The Federal Reserve is set to announce another interest rate hike during its meeting next month, possibly triggering another round of market pullback.
With the central bank’s attempts to leave no loose ends in its fight against inflation, a pause or reversal in interest rate hikes remains unlikely. Despite recent economic data suggesting that inflation may have eased, Fed speakers indicated that a pause is not imminent. Atlanta Fed President Raphael Bostic said rates would likely have to go higher still.
Amid such uncertainty and speculation, the market may not return to stability anytime soon. Given this backdrop, the most appropriate stocks for investing belong to well-entrenched businesses that have survived previous market routs and emerged as winners.
Hence, it could be wise to invest in fundamentally solid and time-tested stocks Microsoft Corporation (MSFT), Johnson & Johnson (JNJ), and The Coca-Cola Company (KO), which have a track record of building wealth and generating income regardless of economic turbulence.
Microsoft Corporation (MSFT)
Being one of the global technology giants, MSFT needs no introduction. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
On November 16, MSFT and Lockheed Martin Corporation (LMT) announced a landmark expansion of their partnership to help power the next generation of technology for the Department of Defense (DOD).
The agreement would span four critical areas: Classified Cloud Innovations; Artificial Intelligence/Machine Learning (AI/ML), Modeling and Simulation Capabilities; 5G.MIL Programs; and Digital Transformations. Both companies expect to infuse immersive experiences and other advanced commercial technologies into the most capable defense systems.
On November 14, MSFT announced the Microsoft Supply Chain Platform, which would help organizations maximize their supply chain data estate investment with an open approach. It would enable organizations to make the most of their existing investments to gain insights and act quickly.
Furthermore, MSFT declared a quarterly dividend of $0.68 per share in September, reflecting a 10% sequential increase. The dividend is payable on December 8, 2022. MSFT pays $2.72 per share annually as a dividend, representing a yield of 1.13% at the current price, better than the 4-year average dividend yield of 1.06%. The company raised its dividends for 18 consecutive years.
For the first quarter of the fiscal year 2023 ended September 30, MSFT’s total revenue increased 10.6% year-over-year to $50.12 billion, while its operating income grew 6.3% from the year-ago value to $21.52 billion.
Analysts expect MSFT’s revenue for the fiscal year ending June 2023 to come in at $212.95 billion, representing an increase of 7.4% year-over-year, while the company’s EPS is expected to increase 3.5% year-over-year to $9.53. The company has an impressive earnings surprise history since it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock is currently trading above its 50-day moving average of $237.85, indicating a bullish trend. It has gained 1.4% over the past month to close the last trading session at $241.22.
MSFT’s POWR Ratings reflect its promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
MSFT has a grade of B for Stability and Quality. Within the Software – Business industry, it is ranked #9 of 53 stocks.
Click here for MSFT’s additional POWR Ratings for Growth, Value, Sentiment, and Momentum.
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 November 11, the Janssen Pharmaceutical Companies of JNJ announced a new post-hoc analysis in which early skin and enthesitis responses in active psoriatic arthritis patients treated with TREMFYA predicted long-term clinical response, measured at two years, including disease remission.
This gets JNJ one step closer to helping address the needs of patients with active psoriatic arthritis, a chronic, lifelong condition that can be progressive and lead to extensive and permanent joint damage.
On November 1, JNJ announced that it had entered a definitive agreement with ABIOMED Inc (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies, to acquire all outstanding shares of ABMD for an upfront payment of $380.00 per share in cash, corresponding to an enterprise value of approximately $16.6 billion which includes cash acquired.
The transaction broadens Johnson & Johnson MedTech’s (JJMT) position as a growing cardiovascular innovator. According to Joaquin Duato, CEO of JNJ, “The addition of Abiomed provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients around the world while driving value for our shareholders.”
On October 19, JNJ announced its cash dividend of $1.13 per share for the fourth quarter of 2022, payable on December 6, 2022, to shareholders of record at the close of business on November 22, 2022. The company pays $4.52 per share annually, which translates to a yield of 2.57% at the current price. This compares to a 4-year average yield of 2.60%.
The payout ratio is 44.06%. JNJ has been growing its dividends for the past 60 years.
JNJ’s sales increased 1.9% year-over-year to $23.79 billion in the fiscal 2022 third quarter ended October 2, 2022. The company’s gross profit stood at $15.98 billion during the same period.
Analysts expect JNJ’s revenue for the fiscal year 2022 to increase by 1.4% year-over-year to $95.05 billion. The company’s EPS for the current year is expected to increase 2.5% year-over-year to $10.05. Moreover, JNJ has topped the consensus EPS estimates in each of the trailing four quarters.
The stock is currently trading above its 50-day and 200-day moving averages of $167.84 and $172.18, respectively, indicating a bullish trend. It has gained 6.1% over the past month to close the last trading session at $175.07.
JNJ’s POWR Ratings reflect its inherent resilience. The company’s overall A rating translates to Strong Buy in our proprietary rating system. The stock has an A grade for Stability and grade B for Value and Quality.
JNJ ranks #8 of 163 stocks in the Medical – Pharmaceuticals industry.
Get additional ratings for JNJ’s Growth, Momentum, and Sentiment here.
The Coca-Cola Company (KO)
As a world-renowned beverage company, KO manufactures, markets, and sells various non-alcoholic beverages worldwide. The company operates through six segments: Europe, the Middle East, and Africa; Latin America; North America; Asia Pacific; Global Ventures; and Bottling Investments.
On October 20, KO announced its regular quarterly dividend of $0.44 per common share, payable on December 15. The company pays $1.76 per share as dividends annually. This translates to a 2.88% yield at the current price, compared to the 4-year average dividend yield of 3.08%. The company has raised its dividend for the past 59 years.
For the third quarter of fiscal 2022 ended September 30, KO’s net operating revenue increased 10% year-over-year to $11.1 billion. The company’s non-GAAP gross profit increased 6.5% year-over-year to $6.54 billion, while its non-GAAP net income improved 6.7% year-over-year to $3.01 billion.
As a result, non-GAAP net income per common share increased 6.2% from its year-ago value to $0.69.
Analysts expect KO’s revenue for the fiscal year (ending December 2022) to increase 10.4% from the previous year to $42.66 billion. The company’s EPS is expected to increase 7% year-over-year to $2.48. Additionally, the company has continued its impressive feat by surpassing consensus EPS estimates in each of the trailing four quarters.
The stock is currently trading above its 50-day moving average of $58.27, indicating an uptrend. It has gained 8.3% over the past month to close its last trading session at $61.14.
KO’s stable outlook has earned it an overall POWR Rating of B, which translates to a Buy in our proprietary rating system. It also has grade B for Stability, Sentiment, and Quality.
Within the A-rated Beverages industry, it is ranked #18 of 34 stocks.
Click here to see additional POWR Ratings for Growth, Value, and Momentum for KO.
MSFT shares were trading at $242.47 per share on Monday afternoon, up $1.25 (+0.52%). Year-to-date, MSFT has declined -27.23%, versus a -15.99% 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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