Equity markets have been volatile over the past week as some of the industry leaders in artificial intelligence (AI) — which make up a large percentage of indexes like the Nasdaq Composite — have been encountering stiff competition out of China.
Additionally, the Trump administration has threatened to impose tariffs on various countries, and the leaders of these nations might retaliate. These and other developments could continue affecting the performance of the stock market.
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Will there be a severe downturn as a result? No one can say for sure, but investing in companies that can handle market crashes is not a bad idea, just in case things go down that road. Let’s consider two such stocks as potential buys: Johnson & Johnson (NYSE: JNJ) and HCA Healthcare (NYSE: HCA).
1. Johnson & Johnson
Healthcare is a defensive industry. People don’t stop needing medical services just because the market is down.
Medicines are among the products they keep buying, and that’s one of Johnson & Johnson’s main businesses. The company has long been a pharmaceutical leader. It boasts an impressive number of drugs in its lineup, many of which generate more than $1 billion in annual sales. Its portfolio spans multiple therapeutic areas, including infectious diseases, oncology, immunology, and neuroscience.
Doctors won’t stop prescribing the company’s cancer drug Imbruvica, or other lifesaving medications, just because the stock market or the economy crashes. And Johnson & Johnson also has a medical devices segment that markets products in several fields, including vision care and orthopedics. Between these two units, J&J provides many non-optional services.
Johnson & Johnson has consistently delivered growing revenue and earnings for a long time, partly thanks to its ability to develop and market newer, better medicines and medical devices:
JNJ Revenue (Annual) data by YCharts.
The healthcare leader should continue doing so for a while, despite some headwinds. Johnson & Johnson has moved closer to settling over 99.75% of the lawsuits related to its talc-based products that allegedly caused cancer, thanks to a proposed settlement that has the support of the overwhelming majority of the claimants.
The drugmaker has survived quite many legal and regulatory changes and, for that matter, market downturns and recessions. And for a long time, it’s continued to deliver strong financial results and dividend hikes.
Johnson & Johnson is a Dividend King with 62 years of consecutive payout increases under its belt. The company is unlikely to end that streak during the next bear market whenever that happens. That’s one more reason why those preparing for potential bad times should seriously consider investing in Johnson & Johnson.
2. HCA Healthcare
HCA Healthcare is a leading hospital chain with facilities across much of the U.S., although its hospitals are somewhat concentrated in Texas and Florida. That’s another business that remains healthy during recessions and market downturns: People typically don’t go to hospitals unless really required.
True, elective surgeries such as cosmetic procedures can be put off in bad times, but for the most part, HCA Healthcare’s services should remain in high demand regardless of market and economic conditions.
Consider how the company handled the early pandemic years, during which admission and occupancy rates in its facilities fluctuated quite a bit. While its competitors dealt with the same issues, HCA Healthcare’s market share grew from 2019 to 2021, going from 26.5% to about 28%.
That’s not easy to pull off. Nor is it a fluke, since HCA Healthcare’s market-share gains go way back; in 2011, it had only 23% of the market. No wonder, then, that the stock has delivered excellent returns over the past few decades:
HCA Revenue (Annual) data by YCharts.
So, HCA Healthcare has a resilient business in a resilient industry. That bodes well for the company’s future, even if it faces challenging times this year (or the next, or the one after that). At least two factors should help it perform well over the long run.
First, it can be challenging for newcomers in the industry to attract various players, including third-party payers, patients, and physicians. HCA Healthcare has already done that job, which grants it a significant incumbent advantage.
Second, hospital spending will continue to increase at a decent annual rate, according to projections. Given HCA Healthcare’s position in the market and its ability to perform better than its competitors, as evidenced by its market-share gains, the company should benefit from this long-term trend.
Investors who hold the stock through market downturns can expect HCA Healthcare to produce excellent long-term returns.
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Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool recommends HCA Healthcare and Johnson & Johnson. The Motley Fool has a disclosure policy.