2 Low-Beta Mega Stocks That Could Outperform the Market

NYSE: JNJ | Johnson & Johnson News, Ratings, and Charts

JNJ – The stock market has witnessed a free fall since the beginning of the year due to the Fed’s interest rate hikes and the recession fears. Moreover, interest rates are expected to rise further this year. Given the heightened volatility in the market, we think low beta mega stocks Johnson & Johnson (JNJ) and Coca-Cola (KO) might be solid buys. Read on….

The Dow Jones Industrial Average gained 0.3% in the last trading session. However, the S&P 500 and the Nasdaq Composite posted third straight day losses of 0.1% and 0.03%. The S&P seems set to post its worst half-year since 1970.

The CBOE Volatility Index (^VIX) is up more than 15% this month, indicating rampant volatility. On top of it, Loretta Mester, President of the Federal Reserve’s Cleveland bank, stated that she expects benchmark lending rates to reach 3%-3.5% this year and above 4% next year, raising the recession concerns.

The beta coefficient measures the volatility of a stock with respect to the broader market. A low beta value indicates that the stock is less volatile than the market. Hence, we think low beta mega-cap stocks Johnson & Johnson (JNJ) and The Coca-Cola Company (KO) might be solid buys to navigate the volatile market.

Additionally, these stocks have outperformed the S&P 500’s 19.9% decline year-to-date and might continue to do so.

Johnson & Johnson (JNJ)

JNJ engages in the global research, development, manufacture, and sale of various healthcare products. The company operates through the three broad segments of Consumer Health; Pharmaceutical; and MedTech. The company has a $465.73 billion market capitalization.

On June 20, JNJ announced the launch of the new J&J Satellite Center for Global Health Discovery at Singapore’s Duke-NUS Medical School. On April 25, JNJ announced the launch of the J&J Satellite Center for Global Health Discovery at its Holistic Drug Discovery and Development Centre, University of Cape Town, in Cape Town, South Africa. The center establishments are expected to bolster the company’s global scientific network.

On April 19, the company declared a quarterly dividend of $1.13 per share, which marked a 6.6% increase from its prior dividend of $1.06 per share. The dividend was payable on June 7 and cumulates to $4.52 per share annually. This reflects on JNJ’s shareholder return ability.

For the fiscal first quarter of 2022, JNJ’s reported sales increased 5% year-over-year to $23.43 billion. Adjusted net earnings and adjusted EPS came in at $7.13 billion and $2.67, registering a rise of 3% and 3.1% from the same period the prior year.

Analysts expect JNJ’s EPS to increase 3.6% year-over-year to $2.57 for the quarter ending June 2022. Likewise, Street expects revenue for the same quarter to improve 2.4% from the prior-year quarter to $23.87 billion. Moreover, JNJ has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.

JNJ’s shares rose 7.9% over the past year and 3.5% year-to-date to close its last trading session at $176.99. It has a five-year monthly beta of 0.66.

JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

JNJ has a Stability grade of A and a Quality grade of B. In the 171-stock Medical – Pharmaceuticals industry, it is ranked #8. Click here to see the additional POWR Ratings for JNJ (Growth, Value, Momentum, and Sentiment).

The Coca-Cola Company (KO)

This global non-alcoholic beverage manufacturer sells its beverages under popular brand names such as Coca-Cola, Sprite, Fanta, Dasani, Minute Maid, and Powerade. KO has a market capitalization of $271.94 billion.

On June 13, Brown Forman Corporation (BF-A, BF-B) and KO announced their global relationship to launch the  Jack & Coke cocktail as a branded, ready-to-drink (RTD) pre-mixed cocktail option. The new product introduction is expected to add to the company’s revenue stream.

On April 27, KO declared a dividend of 44 cents per common share, payable to shareholders on July 1. This reflects upon the company’s cash generation ability.

KO’s non-GAAP net operating revenues increased 16.4% year-over-year to $10.50 billion for the fiscal first quarter ended April 1. Non-GAAP net income and non-GAAP net income per share stood at $2.80 billion and $0.64, up 16.6% and 16.4% from the same period the prior year, respectively.

The consensus EPS estimate of $0.66 for the quarter ending September 2022 indicates a 1.5% year-over-year increase. Likewise, the consensus revenue estimate of $10.76 billion for the same period reflects an improvement of 10.3% from the prior-year quarter. In addition, KO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 16.5% over the past year and 5.9% year-to-date to close its last trading session at $62.73. It has a 0.59 five-year monthly beta.

It’s no surprise that KO has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a B grade for Stability, Sentiment, and Quality. In the 35-stock Beverages industry, it is ranked #14. The industry is rated A.

To see the additional POWR Ratings for Growth, Value, and Momentum for KO, click here.


JNJ shares were trading at $175.61 per share on Thursday morning, down $1.38 (-0.78%). Year-to-date, JNJ has gained 3.98%, versus a -20.63% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Dutta


Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...


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