We recently compiled a list of the 10 Best Defensive Stocks According to Reddit. In this article, we will look at where Johnson & Johnson (NYSE:JNJ) stands against the other defensive stocks.
September is typically the worst month for the markets, however with a much anticipated rate cut, 2024 might be a different story. The current market environment is unpredictable. We’re seeing higher highs and lower lows in different categories and for risk-averse investors, defensive stocks are the best bets right now.
“Investors Must Consider Quality Stocks”
On September 7, Co-Chief Investment Strategist at John Hancock Investment Management Emily Roland appeared in an interview on Yahoo Finance to discuss the impact of the September jobs report on financial markets. Roland has a bullish view on the economy, overall, considering that only 142,000 jobs were added in August.
Roland talked about how NVIDIA is influencing the overall market condition, reiterating that the company held the power to bring the market down, followed by other giants such as Broadcom. She believes that anything more than 50 basis points does signal that the Fed may know something that the general public does not.
Roland further added that while we cannot predict a recession coming, the US economy is decelerating at an easy pace. She also pointed out that weak and incomplete economic data has added to the uncertainty, making it hard to predict economic outcomes in the short and long run.
Roland expects that the Fed will be taking cuts slowly and won’t implement drastic measures, to not spook out the market. She believes investors should refrain from taking massive risks and invest in solid quality stocks, with great balance sheets, high cash, and strong return on equity rates.
She’s particularly concerned about mega-cap tech stocks and highlighted that, while they may be attractive, these giants do have a valuation issue, with forward earnings going above and beyond 30. Roland suggests that investors must explore other quality areas of the equity market with reasonable prices such as healthcare, consumer defensive, and utility stocks.
Is a 50 Basis Points Rate Cut Needed?
To shed light on the economic conditions of the United States, New Century Advisors Chief Economist, Claudia Sahm, appeared in an interview on Yahoo Finance on September 7. Sahm was overly concerned about the number of jobs added in August and how they were not enough to outdo a mini-recession. Sahm emphasized that the status quo is giving a clear direction as to how the Fed should proceed. She suggests that the Fed should ease its policies, potentially cutting rates by at least 50 basis points, contrary to what Roland suggested.
Sahm also added that a possible explanation for the softening labor market are Fed’s policies to curb inflation, indicating the need for more economic data points. She emphasized that unemployment data alone is not enough to predict a lingering recession and that broader economic data should be taken into account.
An uncertain market calls for safe investing. With that let’s take a look at the 10 best defensive stocks according to Reddit. You can also take a look at the safest stocks to invest in now.
Our Methodology
We looked at the best stocks in the utilities, finance, healthcare, and technology sectors by sifting through multiple active subreddits. We compiled an initial list of 20 stocks and then picked the top 10 with the largest number of hedge fund holders, as of Q2 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)
Number of Hedge Fund Holders: 80
Johnson & Johnson (NYSE:JNJ) is a leading pharmaceutical company that ranks fourth on our list of the best defensive stocks according to Reddit. Johnson & Johnson’s (NYSE:JNJ) top-selling drugs include Stelaera, Darzalex, Imbruvica, Tremfya, Erleada, Uptravi, Invega, Symtuza, and Opsumit.
In the second quarter of 2024, the company reported sales of $22.4 billion, up by 4.3%. Xarelto, Stelara, and Imbruvica accounted for 19% of the company’s revenue in the second quarter of 2024. Johnson & Johnson (NYSE:JNJ) also saw success with regulatory approvals for some medications such as RYBREVANT and TREMFYA. Johnson & Johnson (NYSE:JNJ) is dominant in the oncology sector, with sales growing by 16% to reach $5.09 billion. This was attributable to the massive success of its cancer drug, Darzalex.
Johnson & Johnson (NYSE:JNJ) is one of the best defensive stocks to buy and we say that because of its growth trajectory over the years across all its departments. The company is expected to deliver over 20 novel therapies and over 50 product expansions by 2030. All its segments are expected to grow at a compound annual growth rate between 5% to 7% between 2025 and 2030. Over 10 assets in its Innovative Medicine segment hold the potential to bring $5 billion in projected operational sales.
Analysts are bullish on JNJ and their 12-month median price target of $170 points to a 3% upside from current levels. Overall, JNJ was held by 80 hedge funds at the close of Q2 2024 with total stakes amounting to $4.76 billion. As of June 30, Fisher Asset Management was the largest shareholder with a position worth $1.02 billion.
JNJ is currently trading at 16.44 times its forward P/E, a discount of 23% to its sector. Analysts polled by Yahoo Finance expect JNJ to grow its earnings by 1.1% this year.
Overall JNJ ranks 4th on our list of the best defensive stocks to buy. 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.
