As the ongoing bull market has become the longest in history and S&P is trading at an all-time high, many investors are afraid that a bear market is just around the corner. Consequently, they hesitate to have exposure to stocks, fearing that the losses from the current levels may be devastating. However, it is a shame to miss the exceptional long-term returns of the stock market due to abstract fears of a bear market, particularly given that no one can time bear markets. Therefore, in this article, I will analyze Johnson & Johnson (JNJ), which offers exciting growth prospects, a reasonable valuation and resilience to recessions and bear markets.
Resilience to Recessions
Johnson & Johnson has proven markedly resilient to recessions. In the Great Recession, the worst financial crisis of the last 80 years, most companies saw their earnings collapse and S&P lost 55% in less than two years. On the contrary, Johnson & Johnson continued to increase its earnings thanks to the nature of its products. As both its consumer products and pharmaceutical products are essential to consumers, the latter do not reduce their consumption of these products even under the most adverse economic conditions. As a result, Johnson & Johnson significantly outperforms the market during recessions. In the Great Recession, the stock lost 33% from peak to trough, much less than the broad market, and thus made it easier to its shareholders to retain their shares, particularly given that it continued to grow its earnings and its dividend.
Growth Prospects
Most investors know this stock from its consumer products and thus consider it a mature stock. The consumer segment is facing increasing competition, as it has become easier than ever for new brands to be promoted at a low cost via social media. Moreover, the online giants, such as Amazon (AMZN), are trying to disrupt the supply chain and sell products directly to consumers. As a result, this segment of Johnson & Johnson reported marginal sales growth last year and flat sales in Q2.
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