Stocks are so expensive that Warren Buffett says investors are “gambling.” The market valuation indicator named after the legendary investor, the Buffett Indicator, is over 230%. Buffett once said that when this indicator, which measures the ratio of total stock market capitalization to U.S. GDP, approaches 200%, investors are “playing with fire.”
Meanwhile, another widely followed valuation metric—the S&P 500’s Shiller CAPE (cyclically adjusted price-to-earnings) ratio—sits at its second-highest level ever. The highest point for that indicator came in early 2000, right before the dot-com bubble burst.
There’s no question the stock market is flashing a valuation warning right now. The good news is that history shows some stocks can hold their ground when volatility strikes. Three stocks in particular fit the bill.
Johnson & Johnson: The Healthcare Fortress
Johnson & Johnson is a textbook example of the kind of stock that usually holds up well even when the overall market tanks. As a case in point, when the S&P 500 plunged more than 40% from 2000 through 2002 amid the dot-com bubble’s burst, J&J’s shares actually rose by 15%.
One key reason for Johnson & Johnson’s resilience is that its products enjoy solid demand regardless of what happens with the economy or the stock market. Patients will always need their prescription medications. Physicians and hospitals will always offer critical services that require advanced medical technology.
Trading around $256 per share with a $621 billion market cap, Johnson & Johnson boasts a more impressive history than most healthcare companies. The company has been in business since 1886, and it belongs to the Dividend Kings—an elite group of stocks that have increased their dividends for at least 50 consecutive years. Its streak currently stands at 64 straight years of dividend hikes.
To add icing to the cake, Johnson & Johnson’s business is humming along nicely these days. The company is on track to generate more than $100 billion in annual revenue this year for the first time in its history.
Coca-Cola: The Beverage Leader That Never Goes Flat
Coca-Cola is another company that’s been around for a long time. Like Johnson & Johnson, Coca-Cola’s roots date back to 1886. Today, it’s the world’s largest beverage maker and the third-largest consumer staples company.
At first, Coca-Cola marketed only one soda. Through the years, it launched new products and acquired others. The company now has 32 brands that generate annual sales of $1 billion or more, with four brands raking in sales of more than $10 billion per year.
Consumer habits and preferences have changed over time. However, soft drinks remain exceptionally popular. Importantly, people still want them even when times are tough—which makes Coca-Cola one of the more stable companies around.
Trading around $86 per share with a $374 billion market cap, Coca-Cola is, like Johnson & Johnson, a Dividend King with 64 consecutive years of dividend increases. Its business also remains strong, with earnings jumping 16% year over year in the latest quarter.
Chevron: An Energy Giant With an AI Tailwind
Chevron’s history dates back even longer than those of Johnson & Johnson and Coca-Cola. The oil and gas producer was founded in 1879 as the Pacific Oil Co. Nearly 150 years later, Chevron ranks as the world’s third-largest energy company by market cap.
The energy sector has often performed well relative to the overall market during periods of uncertainty. Despite the rising adoption of renewable energy sources, the world still runs primarily on oil and gas.
Trading around $189 per share with a $371 billion market cap, Chevron also has a new tailwind that should continue driving growth: artificial intelligence. The company’s Energy Forge One subsidiary recently signed a 20-year deal to provide power to one of Microsoft’s data centers in West Texas. This agreement is one of over 100 U.S. data center projects Chevron has made.
Although Chevron isn’t a Dividend King like J&J and Coca-Cola, it has a great dividend program of its own. The company has increased its dividend for 39 consecutive years and pays an especially juicy yield of 3.7%.
