If you’re like many investors right now, you might be concerned that Wall Street is drawing ever closer to another downturn. With the market’s volatility increasing and many stocks trading at nosebleed valuations, the signals that another crash could be around the corner are growing with each passing day.
Regardless of whether such a crash is imminent, long-term investors would do well to seek out robust businesses with strong brand authorities and track records of resilience in various economic environments.
If you’re trying to prepare your portfolio for the next crash, here are two stocks that are likely to keep generating strong performance even if the market takes a turn for the worse.
Mega-cap tech giant Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) has been continuing its history of impressive share price gains — it’s up by more than 60% over the past year alone. And based on analysts’ price targets, the stock still has an estimated upside of about 8% to 12%.
The company has proven its resilience in a range of market environments and has continued to generate consistent top- and bottom-line growth throughout the pandemic. In 2020, revenues increased by 13% while net income rose by a healthy 17%.
Alphabet is known for its diversified stable of businesses, which includes YouTube, Google Cloud, and Google Search. The last of these, which is the world’s most-used search engine with more than a 92% market share, continues to account for most of the FAANG company’s revenues.
In Q1 2021 — its most recently reported quarter — total revenues increased 34% year over year, and net income spiked by 162%. Alphabet generated $55.3 billion in total revenue during the period, roughly $38.2 billion of which was derived from its Google Services segment, which includes Google Search and YouTube ads. Google Cloud is also accounting for an increasing share of the company’s overall growth: It generated more than $4 billion in revenue in the first quarter, up from $2.7 billion in the year-ago period.
Alphabet’s also rock-solid in terms of its liquidity versus its short-term liabilities. It closed the first quarter with a grand total of $135.1 billion in cash, cash equivalents, and marketable securities, contrasted with only $55.5 billion in current liabilities.
From the fundamental strength of its business to its incomparable brand authority to its stable track record of growth to its robust cash position, there’s a lot to like about Alphabet. Long-term investors can still juice plenty of upside potential out of this top growth stock.
2. Johnson & Johnson
While Johnson & Johnson (NYSE:JNJ) hasn’t delivered the lightning-quick gains that Alphabet has provided over the past year-plus, this tried-and-true pharmaceutical stock has plenty to offer the long-term investor aiming for consistent portfolio growth. The company is known for its broad stable of well-known prescription medicines, medical devices, and consumer goods brands.
After a moderate decline in its stock price in the aftermath of the March 2020 market crash, Johnson & Johnson’s quick rebound showed the underlying resiliency of its business. Over the past 12 months, shares have gained about 11%, while returning 33% over the trailing five-year period.
It’s worth noting that these five-year gains are still far below those delivered by the S&P 500 over the same period, which total just shy of 100%. While Johnson & Johnson can deliver stable — albeit modest — portfolio upticks through share price growth, I would argue that it’s the underlying strength of its business coupled with the company’s exceptional track record of dividend increases that pose the most compelling incentives for long-term investors to buy in.
Here’s what income investors with a low risk appetite need to hear: Johnson & Johnson is on the relatively short list of Dividend Kings — companies that have consistently increased their dividend for 50 years or more. The New Brunswick, N.J.-based company has increased its dividend annually for 59 years. At current share prices, it yields a robust 2.5%.
In the first quarter of 2021, Johnson & Johnson’s sales were up nearly 8% on a year-over-year basis, and adjusted earnings per share (EPS) jumped by approximately 13%. Prescription medicines including plaque psoriasis drug Tremfya and multiple myeloma drug Darzalex were important catalysts for the company’s balance sheet growth in the quarter, as were sales generated by its Listerine and Johnson’s Baby products.
Johnson & Johnson is expecting to report more than 9% adjusted operational sales growth for its fiscal 2021. Investors should keep a close eye on the numbers when the company reports its second-quarter earnings on Wednesday.
While this certainly isn’t a reason in and of itself to buy shares of Johnson & Johnson, investors shouldn’t completely discount the company’s ability to eventually generate revenue growth from its single-shot COVID-19 vaccine, which it’s currently distributing on a not-for-profit basis. Johnson & Johnson just inked another supply deal with the European Union for approximately 40 million doses, according to a report by Reuters. Management also recently reported new data about the vaccine, which was found to produce “strong, persistent activity against the rapidly spreading delta variant and other highly prevalent SARS-CoV-2 viral variants.”
For the time being, investors have plenty of other compelling reasons to buy Johnson & Johnson stock. The nearly 150-year-old company has an impressive list of products and well-known brands to its name that continue to generate robust sales and earnings growth. These include life-saving medicines targeting areas from oncology to infectious diseases to immunology; massive consumer health name brands like OGX, Aveeno, Tylenol, and Johnson’s; and medical devices used for everything from joint reconstruction to the treatment of sports injuries. In the first quarter alone, Johnson & Johnson’s pharmaceutical segment generated 7% sales growth, while its medical device segment saw a nearly 9% jump in sales.
From its attractive dividend to its impressive track record of business growth as one of the world’s largest pharmaceutical companies, Johnson & Johnson is a smart stock you can buy and hold for a lifetime.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.