Understanding the Resilience of Top Stocks: JNJ & SBUX
Investing Amid Market Volatility
Some investors might be feeling the brunt of stock market volatility as concerns about inflation persist. The last several years have certainly been a bumpy ride for many. However, if you're focused on the long term, holding onto stocks of great companies that can weather the storm is advantageous. Ideally, these stocks should be retained for several years, if not a decade or more. If you're investing your cash in quality companies that you are comfortable with, these volatile periods needn't deter you from achieving your financial goals.
Current Market Insights
The bull market has been in full swing, and while no investor can predict the future, having the appropriate buy-and-hold strategy can yield positive outcomes. If you have cash to invest in companies with strong potential, consider adding the following two stocks to your portfolio.
1. Johnson & Johnson
Johnson & Johnson (NYSE: JNJ) has established itself as a cornerstone in the pharmaceutical sector for well over a century. Although it may not be categorized as a high-growth stock, its extensive footprint in healthcare, supported by a diverse portfolio of medicines and medical devices, drives consistent revenue and cash flow.
The company's strategic spinoff of its slower-growing consumer health business into the publicly traded Kenvue last year allows its other divisions to thrive while also creating significant liquidity. Investors may have some concerns regarding ongoing litigation related to talcum powder, but Johnson & Johnson appears resolved to handle these challenges effectively.
The company recently reached a settlement of approximately $700 million and is set to face further claims that could amount to billions. The management's strategy to handle these lawsuits involves placing liability on a subsidiary intended to file for bankruptcy, which has faced setbacks in federal court. Consequently, investors should be aware that while the resolution of these legal matters is ongoing, Johnson & Johnson's financial health positions it well to manage these challenges.
With over $25 billion in cash on hand and approximately $19 billion in free cash flow over the trailing twelve months, Johnson & Johnson remains robust. Additionally, with profits of $16 billion on nearly $87 billion in revenue during the last 12 months, its financial standing is strong. Notable products such as Stelara and Darzalex continue to lead sales, while the company demonstrates a faithful commitment to dividend payments—having increased its dividends for over six decades. Investors seeking long-term stability and income will find that Johnson & Johnson remains a wise investment choice.
2. Starbucks
Starbucks (NASDAQ: SBUX) recently made headlines due to significant changes in its executive leadership. The sudden exit of CEO Laxman Narasimhan has drawn attention, particularly given that he had only recently succeeded the longstanding CEO Howard Schultz, who took a temporary role after Kevin Johnson's departure in 2022.
The market reacted positively when it was announced that Brian Niccol, CEO of Chipotle, would transition to become Starbucks' new leader. Under Niccol's guidance, Chipotle's profits saw remarkable growth, multiplying more than sevenfold during his tenure since 2018. This development has sparked renewed investor interest in Starbucks shares.
Starbucks has faced its share of challenges, including a competitive landscape in vital markets like China, as well as challenges related to consumer spending in the aftermath of the pandemic. The company's largest shareholder, Schultz, aims to redirect Starbucks' strategy towards growth.
Despite recent revenue declines, Starbucks remains profitable, having reported $4 billion in profits from $36 billion in revenue over the trailing twelve months. It also boasts positive cash flow, with free cash flow totaling $2.6 billion, and $4 billion cash available as per the latest financial statement. While the transition in leadership is notable, the underlying business has considerable growth potential, which remains to be tapped.
Starbucks retains its position as a leading coffeehouse chain globally and is recognized for its regular dividend payouts. The stock is currently yielding approximately 2.5%, making it attractive to income-seeking investors.
Investment Considerations for Johnson & Johnson
Before deciding to invest in Johnson & Johnson, it's crucial to weigh various factors, such as the trajectory of its ongoing legal matters and the company's ability to sustain its financial commitments. While recent settlements may seem daunting, the company’s strong balance sheet, extensive cash reserves, and consistent cash flow illustrate its capability to navigate such complexities successfully.
Frequently Asked Questions
What are the main reasons for investing in Johnson & Johnson?
Johnson & Johnson offers a strong financial position with considerable cash reserves, robust cash flow, and a historic reputation in the pharmaceutical industry. Its commitment to dividends makes it appealing for long-term investors.
How has Starbucks performed under its new leadership?
Starbucks has seen leadership changes recently, but it maintains profitability and significant growth potential in its operations, positioning itself to enhance its strategies for future success.
Can stock market volatility impact long-term investments?
While volatility can create concern among investors, holding onto well-established stocks can provide stability and mitigate risks associated with short-term fluctuations.
What is the significance of dividends in stock investing?
Dividends provide a steady income stream for investors, offering returns even during market downturns, and demonstrate a company’s financial health and commitment to shareholders.
What should investors consider when picking stocks?
Investors should assess a company's financial strength, market position, dividends, growth potential, and overall stability before making investment decisions.
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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.
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