U.S. stock markets have experienced  extreme volatility over the past 10 months. After a sharp rebound from a correction in March at the onset of the COVID-19 pandemic, the markets witnessed another slump in September, but  rebounded again after the U.S. Presidential elections in November. The stock markets have had a solid start this year despite the continuing pandemic .

However, the stock markets turned bearish in late January, with a  $700 billion loss in value since January 20. The S&P 500 index has now given up its 2021 gains and is in negative territory. Last week’s loss marked the biggest weekly market decline since September 2020.

While almost all the industries were impacted by the COVID-19 health crisis, the technology and the healthcare sectors  have proved to be among the most resilient. But, a quick uptick in  long-term bond yields is sending a warning sign and tech stocks have already seen setbacks in the past two weeks. In addition, continued pressure from new strains of coronavirus and a slower-than-anticipated global roll-out of vaccines are causing concern among investors. Healthcare stocks, hoverer, tend to be more stable than other sectors and have durable long-term trends supporting them that point to their resilience over the long term.

Economists still expect a significant contraction of the global economy in the coming weeks and believe that the market could see further corrections. Thus, we believe investors should take a diversified approach now and target low-beta, mega-cap stocks and  high-growth stocks with big potential.

As such, we think Johnson & Johnson (JNJ), AbbVie Inc. (ABBV) and Cigna Corporation (CI) are well positioned to help you generate profits despite a market pullback.

Johnson & Johnson (JNJ)

JNJ researches, develops, manufactures, and sells various products in the healthcare field worldwide and is popularly known for its consumer products, such as baby care, women’s health, and wound care. The company has operations in the pharmaceutical, consumer, and healthcare devices segments. JNJ has been working on a potential COVID-19 vaccine candidate, JNJ-78436735, which is being developed by its Janssen Pharmaceutical Companies.

JNJ recently announced that its single-shot Janssen COVID-19 vaccine candidates met all primary and key secondary requirements of its phase three  trials. The vaccine candidate is  72% effective in the U.S. and 66% effective overall at preventing moderate to severe COVID-19, 28 days after vaccination.

Over the past three years, JNJ’s revenues and EPS have grown at a CAGR of 2.8% and 3.4%, respectively. In the fourth quarter of 2020, the company recorded a top-line of $22.5 billion, representing an 8.3% year-over-year gain. Its adjusted operational sales growth came in at 7.3%. JNJ’s  pharmaceutical segment has been witnessing a solid recovery in revenue over the trailing two quarters; its worldwide sales improved 16.3% year-over-year in the last reported quarter. And the company delivered adjusted EPS of $1.86, which was relatively stable versus  the year-ago value of $1.88.

JNJ has a robust drug pipeline with more than 14 new drugs expected to be launched by the end of 2023. Janssen recently announced that the U.S. Food and Drug Administration (FDA) has approved CABENUVA, the first and only once-monthly, long-acting regimen for the treatment of human immunodeficiency virus type 1 (HIV-1) infection in adults. Driven by its diversified product portfolio and focus on growth, analyst expect JNJ’s current year revenue and EPS to grow 10.7% and 18.2%, respectively.

JNJ’s POWR Ratings reflect its promising outlook. It has an overall rating of A which equates to Strong Buy in our proprietary rating system. JNJ has a B for Value Grade, Stability Grade, and Sentiment Grade. Among the 239 stocks in the Medical – Pharmaceuticals industry, it is ranked #9.

In total, we rate JNJ on 8 different levels. In addition to the POWR Ratings grades we’ve just highlighted, you can see JNJ’s ratings for Growth, Momentum, Quality, and Industry here.

AbbVie Inc. (ABBV)

ABBV discovers, develops and markets pharmaceutical therapies that address a range of diseases. It operates in the U.S. and internationally under seven segments – Immunology, Oncology, Aesthetics, Neuroscience, Eye Care, Women’s Health, and Other Key Products like gastroenterology.

Allergan Aesthetics, a wholly owned subsidiary of ABBV, has  announced an agreement with Chicago-based privately held medical device company, Cypris Medical. Under the agreement, upon completion of a clinical study, which is to be initiated this year, Allergan will have an option to acquire Cypris as well as the latter’s Xact device, which is a minimally invasive alternative to for performing face and neck lifts.

ABBV’s revenues and EPS have grown at a CAGR of 14.2% and 3.6%, respectively, over the past three years. The company is scheduled to announce its fourth-quarter and full-year 2020 financial results on February 3. ABBV also delivered a solid top-line of $12.9 billion, surging 52.1% year-over-year, with its aesthetics portfolio demonstrating a strong V-shaped recovery and its hematologic-oncology franchise delivering double-digit growth. Its  EPS came in at $2.83, rising 21.5% versus  the year-ago value of $2.33.

The European Commission (EC) recently approved Rinvoqtm, an oral, once daily selective and reversible JAK inhibitor for the treatment of active psoriatic arthritis (PsA) in adult patients. In addition, y, Allergan’s acquisition last May  is significantly expanding and diversifying ABBV’s  revenue base with new therapeutic areas, enhancing its long-term growth potential and enabling investment in innovation for each of its therapeutic categories. In line with the progress, the Street expects ABBV’s current year revenue and EPS to grow 37.2% and 17.2%, respectively.

It is no surprise that ABBV has an overall rating of B, which equates to Buy in our POWR Ratings system. It has a B for both Value Grade and Quality Grade. It is ranked #10 in the Medical – Pharmaceuticals industry.

Click here to see the additional POWR Ratings for ABBV (Growth, Momentum, Stability, Industry and Sentiment).

Cigna Corporation (CI)

CI provides medical, dental, disability, life and accident insurance and related products and services. CI markets  in more than  30 countries and jurisdictions and has more than 170 million customer relationships worldwide . It operates primarily through five segments – Evernorth, U.S. Medical, International Markets, Group Disability and Other, and Corporate segment.

CI recently added Iora Health, an innovative primary care provider group, to its rapidly expanding Medicare Advantage (MA) network. The company’s value-based care agreement with Iora has paved the way for MA customers to access the primary care practices of Iora. On December 31, New York Life, America’s largest mutual life insurer, announced the acquisition of CI’s group life, accident, and disability insurance business for $6.3 billion.

Over the past three years, CI’s revenues and EPS have grown at a CAGR of 56% and 16%, respectively. The company will release its fourth quarter 2020 financial results on February 4, 2021. In the third quarter, CI reported adjusted revenues of $40.8 billion, increasing 14% year-over-year, led by a strong performance  by its Evernorth segment. CI’s earnings reflect the return of medical utilization to more typical levels as well as focused execution in its businesses. The company’s EPS came in at $3.78, rising 5.8% compared to the year-ago value of $3.57.

The divestment of its group life and disability insurance business has brought CI’s debt levels down significantly and streamlined its operations. The company is focusing on improving its profitability by controlling medical care costs. Furthermore, it is expanding its international business on the back of increasing memberships. Wall Street analysts thus expect CI’s current year revenue and EPS to improve 3.7% and 10.6%, respectively.

CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our rating system. CI has an A for both Value Grade and Industry Grade, and a B for Sentiment Grade. It is also ranked #1 of 8 stocks in the Medical – Health Insurance industry.

Beyond what we stated above, we also have given CI grades for Growth, Momentum, Stability, and Quality. Get all the CI ratings here.

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JNJ shares were trading at $163.47 per share on Monday morning, up $0.34 (+0.21%). Year-to-date, JNJ has gained 3.87%, versus a -0.10% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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