Stock Analysis & Ideas

Here are 2 ‘Perfect 10’ Stocks to Weather the Current Worrisome Waves

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An economic emergency calls for looking extra carefully for stocks that have high potential and stand on solid ground. Two stocks which match this criteria are beverage distributor PepsiCo, and pharmaceutical giant Johnson and Johnson. 

The TipRanks’ Smart Score Tool, which takes into account key factors to rate stocks on a scale of 1 to 10, has picked up a few stocks recently, which boasts of strong upsides over the longer-term. We will discuss two of these stocks today, that have reached a score of “Perfect 10” on TipRanks — PepsiCo (NASDAQ: PEP) and Johnson & Johnson (NYSE: JNJ).

On Wednesday, the U.S. consumer price index (CPI) for June revealed that at 9.1% year-over-year CPI growth, inflation was way ahead of estimates. In such an economic environment roiled by inflation, recession fears, increasing interest rates, and never-ending geopolitical tensions, it is alright to be picky while choosing stocks.

The Smart Score tool does the groundwork by tracking analyst ratings, insider transactions, hedge fund transactions, and other technical and fundamental factors, to shortlist the best-positioned stocks.

PepsiCo (PEP)

Our first choice is food and beverage giant PepsiCo, which, in Evercore ISI analyst Robert Ottenstein’s words, “continues to sound and act like a premier, blue chip global staples company.” The company is one of the rare ones to have raised its revenue outlook for the disruptive year of 2022.

The company’s recently released second-quarter results were also remarkable, supported by strong traction in the Frito-Lay business in North America and Latin America. The Q2 print showed us that PepsiCo is outperforming the broader market during a bear market, a typical trend in defensive stocks.

“While the input cost environment is expected to worsen in 2H relative to 1H, management has a history of guiding conservatively and noted that it ‘likes to give numbers that are highly deliverable,’” noted Ottenstein, who reiterated a Hold rating on PEP with a price target of $180. The analyst is optimistic about the company’s outlook for this year and thereafter.

Moreover, Wall Street has a Moderate Buy consensus rating on the stock, based on seven Buys, six Holds, and one Sell. The average price target of PepsiCo is $180, indicating an upside of 5.82% from pre-Thursday price levels.

Importantly, PepsiCo is a “Perfect 10” according to TipRanks’ Smart Score rating system, indicating that it checks the list of most of the key factors determining a good bet. The company entered the Perfect 10 score in the past week.

Johnson & Johnson (JNJ)

Healthcare products stalwart Johnson & Johnson is the second company that we chose, that has been holding the “Perfect 10” score for more than a week. The company’s solid portfolio of products, strong operational and technological capabilities on the back of a highly skilled workforce makes JNJ a very valuable investment.

Ahead of its expected second-quarter results on July 19, Wells Fargo analyst Larry Biegelsen maintained a Buy rating on the stock and raised the price target to $195 from $190.

The analyst acknowledged the worsening of macroeconomic headwinds in Q2, including currency exchange rate headwinds, which he expects to weigh on the bottom-line outlook for the year. However, Biegelsen believes that JNJ’s operational strength should have helped the company navigate the headwinds in Q2.

Moreover, in April this year, JNJ’s CEO, Joaquin Duato reassured investors that the company’s continued portfolio enhancement and a strong pipeline of innovative products will ensure a bright future for the company.

Wall Street is cautiously optimistic about JNJ, with a Moderate Buy consensus rating based on seven Buys and three Holds. The average price target for JNJ stands at $192.50, suggesting an upside of 9.72% from pre-Thursday price levels.

Moreover, JNJ’s ‘Perfect 10’ Smart Score suggests that the company has the potential to overcome current market volatility.

Conclusion

PepsiCo and Johnson & Johnson enjoy numerous upsides. Along with their top Smart Score rating on TipRanks, the two stocks make compelling bets amid the tumultuous economic situation.

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