarter ended June 30. During the same period, the company’s gross profit increased 2.4% from the prior-year value to $16.10 billion, while its adjusted net earnings improved 4.3% year-over-year to $6.91 billion. As a result, Adjusted EPS increased 4.4% from its year-ago value to $2.59.
Analysts expect JNJ’s revenue for the fiscal year 2022 (ending December 2022) to increase 1.9% year-over-year to $95.53 billion. The company’s EPS is expected to increase 2.8% year-over-year to $10.08 during the same period. Also, Street expects both metrics to keep rising over the next two fiscals. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing five fiscals.
The stock has gained 1.4% over the past year to close the last trading session at $166.28.
JNJ’s POWR Ratings reflect its inherent resilience. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Stability and a B for Growth, Value, and Quality. JNJ tops the list of 165 stocks in the Medical – Pharmaceuticals industry.
Beyond what we’ve stated above, we have also given grades for Momentum and Sentiment for JNJ. Get all JNJ ratings here.
United Parcel Service, Inc. (UPS)
UPS provides package delivery services and supply chain management solutions globally. The company’s segments include U.S. Domestic Package; International Package; and Supply Chain Solutions.
On August 8, 2022, UPS announced its plans to acquire Bomi Group, an industry-leading multinational healthcare logistics provider. The transaction is expected to enhance the company’s end-to-end global healthcare logistic capabilities by adding temperature-controlled facilities in 14 countries and nearly 3,000 highly-skilled Bomi Group team members to the UPS Healthcare network in Europe and Latin America.
On August 3, UPS announced its regular quarterly dividend of $1.52 on all outstanding Class A and B shares, which was paid out on September 1. The company pays $6.08 as dividends annually, which translates to a yield of 3.62% at the current price. This compares with a 4-year average yield of 2.87%. The current payout ratio is 40.19%.
The company has been raising dividends significantly over the past 12 years. The company has maintained and grown its dividend each year since going public in 1999.
During the second quarter of the fiscal year (ended June 30, 2022), UPS’ consolidated revenues increased 5.7% from the year-ago value to $24.80 billion. The company’s adjusted consolidated operating profit increased 9.3% year-over-year to $3.58 billion. Adjusted EPS for the quarter increased 7.5% year-over-year to $3.29.
For fiscal 2022 (ending December 2022), analysts expect UPS’s revenue and EPS to increase 4.7% and 5.9% year-over-year to $101.84 billion and $12.85, respectively. Both metrics are expected to keep growing over the next two fiscals. The company’s impressive earnings surprise history has seen beating the consensus EPS estimates in each of the trailing five fiscals.
The stock has declined 9.4% over the past year to close the last trading session at $167.86.
The stable outlook of UPS is reflected in its overall POWR Rating of B, which equates to a Buy in our proprietary rating system. The stock has an A grade for Quality and a B for Stability.
UPS is ranked #6 among 17 stocks in the A-rated Air Freight & Shipping Services industry. Click here to access additional ratings for UPS for Growth, Value, Momentum, and Sentiment.
JNJ shares were trading at $166.21 per share on Friday afternoon, up $0.03 (+0.02%). Year-to-date, JNJ has declined -0.93%, versus a -22.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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