We recently published a list of 7 Most Profitable Cheap Stocks To Invest In. In this article, we are going to take a look at where Johnson & Johnson (NYSE:JNJ) stands against the other most profitable cheap stocks to invest in.
Insights on Small Caps, Tech, and More
Sherry Paul, Morgan Stanley Private Wealth Management managing director, joined CNBC’s “Squawk Box” on October 8, to discuss her investment strategy amidst the current market trends. Despite the Russell 2000 being down a percent, Paul believes it’s the right time to strategically add to small caps, as they are ripe for M&A and have been teased out due to their dependence on domestic consumption.
Paul emphasizes that the key to navigating this market is to be selective and strategic, recommending a broadening out of investments across sectors in the S&P, with a focus on large caps, particularly in areas such as industrials, financials, and staples. She believes that the rates going lower, combined with the productivity-enhancing cost reduction kicker, will benefit these sectors. Paul also highlights the importance of dividend yields, which can add lower volatility to a portfolio.
Regarding large-cap tech stocks, Paul remains bullish, viewing it as a theme rather than an idea. She believes that corporations will invest in software and hardware upgrades, driven by their enormous cash balances and the need to cut costs as rates go lower. This will be a boost for the sector, although it’s a longer-term game, with a time horizon of 12-24 months.
Despite the S&P 500 near record levels, Tom Lee, co-founder of Fundstrat, an independent equity research firm, remains bullish, citing a strong economic backdrop, the Fed’s decision to cut rates, and stimulus policies in China as tailwinds that will support the market. He believes that the economy is resilient and that the Fed’s easing will lead to a continued bull market, with the S&P 500 potentially reaching 5700 or higher by the end of the year.
Lee acknowledges that there are some headwinds, including the looming election and rising oil prices, but believes that they will be offset by the tailwinds. He also notes that small caps, which have been the weakest area of the market since the Fed hike, are due for a rebound.
As the market continues to navigate through economic trends and global challenges, expert insights help provide valuable insights to make informed investment decisions.
Our Methodology
To compile our list of the 7 most profitable cheap stocks to invest in, we used the Finviz and Yahoo stock screeners to compile an initial list of the 40 largest companies by market cap that are trading at a forward P/E ratio of under 20 as of October 7. From that list, we narrowed our choices to 7 stocks with positive TTM net income and 5-year net income growth informed by reputable sources, including SeekingAlpha, which provided insights into 5-year growth rates, and Macrotrends, which supplied information on trailing twelve-month (TTM) net income. Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.
Why do we care about what hedge funds do? 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)
Number of Hedge Fund Holders: 80
Forward P/E Ratio as of October 7: 16.04
TTM Net Income: $38.01 Billion
5-Year Net Income CAGR: 18.41%
Johnson & Johnson (NYSE:JNJ) is one of the world’s largest healthcare and pharmaceutical companies that has a wide portfolio spanning pharmaceuticals, medical devices, and consumer health products.
Johnson & Johnson’s (NYSE:JNJ) Tremfya, a fully human, dual-acting monoclonal antibody treatment has made a significant impact in immune-mediated diseases. The treatment has shown remarkable growth, with a 28.3% year-over-year increase in Q2 2024, and is expected to continue to be a major contributor to the company’s revenue growth, particularly as it expands its indications and patient base. Tremfya will also provide a boost to the company’s reputation and credibility in the field of immunology, potentially leading to increased investment and partnerships in the future.
On October 2, Johnson & Johnson (NYSE:JNJ) submitted a supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration (FDA) for approval of a new indication for Darzalex Faspro (daratumumab and hyaluronidase-fihj), in combination with bortezomib, lenalidomide, and dexamethasone (D-VRd), for the treatment of adult patients with newly diagnosed multiple myeloma (NDMM) for whom autologous stem cell transplant (ASCT) is deferred or who are ineligible for ASCT. This is a significant step forward in the company’s efforts to provide innovative and effective treatments for patients with this debilitating disease, once approved, Darzalex Faspro will remain a key driver of growth and innovation in the multiple myeloma treatment landscape, ultimately improving the lives of patients and their families.
On October 1, Johnson & Johnson (NYSE:JNJ) announced that it would invest over $2 billion in a state-of-the-art biologics manufacturing facility in Wilson, North Carolina. The new facility will expand the production of the company’s portfolio and pipeline of innovative biologics, supporting its goal of advancing more than 70 novel therapies and product expansion filings and launches by the end of the decade.
Johnson & Johnson (NYSE:JNJ) reported a significant increase in net income for the twelve months ending June 30, with a 191.24% year-over-year growth to $38.01 billion, supported by a strong 5-year net income compound annual growth rate (CAGR) of 18.41%. Johnson & Johnson’s (NYSE:JNJ) forward P/E ratio of 16.04 represents a 25.16% discount compared to the sector median of 21.44. Industry analysts are bullish on the company’s stock price and have a consensus Buy rating at a target price of $172.31, which implies a 7.30% increase from its current level.
Overall JNJ ranks 5th on our list of most profitable cheap stocks to invest in. While we acknowledge the potential of JNJ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. 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.