7 Stocks to Buy to Hone in on Ray Dalio’s Reliable Favorites
InvestorPlace - Stock Market News, Stock Advice & Trading Tips Most analysts agree we could see a sharp price correction soon. Before that happens, take a look at these Ray...
Often acclaimed as “the Steve Jobs of Investing,” Ray Dalio is an investment expert whose tough-but-innovative management style has revolutionized how to analyze stocks to buy. Dalio founded Bridgewater Associates in 1975, now one of the most successful hedge funds out there with over $200 billion in assets under management (AUM).
This ace investor employs a simple three-step formula: save money, create a diversified portfolio and understand the market’s long-term cycles. During times of volatility, this is exactly the kind of approach you need. When you peruse the Bridgewater Associates portfolio, you will not find many headscratchers. Contrast this approach with Cathie Wood, CEO of Ark Invest. Wood tends to have a more risk-tolerant approach when picking stocks, which is why you see Coinbase (NASDAQ:COIN) and Tesla (NASDAQ:TSLA) in that portfolio.
Both of these approaches are successful, no doubt. However, in an environment where Morgan Stanley predicts a 20% correction, taking the more conservative route can’t hurt.
So, without further ado, here are seven top stocks to buy from one of Wall Street’s top investors:
- Johnson & Johnson (NYSE:JNJ)
- McDonald’s (NYSE:MCD)
- Procter & Gamble (NYSE:PG)
- Starbucks (NASDAQ:SBUX)
- Walmart (NYSE:WMT)
- Costco (NASDAQ:COST)
- Pepsico (NASDAQ:PEP)
Stocks to Buy: Johnson & Johnson (JNJ)
Johnson & Johnson’s vaccine business has been struggling to keep up with the competition. For example, third-quarter Covid-19 vaccine sales of $502 million fell short of analyst expectations. Further, JNJ’s $766 million in vaccine revenue thus far is only a fraction compared to leaders like Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA), who have seen much stronger growth in 2021.
Over the past year, JNJ stock has oscillated alongside its vaccine fortunes. Although Johnson & Johnson managed to develop a vaccine very quickly, the drug’s 66% efficacy rate does not compare well with many of the other vaccines out there.
On the bright side, though, this company is not relying solely on its vaccine sales. Rather, JNJ is a conglomerate in every sense of the word. For instance, sales in its medical device unit grew 8% year-over-year (YOY). Despite labor shortages across medical professions and the Delta variant spreading across hospitals, the company has done very well so far. The pharmaceuticals sector grew nearly 14% YOY as well, while consumer health saw a more than 5% increase in sales thanks to increased demand.
Life for JNJ stock will continue to improve as the pandemic recedes. Cold and flu medicine sales will be strong this winter. That should also help device revenues increase as patients return to doctor’s offices for routine care, potentially purchasing JNJ products there, too.
Johnson & Johnson has increased its profit outlook to a range of $9.77 to $9.82 per diluted share. That bodes well for the bull thesis here, making JNJ one of the top Ray Dalio stocks to buy.
When it comes to MCD stock, you can invest with your eyes closed. Quarter after quarter, this company beats earnings estimates. Plus, its presence is ubiquitous around the world.
True, McDonald’s has recently had to negotiate a higher-cost environment by raising menu prices. However, this change has not drastically affected sales. In the most recently reported quarter, net sales rose 14% to $6.2 billion, topping expectations. Further, global same-store sales increased 12.7% while the domestic market grew 9.6% over the year-ago period.
There are several factors at play here. However, the rebounding economy and a return to normal is the biggest reason demand is back. Additionally, the company credits its new chicken sandwich, Famous Orders promotions and other new products for the recent success.
The fast-food industry is seeing a major shift in consumer tastes. McDonald’s has been quick to adapt, making it an enticing all-weather name among stocks to buy.
Stocks to Buy: Procter & Gamble (PG)
There is a common pattern you will find with Ray Dalio. When it comes to stocks to buy, Dalio likes to invest in proven performers — companies with a solid track record and healthy outlook. PG stock fits that bill and then some. The multinational consumer goods corporation has seen profits grow consistently in the last three years.
After posting fiscal Q1 2022 earnings recently, Procter & Gamble revealed that it had performed better than expected. However, the company’s higher costs also negatively impacted profits in comparison to last year’s figures.
For the period, net sales rose 5% to $20.3 billion, exceeding forecasts of $19.9 billion thanks to strong organic revenue growth. Despite a price hike from P&G, organic sales grew nominally as well. Nevertheless, higher freight costs and higher commodity prices were too much for the company to overcome this quarter. CFO Andre Schulten has said the consumer goods giant would hike prices for certain categories to combat inflation.
P&G now forecasts after-tax commodity expenses of $2.1 billion and freight expenses of $200 million. Notwithstanding these issues, though, the company reaffirmed its full-year earnings and revenue projections. It is calling on fiscal year sales to grow 2% to 4%, while core earnings per share (EPS) is projected at 3% to 6%.
Next up on this list of stocks to buy is SBUX stock. Starbucks reported quarterly revenue that fell short of expectations as Covid-19 resurfaced in China and weakened sales. This global coffee chain has also been battling rising costs. Still, it shared its forecast for fiscal 2022, which included an increase despite these challenges to meet customer demand.
Starbucks reported a fiscal Q4 profit of $1.49 per share, up from 33 cents in the same quarter last year. Further, sales missed estimates, coming in at $8.1 billion instead of the analyst predicted $8.21 billion. At the same time, this number is still high, especially with the restrained business atmosphere.
What’s more, the company reported strong growth in the quarter, with same-store sales increasing by 22% in the United States. Starbucks Rewards memberships also saw an increase of 28% YOY, nearing 25 million active members in the program.
All told, aside from the weakened sales in China — the company’s second-largest market — Starbucks has posted solid numbers for the recent quarter. Plus, it has the size to contend with temporary upticks in costs as well as supply-chain disruptions.
Stocks to Buy: Walmart (WMT)
Walmart — the world’s largest retailer and an industry leader in groceries — had another successful quarter recently with earnings exceeding expectations. The company saw good growth during the back-to-school season as well as excellent returns for its grocery business.
Furthermore, food sales grew $2.4 billion YOY for the quarter as Walmart saw an increase in customers and managed to keep produce on hand. Additionally, with consumers returning to their routines, store visits have also been increasing. That’s a very positive sign.
Finally, revenue for fiscal Q2 2022 was a record outside of the holiday season, which says a lot about the Walmart brand as well as the state of the economy. CFO Brett Biggs said these consumption patterns point towards customers “coming out of hibernation.”
In light of these results, this retailer now forecasts EPS in the range of $6.20 to $6.35 and U.S. same-store sales “to increase by 5% to 6%, excluding fuel,” according to CNBC. All told, WMT stock appears to be another solid entry on this list of stocks to buy.
Next up on this list of stocks to buy, Costco is one of the most well-known membership-only stores in the United States. The chain provides memberships for people who want to buy food, fuel and other useful supplies and products at wholesale prices with no monthly fees or delivery charges. Due to the nature of the pandemic, this company did very well last year.
More specifically, Costco has seen incredible growth in recent years with sales climbing 17.7% YOY to $192 billion from $163.2 billion for the 2020 fiscal year. Furthermore, the company reported Q4 fiscal 2021 earnings that beat forecasts yet again. EPS jumped 20.1% while revenues grew more than 17% from the year-ago period.
Lastly, Costco continues to show growth in its comparable sales, but at a more moderate rate than before. Still, the company’s roughly 15% YOY increase in comp sales is good news for shoppers and investors in COST stock alike.
Stocks to Buy: Pepsico (PEP)
The final entry on this list of stocks to buy is PEP stock. Much like its equally famous counterpart Coca-Cola (NYSE:KO), Pepsico is having a terrific time right now despite the supply-chain issues plaguing wider markets.
For starters, this multinational food, snack and beverage company posted an EPS of $1.79 per share for Q3 2021, beating consensus estimates of $1.73 per share. True, Pepsico said that a hike in supply-chain costs weighed down results in the period. Nevertheless, the company managed to eke out a very good quarter. Net sales rose almost 12% to $20.19 billion, for instance, beating expectations. This indicates that, even after considering acquisitions and divestitures, the business continues to grow at a healthy rate.
Looking ahead, PEP’s organic revenue is expected to increase by 8% for fiscal 2021, up from their prior forecast of 6%. Meanwhile, the company reaffirmed its full-year forecast for core constant currency EPS, which is expected to grow 11%.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.
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