Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

2 Stocks to Be Grateful for This Thanksgiving

ng.investing.com/analysis/2-stocks-to-be-grateful-for-this-thanksgiving-141368
2 Stocks to Be Grateful for This Thanksgiving
By Jesse Cohen/Investing.com   |  Nov 24, 2022 10:53
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
MRK
+0.88%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XOM
-3.00%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
IXIC
-1.58%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
XLV
-0.75%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
ABBV
-0.75%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TTE
-1.67%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Rising rates, accelerating inflation, and slowing economy hammered S&P 500
  • Energy and healthcare shares have been the market’s top gainers
  • Investors should consider buying Exxon Mobil and Merck

With just 25 trading days left in 2022, U.S. stocks are on track to record one of their worst annual performances in recent history, hammered by fears the Federal Reserve’s aggressive rate hikes to combat inflation will tip the economy into recession.

S&P, Dow, Nasdaq Daily
S&P, Dow, Nasdaq Daily

The S&P 500 is down 15.8% year-to-date (ytd) and roughly 17% away from its Jan. 3 record close. The tech-heavy Nasdaq Composite, which has languished in bear market territory for most of the year, is off by 28.6% ytd and is 31% below its Nov. 19, 2021 all-time high.

Meanwhile, the blue-chip Dow Jones is down the least, declining 6.1% ytd, and is approximately 7.7% off its record peak reached at the start of the year.

Price Performance Year To Date
Price Performance Year To Date

Despite the months-long selloff, energy titan Exxon Mobil (NYSE:XOM) and healthcare giant Merck (NYSE:MRK) have offered investors a bit of a relief, shining in an otherwise challenging market at the expense of the high-growth tech winners of yesteryear.

Undoubtedly, investors who caught the sharp moves higher are extremely grateful this time of year. For those who missed out, I recommend buying XOM and MRK, given their profitable business model, healthy balance sheet, and enormous cash pile.

Exxon Mobil

  • Year-To-Date Performance: +86.6%
  • Market Cap: $471.1 billion

2022 has been a banner year for Exxon Mobil. Shares of the Irving, Texas-based company, which began trading at $61.19 on Jan. 1 and rose all the way to a record high of $114.66 on Nov. 8, have gained 86.6% year-to-date amid a furious rally in crude oil and natural gas prices.

U.S. crude is up nearly 15% this year, with prices jumping to their highest level since 2008 at one point amid a disruption to global supplies following Russia's invasion of Ukraine in February. Meanwhile, U.S. natural gas prices, which climbed to a 14-year peak in late August, are up about 85% since the start of the year.

At current levels, Exxon, which has significantly outperformed its major competitors—Chevron (NYSE:CVX) (+58.4% ytd), Shell (NYSE:SHEL) (+30.9% ytd), TotalEnergies (NYSE:TTE) (+21.4% ytd), and BP (NYSE:BP) (+31% ytd)—is the eighth most valuable company listed on the U.S. stock exchange.

Exxon Weekly
Exxon Weekly

In my opinion, XOM remains one of the best stocks to own heading into the new year thanks to the company’s ongoing efforts to return capital to shareholders amid a strong balance sheet and high free cash flow levels. It also boasts a relatively cheap valuation.

The oil-and-gas behemoth reported record quarterly profit of $19.7 billion last month, almost matching the $20.7 billion earned by Apple (NASDAQ:AAPL) over the same period. It made approximately $43 billion in profit throughout the first nine months of 2022, up 19% year-over-year.

Indeed, Exxon said it returned $8.2 billion to its stockholders in the July-Sept. period, including $3.7 billion of dividends and $4.5 billion of share buybacks. The company has repurchased $10.5 billion of its own stock so far this year, consistent with its plan to buy back up to $30 billion of shares through fiscal 2023.

I believe that Exxon is well placed to extend its strong performance as it continues to benefit from robust commodity prices and increased output at its stellar operations throughout the Permian basin.

With a price-to-earnings (P/E) ratio of 9.0, the stock is undervalued given the company's growth prospects.

Merck

  • Year-To-Date Performance: +39.5%
  • Market Cap: $270.5 billion

Merck’s stock has been a bright spot on the S&P as investors pile into the thriving healthcare name. Shares of the Rahway, New Jersey-based pharmaceutical giant, which climbed to an all-time peak of $107.09 last night after starting the year at $76.64, are up 39.5% year-to-date.

The drugmaker is the top-performing stock of the year amongst names found in the Health Care Select Sector SPDR® Fund (NYSE:XLV), outpacing the annual performance of major industry peers, Johnson & Johnson (NYSE:JNJ) (+3.3% ytd), Eli Lilly (NYSE:LLY) (+30.6% ytd), AbbVie (NYSE:ABBV) (+18% ytd), and Pfizer (NYSE:PFE) (-16.8% ytd), thanks to robust demand for its blockbuster drugs.

Merck owns six blockbuster drugs, each with over $1 billion in revenue, most notably its cancer immunotherapy Keytruda, human papillomavirus vaccine Gardasil, and diabetes treatment Januvia.

Merck Weekly
Merck Weekly

Merck is well positioned for further gains in the coming months as it continues to benefit from strong fundamentals, which will help fuel future growth in earnings and free cash flow, allowing it to maintain its focus on shareholder returns.

It has beaten profit and revenue forecasts in each quarter so far this year and as of the end of September, the pharma giant had more than $11 billion in cash.

Stocks of high-quality defensive companies whose products are essential to people’s everyday lives, such as drug manufacturers, tend to perform well in times of economic downturns as they boast high free cash flow, low debt levels, and down-to-earth valuations.

Indeed, with a forward P/E ratio of 14.1, and an annualized dividend of $2.76 per share at a relatively elevated yield of 3.20%, Merck stock still has plenty of room to extend its march higher, making it a solid investment with strong long-term growth prospects.

Disclosure: At the time of writing, Jesse is long on the Dow Jones Industrial Average, S&P 500, and Nasdaq 100 via the SPDR Dow ETF, SPDR S&P 500 ETF, and Invesco QQQ ETF. He is also long on the Energy Select Sector SPDR ETF and the Health Care Select Sector SPDR ETF. The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.

2 Stocks to Be Grateful for This Thanksgiving
 

Related Articles

2 Stocks to Be Grateful for This Thanksgiving

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email