Stocks to buy now: Johnson & Johnson
Johnson & Johnson is a multinational company that specialises in the creation of medical devices, as well as consumer and pharmaceutical packaged goods and their main operation is based in the United States. With difficulties that the market has seen in recent months, it has seen Johnson & Johnson shares fall approximately by 14% after they had managed to reach an all-time high back in January. This downturn came even though there were strong numbers released at the start of 2018 by the company, reporting a 12.6% increase year over year in their revenue. Their earnings per share when adjusted for their new acquisitions showed an increase of 5.5%.
These are very strong numbers for a company of this size, as it is at the moment valued as being worth more than $340 billion. Their consumer products division is one of their gems and they own some of the most well-known household brands such as Neutrogena, Band-Aid and Listerine. This division managed to improve by 1.3%, with their medical device sector seeing growth of 3.2%. However, the bulk of the growth experienced in the company over the past year and a bit was thanks to their pharmaceutical department which managed to post growth levels of 15.3%.
This is the department that was supposed to be the main driver of their increase in revenue.
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Stocks to buy now: Kinder Morgan
Kinder Morgan is a giant when it comes to the world of natural gas pipelines. In the last three years however their stock price has been bleeding, with a fall of 60% been seen in this period. Their cash flow has only fallen about 4% since its peak, which throws up an interesting scenario. This is why it appears that there is great value available these days at the current price level. The reason that this cash flow figure has not fallen too much despite the volatile nature of oil prices in recent times is because over 90% of their revenues come from contracts that are fee-based and stable. This allows them to have consistent cash flows no matter what the oil prices may be doing.
This is what paved the way for them generating $2.05 per share in terms of cash flow in 2018. The Kind Morgan stocks had been around the $15 mark for a while which would make the price to cash flow multiple being at the 7.3 mark. Many of their competitors in the industry would trade have a figure of around 11.9 times for this metric on average, which means that Kinder Morgan could be trading at a discount of about 40%.
What stocks to invest in: IBM
IBM is a tech giant that saw its share price fall sharply following the release of their 2018 first quarter results. Despite revenue showing increases of 5% year on year, which beat many estimates, the majority of this growth can be attributed to foreign exchange rates changes that worked out favourable for the tech giant. However, despite this increase in earnings, their gross margin as a whole fell when compared to the previous year. However, despite these woes, there have been some good indicators of future success. Their strategic imperatives, which are made up of largely their growth businesses have seen an increase in revenue of around 15% and this now makes up 47% of the total revenue for the company when looking at things on a 12 month trailing basis.
Their cloud revenues increased by 20% and their cloud as a service business saw revenues increase by 25%. This is an area that they are targeting for significant growth in the coming years, with 15-20% increases expected annually into the long term. As a result of the strong market reaction to the announcement of the earnings of IBM, there is some value in the stock for those looking for a reliable option. They are projecting adjusted earnings at the lowest of $13.80 per share for the year, which would see their price to earnings ratio being only 10.6. They also have an attractive dividend yield of 4.3% .
What stocks to invest in: Bank of America
Bank of America is one of the favourite stocks of the all-time great investor Warren Buffet and where Warren is, is usually a good place for you to be too. In addition to him Goldman Sachs are also very bullish about its potential. One stock to watch closely. Recently they announced their fourth quarter results which resulted in an impressive earnings per share of $0.20 after tax. This was a polished end to a great year for the bank after many analysts had been forecasting a significantly lower earnings per share figure.
There is a lot of potential going forward as a result of their rising return on equity. There are also set to be significant gains made by the bank this year going forward thanks to rising interest rates. This is thanks to their significant book of floating rate loans, as well as their large deposit franchise. As they had excess capital of 9%, they will no doubt looks to increase the number of share repurchases, as well as making further dividend payouts. It certainly is a stock that has a lot of upward potential and is well worth keeping an eye on for your future consideration.
What stocks to invest in: MetLife
MetLife is a massive United States life insurance company that is looking to transform the way the insurance game works. Their product is all about well being and ultimate happiness. If you go to visit their website you will see this well reflected in the refreshing user interface and colours of the site. It was in January that the company had a massive win when they had a legal victory versus the regulators in the US.
These regulators had wanted MetLife to be categorised as a company that was too big to fail, which would have led to a lot stricter regulations being imposed on the company. Thankfully for MetLife, this case was dropped on the 19th of January. There is a lot of optimism for an increase in their return on equity in the coming years as a result of their extensive investments in technology that will save significant costs, as well as having a business mix that is not as volatile. They are also set to see significant success when 10 year US treasury note yields start to rise. Despite all of this optimism, the market still doesn’t seem to be convinced.
What stocks to invest in: Skechers USA & Wells Fargo
One of the leading shoe brands in the United States, Skechers could be poised for a breakout. They had a strong fourth quarter and they look to be bringing this momentum into 2018. They have seen superior earnings growth and they also have generated outsized returns for their investors. Currently, their domestic wholesale business is inflecting and there is also strong potential for growth on the international front. In particular, they see growth in China as being a very lucrative avenue and they believe that by focusing on this area, they will be able to reach their target of $6 billion revenue by the year 2020. There is clearly a lot of potential to be excited about going forward.
Another large cap bank, Wells Fargo is going to be receiving a significant tax break thanks to the United States President Donald Trump. In just the fourth quarter they could see their level of taxes cut by a whopping $3 billion. This is thanks to a decrease in there expected expenses that has been allocated towards future taxes. They also seem to be behind the regulatory issues that had been somewhat plaguing them. It is expected that the bank will increase their dividend payouts and will also have more share repurchases. At their current price and dividend yield, it certainly is an attractive investment opportunity.
What approach to take going forward?
With the markets being in such a turbulent time as of late, it is important that you put a lot more thought into your investing decisions if you do not do so at the moment. When the markets are constantly on the rise and times are good, it seems that you can nearly close your eyes and throw a dart on a solid company and you will see decent returns. However, in times of high volatility and an uncertain future, it is time to crackdown and conduct comprehensive research. You should be looking at more established companies that are inherently low volatile stocks.
A lot of people are moving away from riskier equities and turning to the likes of bonds and more resistant stocks, in addition to increasing the level of cash that they are holding. While the ship has steadied somewhat after a bumpy ride for a couple of months, nobody knows what the future is going to hold. Having seen the longest bull run of all-time, there surely is a correction around the corner and it is important that you are prepared for this ahead of time, before it is too late. You could see a significant portion of your gains accumulated during this bull run wiped out if you are not careful and there is a downturn.
Which Stocks Should you Buy Now?
As you have seen, there are still any great opportunities out there, with not all stocks being over inflated with their price to earnings ratios. There is a lot of opportunity still out there, especially if you are looking to position your portfolio in a way that minimises your risk when and if a downturn occurs.
If you cash in on some of your profits from your riskier investments that have paid off during the Bull Run, you will have liquidity when a downturn comes. This is usually the time when you should buy, as stocks are effectively on sale and panicked holders sell them. There will be a point when you can see the market bottoming out and you need to have the liquidity to be able to take advantage of this and buy up as many bargains stocks as possible. By the time the next Bull Run comes around, you will then be sitting pretty on a pile of quality discounted stocks. This is a strategy that most great investors use, as seen with the age old adage of buy low, sell high.