With the Nasdaq Compound Still firmly entrenched in bear market territory, if you’re feeling discouraged by the state of your portfolio and the performance of some of your favorite stocks, you’re certainly not alone. However, even in volatile markets, attractive buying opportunities remain for patient and forward-thinking investors.
That said, in this type of environment, it is even more important than usual to differentiate between companies that have clear paths to growth and are simply trading in difficult macroeconomic conditions, and those that see their Shares decline for valid reasons that suggest they’ll face long-term headwinds.
Two actions which, in my opinion, belong firmly in the first category are DexCom (DXCM 4.04%) and Procter & Gamble (PG 0.72%).
If you’re looking for a non-cyclical company with products that are consistently in demand, regardless of the macro environment or consumer sentiment, DexCom could be an obvious contender for your portfolio. It is one of the leading developers and manufacturers of Continuous Glucose Monitoring (CGM) devices in the world. Its devices are worn by millions of type 1 and type 2 diabetics worldwide.
With a global market share of around 50% in the CGM space, it’s fair to say that DexCom has considerable room for growth, even in a difficult economic environment. The company is currently in the process of launching the latest generation of its flagship CGM device, the G7. The G7 system is much smaller and lighter than its predecessor, and has the fastest warm-up time of any CGM device on the market.
In the third quarter, DexCom reported year-over-year revenue growth of 18% to $770 million, while its net income rose 16% to $101 million. Over the past decade, its annual revenue has grown over 2,400%, while the stock has generated an astonishing total return of 3,300%.
CGMs are not discretionary products. These devices can make a life or death difference in the health of their users. It’s also worth noting that a growing number of private insurers have expanded their coverage to include CGM devices, and Medicare and Medicaid last year adjusted their rules to expand coverage for these devices.
As such, DexCom’s total addressable market continues to expand and demand for its products is expected to continue to grow. In fact, the American Diabetes Association estimates that 1.4 million Americans are diagnosed with diabetes each year.
At the current share price, a $1,000 investment in DexCom would add about nine stocks to your portfolio.
2. Procter & Gamble
Speaking of non-cyclical companies, Procter & Gamble is another good stock to consider for long-term investors, and is a dividend king to boot. At its current share price, its payout returns investors 2.5% and it has increased its dividend every year for 66 consecutive years.
In the past decade alone, management has increased the dividend by more than 60%, helping the stock deliver a 188% total return to investors. Not bad for a consumer staples stock that might get a bad rap with some investors for being a “boring” business. Often it is these value-driven businesses, even those that may be considered boring, that can deliver the most sustainable returns in a wide variety of environments.
Procter & Gamble’s products cover a wide range of consumer needs, from personal care products and oral health to hair care and home care. Familiar names like Pampers, Downy, Tide, Bounty, Charmin, Always, Tampax, Gillette, Herbal Essences, Pantene and Old Spice are all part of its family of brands.
In the most recent quarter, Procter & Gamble grew its organic percentage sales in the mid to high numbers in each of its five core business segments. Overall, organic sales (which exclude the effects of currency fluctuations) increased 7% over the prior year period. Even accounting for foreign currency headwinds, total net sales were still up 1% year-over-year to $21 billion. The company also reported net income of about $4 billion for the quarter. And over the past five years, Procter & Gamble has increased its revenue and earnings by 20% and 51%, respectively.
A $1,000 investment in Procter & Gamble at the current share price would add about seven stocks to your portfolio.
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