We recently published a list of 10 Cheap NYSE Stocks To Invest In Now. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against other cheap NYSE stocks to invest in now.
The stock market appears poised for another year of impressive returns, likely extending into 2025. However, concerns about high valuations persist. To gain insight into this, Aswath Damodaran, professor of finance at NYU Stern School of Business, recently joined CNBC’s ‘Closing Bell’ on December 14. Damodaran recognized that it’s tough to keep up after two years of returns over 25%. He mentioned that if the market stays stable until the end of the year, it would be similar to the high points seen in the 1950s and mid-1970s. However, he was doubtful about being able to keep this strong performance going, as it’s challenging to continue rising after such big gains.
When asked if the market is overvalued, Damodaran said that while prices are high, they haven’t reached the level of a bubble yet. He compared the current situation to the late 1990s but clarified that he doesn’t plan to sell all his investments. Instead, he is hesitant to invest cash right away because staying in cash might mean losing out on potential gains. He also mentioned that while there may be limited growth in price-to-earnings ratios in 2025, there could still be good returns due to better-than-expected earnings growth from new government policies. Damodaran believes that a return of 8% to 10% would be satisfactory for him, as he prioritizes preserving wealth over aiming for very high returns.
The US stock market currently presents a mixed valuation picture. According to Morningstar, Large growth stocks have experienced significant price appreciation. However, their current valuations may not fully reflect the inherent risks associated with high growth expectations and potential competition. Consumer defensive stocks tend to be less volatile during economic downturns, but the current valuations may be inflated due to a perceived safe-haven status. Utilities may be currently overvalued relative to their historical performance and future earnings potential as interest rates rise. The industrial sector may be overvalued due to concerns about potential economic slowdowns and rising input costs, although some sub-sectors may offer value.
Conversely, the communication services sector may present attractive opportunities for investors. While facing challenges such as increased competition and regulatory scrutiny, certain companies within this sector may be undervalued relative to their long-term growth prospects. The energy sector has experienced significant volatility in recent years. However, with increasing global energy demand and ongoing geopolitical uncertainties, certain segments of the energy sector may be undervalued at current prices.
Markets are constantly evolving, influenced by various factors such as economic growth, interest rates, and geopolitical events. Damodaran’s insights reflect a cautious view of market prospects heading into 2025, emphasizing careful investment strategies amid high valuations.
Methodology
We sifted through the Finviz stock screener to compile a list of the top NYSE-listed stocks. We then selected the 10 stocks with a forward P/E ratio under 15 that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A smiling baby with an array of baby care products in the foreground.
Johnson & Johnson (NYSE:JNJ)
Current Forward P/E as of December 16: 13.79
Number of Hedge Fund Holders: 81
Johnson & Johnson (NYSE:JNJ) is a diversified global healthcare leader with a presence across pharmaceuticals, medical devices, and consumer health. Its extensive product portfolio spans from everyday essentials like Band-Aids and Tylenol to advanced medical technologies and innovative prescription medications.
Its Innovative Medicine segment, focused on developing and delivering new medicines, demonstrated strong growth in Q3 2024, exceeding $14 billion in revenue for the second consecutive quarter. This was driven by the performance of 11 key brands that achieved double-digit growth. DARZALEX, a medication used to treat multiple myeloma by targeting a protein on cancer cells, became the first product in the company’s history to reach $3 billion in sales within a single quarter.
The segment’s success was also supported by a robust pipeline, with 5 major US and European approvals obtained during the quarter. These approvals included FDA approval of RYBREVANT plus LAZCLUZE for first-line treatment of EGFR-mutated advanced lung cancer and FDA approval of TREMFYA for active ulcerative colitis. With several innovative medicines currently in the filing and review process, each with the potential to generate $5 billion in peak-year sales, Johnson & Johnson (NYSE:JNJ) is confident in its near- and long-term growth trajectory.
Overall, JNJ ranks 7th on our list of cheap NYSE stocks to invest in now. While we acknowledge the growth potential of JNJ, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than JNJ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
