3 Stocks That Always Thrive While Others Fall

This year has been rough so far for the stock market. Multi-decade high inflation, the Fed’s aggressive interest rate hikes, geopolitical instability, and growing recession odds have led to heightened market volatility.

Although October CPI data came in lower than expected, indicating that inflationary pressure is cooling, the level is still much higher than the Fed’s target of 2%. Therefore, the Fed is expected to maintain its hawkish stance.

The central bank is expected to raise the federal funds rate by 50 basis points in December. Economists believe that a more extended period of central bank tightening and a higher policy rate peak are the greatest risks to the current economic outlook. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, warned that the Fed raising rates until 2% inflation is reached “would guarantee an overshoot and a deep recession.”

Food and beverages, consumer staples, utilities, and healthcare companies perform relatively well during a recession due to the inelastic demand for their products and services. So, their stocks perform pretty well amid an economic downturn.

Fundamentally strong defensive stocks UnitedHealth Group Incorporated (UNH), Johnson & Johnson (JNJ), and Casey’s General Stores, Inc. (CASY) are well-positioned to deliver stable returns amid the potential recession. So, these stocks could be solid additions to one’s portfolio.

UnitedHealth Group Incorporated (UNH)

UNH is a diversified healthcare company in the United States that operates through four segments: UnitedHealthcare; OptumHealth; OptumInsight; and OptumRx.

On November 4, UNH’s Board of Directors authorized the payment of a cash dividend of $1.65 per share, payable on December 13, 2022. The company pays $6.60 per share annually as dividends, which translates to a yield of 1.25% at the current share price. Its 4-year average dividend yield is 1.36%.

UNH’s dividend payouts grew at a CAGR of 16.1% in the last three years and 17.7% in the last five years. Moreover, the company’s dividends increased in 12 consecutive years.

On October 27, UNH expanded its Individual and Family Plan footprint in the Health Insurance Marketplace, offering affordable coverage, a wide range of benefits, and a simple service experience in 22 states.

“With extended eligibility and subsidies, we have created even more options for the 2023 Health Insurance Marketplace that meet the diverse needs of our members and help people make the best choice for themselves and their families,” said Marcus Robinson, Senior Vice President, UnitedHealthcare Individual and Family Plans.

In the fiscal 2022 third quarter ended September 30, 2022, UNH's total revenues increased 11.8% year-over-year to $80.89 billion. Its earnings from operations grew 30.6% from the prior-year period to $7.46 billion. The company’s income before income taxes rose 31.3% year-over-year to $6.95 billion.

In addition, adjusted net earnings attributable to UNH common shareholders increased 27.2% year-over-year to $5.49 billion, while its adjusted earnings per share came in at $5.79, up 28.1% year-over-year.

Analysts expect UNH’s revenue and EPS of $323.18 billion and $22.02 for fiscal 2023 (ending December 2023), indicating a rise of 12.4% and 15.8% year-over-year, respectively. Furthermore, the company’s revenue and EPS for the next fiscal year are expected to grow 9% and 13.3% year-over-year to $352.19 billion and $24.95, respectively.

The stock has gained 12.4% over the past six months and 17.9% over the past year to close the last trading session at $530.00.

UNH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

UNH has a B grade for Sentiment, Growth, Stability, and Quality. Within the A-rated Medical-Health Insurance industry, it is ranked #2 out of 11 stocks.

Beyond what is stated above, we’ve also rated UNH for Momentum and Value. Get all UNH ratings here.

Johnson & Johnson (JNJ)

JNJ is a diversified healthcare products company. It operates through three segments: Consumer Health; Pharmaceutical; and MedTech. The company offers baby care, skin health, allergy, electrophysiology, orthopedics, and advanced and general surgery products and solutions.

This month, JNJ and Abiomed Inc. (ABMD), a world leader in breakthrough heart, lung, and kidney support technologies, entered into a definitive agreement under which JNJ will acquire all outstanding shares of ABMD for an upfront payment of $380 per share in cash.

The acquisition is expected to broaden Johnson & Johnson MedTech’s (JJMT) position as a growing cardiovascular innovator, advancing the standard of care in one of healthcare’s largest unmet need disease states: heart failure and recovery.

In September, JNJ opened its San Francisco Bay Campus, a cutting-edge Research and Development (R&D) center in the Bay Area, one of the most well-known global hubs for innovation and entrepreneurship. The facility connects essential scientific and technology resources by combining Janssen R&D, Johnson & Johnson Innovation, and Johnson & Johnson Technology.

JNJ’s annual dividend of $4.52 per share yields 2.57% on the current price. Its dividend payments grew at a CAGR of 5.9% over the past three years and 6% over the past five years. The company has increased dividends for 59 consecutive years.

JNJ’s sales increased 1.9% year-over-year to $23.79 billion for the third quarter ended September 30, 2022. The company’s net earnings increased 21.6% year-over-year to $4.45 billion. Also, its earnings per share came in at $1.68, representing an increase of 22.6% year-over-year.

Analysts expect JNJ’s revenue and EPS for the current year (ending December 2022) to grow 1.4% and 2.5% year-over-year to $95.05 billion and $10.05, respectively. Also, the company’s revenue and EPS for the next year are expected to come in at $97.54 billion and $10.37, indicating a growth of 2.6% and 3.2% year-over-year, respectively.

Furthermore, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. JNJ has gained 6% over the past month to close the last trading session at $176.20.

JNJ’s fundamental strength and strong outlook are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

JNJ has a grade of A for Stability and B for Value and Quality. It is ranked #8 of 163 stocks in the Medical-Pharmaceuticals industry. 

Click here to see additional POWR Ratings (Growth, Sentiment, and Momentum) for JNJ.

Casey’s General Stores, Inc. (CASY)

CASY operates convenience stores under the Casey’s and Casey’s General Store names. The company offers a selection of food, beverages, tobacco and nicotine products, health and beauty aids, automotive products, and other non-food items. In addition, its stores provide motor, gasoline, and diesel fuel. It operates more than 2,450 convenience stores.

On November 1, CASY stated that it continues to expand its alternative fuel options in response to evolving guest needs and as part of its environmental stewardship efforts. The company has doubled the number of stores with EV chargers in the previous year and is a leading retailer of biofuels in its footprint.

Moreover, the company has raised its dividend for 23 consecutive years. It pays an annual dividend of $1.52, representing a yield of 0.63% at the current share price. Its dividend payouts grew at a CAGR of 6.2% over the past three years and 7.9% over the past five years.

CASY’s total revenues came in at $4.45 billion for the first quarter that ended July 31, 2022, up 40% year-over-year. Its adjusted EBITDA increased 20.6% from the year-ago value to $293.21 million. The company’s net income came in at $152.93 million, up 28.3% year-over-year. Also, its EPS came in at $4.09, up 28.2% year-over-year.

Analysts expect CASY’s revenue for the current fiscal year (ending April 2023) to increase 22.6% year-over-year to $15.87 billion. The company’s EPS for the ongoing year is expected to grow 11.4% year-over-year to $10.14. It has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

Shares of CASY have gained 19.2% over the past six months and 21.5% year-to-date to close the last trading session at $239.72.

CASY’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system.

CASY has a B grade for Growth, Value, Sentiment, and Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #3 out of 39 stocks. 

Click here for the additional POWR Ratings for Momentum and Stability for CASY.

UNH shares were unchanged in premarket trading Monday. Year-to-date, UNH has gained 6.57%, versus a -15.65% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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