The past year has not been particularly kind to investors who suffered through an interest-rate-driven bear market. However, long-term investors know that bears are a normal part of the investing cycle. According to S&P Dow Jones Indices, since 1932, bear markets have occurred about every four years and eight months on average. Long-term investors also know that market downturns are a great time to load up on forever stocks at a discount.
Forever stocks are established companies with great track records that have proven they can weather the ups and downs of the market and the economy. They have stable but growing businesses and deliver consistent returns for shareholders. In short, you won’t be losing any sleep over them.
So, without further ado, here are the best forever stocks to buy this month.
| AAPL | Apple | $151.73 |
| PEP | PepsiCo | $171.82 |
| JNJ | Johnson & Johnson | $163.36 |
Apple (AAPL)
Apple (NASDAQ:AAPL) reported its latest quarterly results after the close on Feb. 2, missing on both the top and bottom lines. Revenue was down 5% year over year — the first sales decline since 2019 and the biggest drop since 2016 — while iPhone sales fell 8%. But the bad news didn’t stop there. Earnings of $1.88 per share were 6 cents below expectations and management declined to provide a forecast for the current quarter.
As CNBC reported, CEO Tim Cook cited a strong U.S. dollar, production issues in China and a challenging macroeconomic environment as the main reasons for the lackluster results. Of course, these issues are not unique to Apple, and Yahoo Finance Technology Editor Dan Howley argued that Apple’s earnings “were a lot better than they look.” Perhaps this is why APPL stock closed up 2.4% after delivering a rare earnings miss.
Howley pointed to the fact that Apple’s install base is at an all-time high at 2 billion devices and is seeing sharp growth in emerging markets. Moreover, Apple’s services business is growing at a fast clip with 935 million paid subscribers across its services, up 19% from a year ago. Growth in Apple’s services segment should continue to help offset some of the slowdown in iPhone sales.
Artificial intelligence may provide another growth driver for the company, including the semi-autonomous electric vehicle Apple is developing, with production possible in 2026. On the company’s earnings call, Cook called AI a “major focus” for the company, with Business Insider reporting that Apple’s website currently lists more than 100 machine learning and AI-related job postings.
Apple will continue to face headwinds as the economy struggles to regain its footing. But can you really imagine a world in which Apple is not a leader in smartphones, computers, tablets, wearables, apps, etc.? I cannot.
While the stock is up 17% year to date, it is down 11% over the past year and sits 17% below its all-time high. Thus, investors still have time to buy shares at a discount. Because, like my previous question, can you really imagine a world in which Apple’s share price is not higher 10 years from now than it is today? The answer is “no,” and that’s what makes it one of the top forever stocks to own.
PepsiCo (PEP)
PepsiCo (NASDAQ:PEP) is another company that is hard to imagine faltering regardless of the broader economic environment. Founded in 1898, the company has weathered plenty of economic downturns in its 125-year history. And the snack and drink maker is navigating the current one with flying colors.
In the third quarter of 2022, PepsiCo saw revenue jump 9% year over year to $21.97 billion, beating analysts’ estimates, while net income was up 21% to $2.7 billion. This was in spite of the fact that sales volumes declined by 1% from a year ago. This tells us that consumers have absorbed the company’s 17% price increases even as they look to limit spending. In another positive sign, the company recorded revenue increases across all geographic regions.
PepsiCo is scheduled to report fourth-quarter results on Feb. 9. According to Zacks, the company is “well-poised for growth in the fourth quarter of 2022, driven by the resilience and strength of global beverage and convenient food businesses.” Zacks also expects “gains from improved pricing across all segments,” adding that the “bottom line is likely to reflect the continued benefits of the mitigation of inflationary pressures through cost-management and revenue-management initiatives.”
Given PepsiCo’s reputation as a rock-solid consumer staples stock, shares are up 2.7% over the past 12 months and hit a record high as recently as mid-December. However, a rotation out of safety and into the risk-on trade in 2023 has PEP stock trading 8% below its all-time high. If the company delivers on earnings this week the way Zacks expects it to, shares could easily retest that high.
Finally, PEP deserves a place in your portfolio of forever stocks due to the company’s reliable dividend. PepsiCo is one of the elite Dividend Kings, having raised its dividend for 50 consecutive years.
Johnson & Johnson (J&J)
Last but not least on today’s list of forever stocks to buy is Johnson & Johnson (NYSE:JNJ). The company is a household name whose products span medical devices, pharmaceuticals and consumer packaged goods.
The company reported Q4 results on Jan. 24. While revenue and profits were lower on a year-over-year basis, they came in above estimates. And management offered up a better-than-expected operational earnings-per-share forecast of $10.40 and $10.60 for 2023 as well. Meanwhile, analysts are calling for revenue and earnings growth in the low single digits this year and next.
Like PEP, JNJ is seen as a defensive play. So, it’s not surprising shares are down 7.5% so far in 2023 as investors turned their focus to riskier assets. However, the stock has held up much better than the broader market over the past year, declining just 2%.
JNJ is not likely to deliver eye-popping gains. But it is likely to reliably grow its business and offer investors a safe haven in times of economic turbulence. Plus, it’s a solid dividend play. Shares throw off a 2.7% yield, and the company has raised its payout in each of the past 60 years.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.