Warren Buffett, also known as the Oracle of Omaha, is one of history’s most successful investors. Buffett’s investment strategy involves picking stocks possessing superior pricing power, long-term growth, efficient management, and low valuation. He is the Chairman and CEO of Berkshire Hathaway (BRK.A) (BRK.B), a multinational holding company.
In more than half a century since Buffett managed the company (1965-2021), Berkshire has generated a compound annual return of 20.1% versus the S&P 500’s 10.5% gains.
BRK.A has gained 2.6% over the past month and 2.2% over the past year, while BRK.B has gained 2.5% over the past month and 2.3% over the past year. Buffett’s portfolio has been an investment guide for several investors for decades, given his solid track record of outperforming the market.
Amid the current uncertain market conditions, we think Buffett’s holdings, The Procter & Gamble Company (PG) and Johnson & Johnson (JNJ), could be solid additions to your portfolio. These stocks are rated Strong Buy or Buy in our proprietary POWR Ratings system.
The Procter & Gamble Company (PG)
PG provides branded consumer packaged goods worldwide. The company operates through five segments: Beauty: Grooming; Health Care; Fabric & Home Care; and Baby, Feminine & Family Care. It sells its products primarily through mass merchandisers, grocery stores, e-commerce, membership club stores, department stores, distributors, pharmacies, and professional channels.
Buffett’s Berkshire Hathaway holds nearly 315,400 shares of PG. The company represents about 0.1% of Berkshire’s portfolio.
On July 20, PG and Shopee, the leading e-commerce platform in Southeast Asia and Taiwan, kicked off P&G’s Regional Super Brand Day on Shopee with the launch of a new exclusive 360-degree virtual home shopping experience.
The virtual home shopping experience includes multi-format touch points such as videos, gamification, and localized content to make online home shopping convenient and engaging for users. It is expected to uplift the company’s sales and extend its market reach.
On June 8, PG and Microsoft Corp. (MSFT) announced a multi-year collaboration to co-innovate to accelerate and expand PG’s digital manufacturing platform and leverage the Industrial Internet of Things (IIoT) to increase customer satisfaction and improve productivity to reduce costs. This partnership is expected to boost the company’s growth and profitability.
In the fiscal 2022 third quarter ended March 31, 2022, PG's net sales grew 7% year-over-year to $19.38 billion, and its operating income improved 6.3% from the year-ago value to $4.02 billion. The company's earnings before income taxes rose 5% year-over-year to $4.07 billion. Its net earnings and earnings per share came in at $3.37 billion and $1.33, up 3.6% and 5.6% year-over-year, respectively.
The $19.41 billion consensus revenue estimate for the fiscal 2022 second quarter (ended June 2022) represents a 2.5% improvement from the same period in 2021. Analysts expect PG’s EPS for the to-be-reported quarter to increase 8.6% year-over-year to $1.23. It’s no surprise that the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 2.8% over the past year to close the last trading session at $144.27.
PG’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PG has a grade of B for Stability and Quality. Within the Consumer Goods industry, it is ranked #4 of 60 stocks. Click here to see additional POWR Ratings (Growth, Value, Sentiment, and Momentum) for PG.
Johnson & Johnson (JNJ)
JNJ develops, manufactures, and sells various products in the healthcare field worldwide. The company operates through three segments: Consumer Health; Pharmaceutical; and MedTech. It offers baby care products, oral care products, skin health products, and allergy products.
In addition, it offers electrophysiology products, orthopedics products, and advanced and general surgery solutions. Buffett’s Berkshire Hathaway owns over 327,000 shares of JNJ. It currently constitutes nearly 0.02% of Berkshire Hathaway’s portfolio.
On June 21, JNJ launched its new J&J Satellite Center for Global Health Discovery at Singapore’s Duke-NUS Medical School to advance dengue research. The satellite center is the first Asia Pacific site in JNJ’s network of research collaborations to address entrenched and emerging pandemic threats. The new launch might accelerate the company’s growth.
JNJ's sales increased 3% year-over-year to $24.02 billion in the fiscal 2022 second quarter ended March 31, 2022. Its gross profit amounted to $16.10 billion, up 2.4% year-over-year. Furthermore, the company’s adjusted net earnings and earnings per share came in at $6.91 billion and $2.59, registering a rise of 4.3% and 4.4% from the prior-year period, respectively.
Analysts expect JNJ's revenue for the fiscal year 2022 (ending December 2022) to come in at $95.16 billion, representing a 1.5% rise year-over-year. Also, Street expects the company's EPS for the current year to come in at $10.09, representing a growth of 3% year-over-year. The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
JNJ’s shares have increased 3.2% over the past six months to close the last trading session at $173.68.
JNJ’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
JNJ has a grade of A for Stability and B for Growth and Quality. Within the Medical-Pharmaceuticals industry, it is ranked #6 of 169 stocks. Click here to see additional POWR Ratings (Value, Sentiment, and Momentum) for JNJ.
PG shares fell $0.14 (-0.10%) in after-hours trading Wednesday. Year-to-date, PG has declined -9.40%, versus a -14.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
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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