In volatile markets, who doesn’t love stable stocks? Johnson & Johnson (JNJ, Financial) is one such play that investors constantly have on their watchlist, owing to the "recession-proof" nature of the investment, as some analysts like to term it.
While it isn’t challenging to pick winners in a bull and trending market, picking a northward-marching investment in a volatile and shaky market can be quite the hassle.
To save the day comes Johnson & Johnson. While the overall macroeconomic condition of the economy is quite stable, with interest rates going toward normal pre-crisis numbers along with increasing GDP and job growth, there are few negative externalities as well. These might be in the form of volatile crude and energy prices or sour relations with other economies impacting the global balance. In such times, a portfolio-balancer like Johnson & Johnson goes a long way in protecting investor interest.
New developments with J&J
Regarding specific drug developments at the company, test results from a late-stage study of Symtuza in HIV-1 patients who are virologically suppressed came back positive. The study revealed that switching to J&J’s treatment helped maintain high rates of virologic suppression in patients suffering from the condition.
Another development is Johnson & Johnson’s Juluca, which it developed in partnership with GlaxoSmithKline (GSK, Financial). This drug gained FDA approval and reduces the number of medicines HIV patients take without compromising the efficiency of the treatment.
Also, on Oct. 4, Johnson & Johnson’s subsidiary Janssen entered into a value-based contract with Prime Therapeutics (FPRX, Financial) for Janssen’s drug Stelara, used for the treatment of psoriasis.
Moreover, Johnson & Johnson entered into a deal with Arrowhead (ARWR, Financial) for developing a gene-silencing Hepatitis-B drug for the company. Johnson & Johnson is expected to make a $75 million equity investment in Arrowhead at $23 per share along with $175 million up front. The potentially $3.7 billion deal validates Johnson & Johnson's interest in Arrowhead's Targeted RNAi Molecule (TRiM) technology.
Strong fundamentals
Being one of the biggest makers of health care products, Johnson & Johnson has quite the reputation in the markets when it comes to topping earnings estimates. In the last quarter, Johnson & Johnson was expected to post earnings per share of $2.06, but it reported earnings per share of $2.10 instead. It has a dividend yield of about 2.51%, compared to the industry median of 1.54%.
From a valuation perspective too, Johnson & Johnson floats relatively interesting numbers. It currently has a forward price-earnings ratio of 16.18, compared to the industry median of 21.6, leaving massive room for growth. Also, the company seems to be performing tremendously well, as is evident from its operating margin of 23.44%, compared to the industry median of 7.97%.
To conclude
While no stock can provide you with assured returns, considering the current market landscape, Johnson & Johnson is well-positioned to offer some stability to the regular investor's portfolio. While the constant heated debate between U.S. President Trump and China's president Xi-Jinping continues to bother global markets, it is of utmost importance to safeguard yourself from impending volatility by diversifying your portfolio with certain less aggressive stocks.
Disclosure: I do not own any of the stocks mentioned.
