With stock market volatility rife amid the concerns that persistently high inflation and the Fed’s rate hikes will lead to a recession, investors should check out these extremely safe stocks, Johnson & Johnson (JNJ), The Descartes Systems Group Inc. (DSGX), and Weis Markets, Inc. (WMK).
The job market has remained strong despite the Fed’s efforts to loosen it. A tight labor market and inflation above the Fed’s target of 2% are strengthening the case for continued rate hikes ahead. The Fed still has a long way to go in the fight against inflation.
According to TD Securities strategist Priya Misra, “I think the Fed has no choice but to engineer a hard landing. I think the Fed is going to feel that pressure to continue to hike.”
However, according to a survey of economists, a recession is likely to begin later in 2023 than initially expected.
I think JNJ, DSGX, and WMK can help navigate such market uncertainties.
Johnson & Johnson (JNJ)
JNJ and its subsidiaries research, develop, manufacture, and sell various products in the healthcare field worldwide. The company operates through three segments: Consumer Health; Pharmaceutical; and Medical Devices.
JNJ’s forward non-GAAP P/E multiple of 14.65 is 27.7% lower than the industry average of 20.28.
JNJ has paid dividends for 60 consecutive years. Over the last three years, JNJ’s dividend payouts have grown at 6% CAGR. While JNJ’s four-year average dividend yield is 2.60%, its current dividend translates to a 2.93% yield.
JNJ’s gross profit margin of 67.36% is 21.4% higher than the 55.50% industry average, while its EBITDA margin of 34.46% is 867.3% higher than the industry average of 3.56%.
JNJ’s consumer health segment revenue came in at $3.77 billion for the fiscal year 2022 fourth quarter, up marginally year-over-year. Moreover, its adjusted net earnings came in at $6.22 billion, representing a 9.5% year-over-year increase. Its EPS increased 10.3% year-over-year to $2.35.
JNJ’s revenue is expected to increase by 3% year-over-year to $97.83 billion in 2023. Its EPS is expected to grow 3.5% year-over-year to $10.51 in 2023. It surpassed EPS estimates in all four trailing quarters. JNJ’s shares have gained marginally intraday to close the last trading session at $155.56. Its 60-month beta is 0.54.
JNJ’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.
JNJ has an A grade for Stability and a B for Value, Sentiment, and Quality. Within the Medical – Pharmaceuticals industry, it is ranked #5 out of 167 stocks. Click here for the additional POWR Ratings for Growth and Momentum for JNJ.
The Descartes Systems Group Inc. (DSGX)
Headquartered in Waterloo, Canada, DSGX provides cloud-based logistics and supply chain management and business process solutions that enhance the productivity, performance, and security of logistics-intensive businesses worldwide. Its Logistics Technology platform offers a range of modular, cloud-based, and interoperable web and wireless logistics management applications.
On February 22, 2023, DSGX announced that SEL Supply Chain Solutions (SELSCS) of Fort Worth, Texas, is adopting Descartes to digitize its freight brokerage business. SELSCS is leveraging the cloud-based Descartes AljexTM transportation management system (TMS), seamlessly connected with Descartes MacroPointTM for real-time freight visibility, load tracking, and automated capacity sourcing.
Also, DSGX announced the acquisition of GroundCloud, a cloud-based provider of final-mile carrier solutions and road safety compliance technologies. These new collaborations should boost its capabilities.
DSGX’s trailing-12-month gross profit margin of 76.68% is 55.9% higher than the 49.19% industry average. Its trailing-12-month EBIT margin of 27.96% is 375.5% higher than the 5.88% industry average.
DSGX’s revenues increased 14.4% year-over-year to $486.01 million for the fourth quarter that ended January 31, 2023. Also, its gross margin came in at $372.69 million, up 15.4% year-over-year. Its net profit came in at $102.24 million, up 18.5% year-over-year. Moreover, its EPS came in at $1.18, representing an 18% year-over-year rise.
The consensus revenue estimate of $550.10 million for the fiscal year 2024 indicates a 13.2% increase year-over-year. Its EPS is expected to grow 18.6% year-over-year to $1.4 in 2024. It surpassed EPS estimates in three of four trailing quarters. Over the past nine months, the stock has gained 22.1% to close the last trading session at $76.30. Its 60-month beta is 0.89.
DSGX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our proprietary rating system. It has an A grade for Stability and Sentiment and a B for Quality. It is ranked #3 out of 24 stocks in the Software – SAAS industry.
Beyond what is stated above, we’ve also rated DSGX for Growth, Value, and Momentum. Get all DSGX ratings here.
Weis Markets, Inc. (WMK)
WMK is a food retailer that engages in the retail sale of food through a chain of supermarkets. The company operates primarily under the Weis Markets name and Weis, Weis Great Meals Start Here, Weis Gas-n-Go, and Weis Nutri-Facts brands.
In terms of trailing-12-month EV/Sales, WMK is currently trading at 0.43x, 76.4% lower than the industry average of 1.80x. Its trailing-12-month EV/EBITDA of 7.65x is 43.9% lower than the industry average of 13.63x.
WMK has paid dividends for 33 consecutive years. Over the last three years, WMK’s dividend payouts have grown at 2.1% CAGR. While WMK’s four-year average dividend yield is 1.36%, its current dividend translates to a 1.70% yield.
WMK’s trailing-12-month ROTA of 6.39% is 67.4% higher than the 3.82% industry average. Its trailing-12-month asset turnover ratio of 2.43% is 194.1% higher than the 0.83% industry average.
WMK’s revenues increased 18% year-over-year to $1.31 billion for the fourth quarter that ended January 31, 2023. Also, its income from operations came in at $33.58 million, up 10.6% year-over-year. Its net profit and EPS came in at $28.88 million and $1.07, up 27.7% and 27.4% year-over-year.
The stock has gained 20.8% over the past year to close the last trading session at $81.72. Its 60-month beta is 0.33.
It’s no surprise that WMK has an overall A rating which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Stability and a B for Growth and Quality. The stock is ranked #5 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry. We’ve also rated WMK for Value, Sentiment, and Momentum. Get all WMK ratings here.
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REVISED: 2023 Stock Market Outlook (includes top 7 picks)
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JNJ shares . Year-to-date, JNJ has declined -11.31%, versus a 5.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
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. More...
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