What stocks do billionaires buy in a crisis?
Most financial forecasters suggest that a recession is likely on the way, and one prominent person agrees that it is almost inevitable. Legendary investor Paul Tudor Jones can see the recession coming and even predict when it will arrive.
The founder and billionaire Tudor Investment Corp expects a recession to begin this fall, largely as a result of a sharp rise in debt and asset prices in recent years. Such activity is usually accompanied by an economic downturn.
"Historically, it's about two years when it really bites and you go into recession," Tudor Jones explained. "It would be the third quarter of this year, and there's a good chance that -- based on our most recent financial episode -- there's a really good chance that we're on the verge of a recession-like or actually recession."
That doesn't mean it's time to get out of the stock market. In fact, Tudor Jones was filling the portfolio with shareholders he believed to be well equipped to deal with the coming recession - he was investing millions in several. We checked out a few new additions to his stock collection via the TipRanks database to gauge the Street's sentiment on those names as well. Here are the results.
Abbott Laboratories ( ABT )
During economic downturns, healthcare stocks are often viewed as defensive investments because of their resilience and stability in the face of recessionary pressures. This is true for Abbott Laboratories.
Founded way back in 1888, Abbott is a multinational healthcare company known for its wide range of products and services in diagnostics, medical devices, nutrition and branded generic pharmaceuticals. With a rich history, a global presence in more than 160 countries, approximately 115,000 employees and a market capitalization of $189 billion, Abbott has earned a reputation as an innovator and a significant presence in the industry.
Investors positively evaluated the company's latest quarterly results, despite the decrease in indicators compared to last year. Although revenues fell 18.5% from a year ago to $9.7 billion, the figure was slightly ahead of the consensus estimate. The company said the drop in sales was due to an expected year-over-year decline in sales related to COVID-19 testing. Adjusted earnings per share ultimately fell 40.5% year-over-year to $1.03, but the number beat estimates by $0.05. As for the full-year outlook, the company maintained its guidance for adjusted earnings per share in the range of $4.30 to $4.50.
Tudor Jones must like what's on offer here. It opened a new position in ABT during the first quarter by buying 139,628 shares. They are currently worth $15.13 million.
The company also has a fan - Morgan Stanley analyst Cecilia Furlong. She says of the company: “Abbott has a strong balance sheet that supports a faster organic growth profile in the core business (ex-COVID Dx) over 2023-2025, and Q1 results underscore the strength of the core business. Recent headwinds including infant formula recalls and macroeconomic supply and margin pressures continue to improve and at current levels we remain bullish on Abbott given its leading organic growth profile (ex-COVID Dx), diversified business structure, continued core opportunity post-COVID-19 margin expansion and net leverage below peers, creating additional opportunities.”
Quantifying the position, Furlong sees ABT as Overweight (i.e., Buy), while its $133 price target suggests the stock will grow by about 23% year-to-date. (To view Furlong's track record, click here)
Elsewhere on the street, the stock gets an additional 11 buys and 1 hold and sell each, implying a strong consensus rating. With an average target of $123.79, the stock will rise 14% over the coming months. As an added bonus, the company also has a dividend that it has increased regularly over the years. The current payout is $0.51. USA and yields 1.78%. (See Forecast of ABT shares)
Johnson & Johnson (JNJ)
From one healthcare giant to an even bigger one. With a market capitalization of over $411 billion, Johnson & Johnson is one of the largest healthcare corporations in the world. The company operates in three business segments: pharmaceuticals, medical equipment and consumer health.
In the pharmaceutical sector, Johnson & Johnson develops and markets a diverse portfolio of prescription medicines, focusing on areas such as oncology, immunology, neuroscience and infectious diseases. The company's Medical Devices segment manufactures and sells a wide range of innovative medical devices, including surgical instruments, orthopedic devices, cardiovascular products and diagnostics. In addition, Johnson & Johnson offers a variety of consumer health products such as over-the-counter medicines, baby care, oral care, and cosmetics and skin care brands.
The value proposition proved beneficial for the company in its last reported quarter, 1Q23. The company's revenue was $24.7 billion, up 5.6% from last year and beating the $1.09 billion forecast. Additionally, adjusted earnings per share of $2.68 beat analysts' estimates of $2.50.
Moreover, the company raised its sales and earnings forecast for FY23. Additionally, the dividend rose 5.3% to $1.19 per share. The payout currently provides a yield of 2.81%.
Tudor Jones enters the frame here with the purchase of 216,183 shares in the first quarter, a new position in JNJ, which is now worth more than $34.23 million.
Jones isn't the only one supporting JNJ's cause. Cantor analyst Louise Chen, hailing a "beat-and-boost" quarter, praises the healthcare giant and believes the stock is undervalued.
"In our view, the strength and longevity of JNJ's business segments remain undervalued," Chen said. "We continue to believe that an upward revision to earnings estimates and multiple expansion to 15-20x 2023E EV/EBITDA now from ~13x, driven by out-of-market growth in key franchises, should boost JNJ stock."
The comments are the basis for Chen's Overweight (i.e. Buy) rating, while her $215 Street price target suggests the stock will rise 36% over the next year. (To view Chen's track record, click here)
Looking at the rating distribution based on 5 buys and 12 holds, the analyst consensus rates the stock as a moderate buy. The forecast calls for a one-year return of 13.5%, given an average target of $179.52. (See Forecast of JNJ shares)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended for informational use only. It is very important to do your own analysis before making any investment.