2 unstoppable stocks that scream to buy in August

Some investors may feel the brunt of stock market volatility as inflation concerns persist. The last few years have been a bumpy ride, that’s for sure.

If you’re focused on the long term, you should own stocks of large companies that can weather the storm. You should hang onto them for at least a few years, but more likely a decade or more. And if you only invest your money in quality companies that you feel comfortable with over the long term, these volatile times don’t have to deter you from your financial goals.

The bull market was in full swing in the first half of 2024, and while no investor can predict what will happen in the second half of the year, there’s no need to with the proper buy-and-hold horizon. If you have money to invest in great companies, here are two unstoppable-looking stocks to consider adding this August.

1. Johnson & Johnson

Johnson & Johnson (JNJ 1.10%) has been a mainstay in the pharmaceutical industry for 138 years and counting. The business is not a high-growth play, but its broad footprint in healthcare, thanks to an extensive portfolio of drugs and medical devices, generates consistent revenues, profits and cash flows.

The company’s shift of its slow-growing consumer health business (with products like Listerine and Tylenol) to the public listing. Kenvue last year was a smart move that allowed the other businesses to flourish while bringing in some cash.

Some investors may be worried about the talcum powder litigation Johnson & Johnson has been embroiled in for years at this point, with recent reports saying the company could be close to settling claims worth about $6.5 billion of dollars with the plaintiffs. Earlier this year, it reached a $700 million settlement and was already required to pay $2 billion in a previous settlement.

Efforts were made to mitigate these talc cases by placing liability on a subsidiary, which would then go bankrupt. The idea is to settle all cases in one fell swoop without imposing legal liability on the parent. That approach has been rejected twice in federal court, though the company is trying to take that route to settle its claims a third time.

Regardless of how this shakes out, the company is likely to be forced to pay billions more before these lawsuits are settled. Investors should know that Johnson & Johnson has the balance sheet to support these obligations. It had more than $25 billion in cash in the most recent quarter and generated about $19 billion in free cash flow in the past 12 months alone. It also brought in $16 billion in profits on nearly $87 billion in revenue over the past 12 months.

Top-selling immunology drugs Stelara and Tremfya and oncology treatments Darzalex and Erleada are just a few of the strongest players in Johnson & Johnson’s portfolio. The company is also a faithful dividend payer with more than six decades of consecutive annual increases. It was yielding about 3% at the time of writing, nearly double the average stock in the S&P 500. This healthcare stock continues to look like a smart buy for the long-term, income-seeking investor.

2. Starbucks

Starbucks (SBUX 1.72%) has made headlines in recent days for a significant shakeup in the C-suite with the unexpected departure of CEO Laxman Narasimhan, who had been in that role for just about a year. In April 2023, he took over from longtime CEO Howard Schultz, who returned to the role in an interim capacity after Kevin Johnson left in 2022.

The part that sent the stock skyrocketing was the word which ChipotleIts CEO, Brian Niccol, will leave the Mexican fast-casual chain to take the helm at Starbucks in September. Chipotle has done extremely well under Niccol, with profits growing more than sevenfold since he became CEO in 2018.

Starbucks has gone through numerous management and business changes in recent years. Headwinds in key markets such as China, where competition is fierce, along with limited consumer spending after the pandemic, have hurt its growth. It seems that the company’s largest shareholder, Schultz, wanted to steer the boat in a different direction.

In the most recent quarter, revenue was down slightly from a year ago, but Starbucks is still profitable. In the last 12 months, it had profits of $4 billion on revenues of $36 billion.

It’s also cash flow positive, with trailing 12-month free cash flow totaling $2.6 billion. The company had about $4 billion in cash on hand as of its most recent financial report.

I wouldn’t say that Niccol’s role as new CEO is the only reason to buy the stock. The business has a lot of potential for growth, which just needs to be harnessed effectively. Time will tell how Niccol will apply the strategies he has used to drive Chipotle’s exceptional performance in recent years.

Starbucks is much bigger with a massive global footprint. The company remains a leading global coffee chain and is a loyal dividend payer — two reasons that might cause investors to take a second look. The stock is yielding about 2.5% at the time of writing and has a payout ratio of about 63% to earnings.