6 Ozempic Hedges to Buy on Sale
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Oh, and grab McDonalds (MCD)… Walmart (WMT)… Hershey’s (HSY)… PepsiCo (PEP)… and Costco (COST) while you’re at it…
Looking at the charts over the past few weeks, you might call me crazy.
All of these consumer staples stocks have sold off, with some even doing worse than the broad market’s brutal slide.
The cause? An all-out panic over GLP-1 diet drugs like Ozempic and Wegovy.
These new prescription shots — originally meant for diabetes sufferers but, naturally, co-opted by Big Pharma to sell as a weight-loss miracle drug – are sending shivers down the spine of any investor exposed to companies that sell not-exactly-healthy foods.
During an earnings call, Walmart CEO Doug McMillon mentioned customers who take these drugs are buying less food. So the mainstream media headlines went a-buzzin’ and investors began selling off these stocks in abjectly irrational fashion.
Now, listen. I’m no doctor. But I don’t see Ozempic as a systemic threat to the biggest, highest-quality food companies and grocers in America. Mainly because I don’t buy the idea that most people will be down to use it for the rest of their lives.
Would you take a shot in the arm every week with a drug that’s been shown to kill your appetite, make you sick in the bathroom, and raise your heart rate… Just to lose a little “weight” on the scale, even if you’re losing that weight from your muscles and bones?
Maybe you already do. But even if so, I doubt you’ll want to forever. (Oh wait — the drug’s “miracle” effects seem to stop working as soon as you miss a shot. Imagine that.)
I’ll stick my neck out and say it. These drugs are a fad just like Atkins and Weight Watchers were. Eventually people will get sick and tired — maybe literally — of filling their bodies with God-knows-what instead of just making healthier food choices.
And even if they don’t and these drugs prove to have zero adverse long-term effects (forgive me, but fat chance), I’m still confident my grandkids will enjoy Big Macs, Coca Cola, and Kit-Kats long after I’m gone.
The mindless selling in quality, capital-efficient companies we’re seeing today is just that. And it’s giving you an opportunity to scoop up shares of these time-tested businesses on sale.
Today, we’ll look at the TradeSmith toolkit to see what our proprietary algorithms say about the most extreme examples of this selloff… And I’ll tell you if I think they’re a good buy today.
The Best “Ozempic Hedge” for Your Portfolio
All of the stocks I mentioned above are allegedly “threatened” by the rise of weight loss drugs…But if you disagree as I do, and had to pick just one to add to your portfolio today, which should it be?
For the answer to that question, I always turn to Ratings by TradeSmith.
This simple tool tells you, at a glance, whether a stock is a great buy… one to avoid like the plague… or simply one to stick on your watchlist and wait for better prices. Let’s run each of those stocks through the Ratings software and see where it lands.
1. Coca Cola (K)
KO currently rates a Bullish 51 out of 100…
And holds a Low-Risk Volatility Quotient of 12.90% and a Business Quality Score (BQS) of 90.
It’s also among the cheapest stocks in this list, with a P/E ratio of 22.9, just a hair above the average Consumer Staples sector P/E of 22.3.
At its current dividend yield of 3.31%, KO makes for a great Ozempic hedge. But is it the best?
2. McDonald’s (MCD)
MCD is rocking a Strong Bullish 62…
And a low-risk VQ of 13.07% with a BQS of 90…
MCD is valued at a 23.6 P/E ratio, just above the sector average.
That gives MCD a slight edge over KO on momentum at the slight expense of soever-so-slightly higher risk and a richer valuation. You are getting a lower yield, too, at 2.6%.
3. Walmart (WMT)
WMT stock has the strongest Rating so far, at a Strong Bullish 69.
It’s also got a slightly higher, but still Low-Risk VQ of 14.10% and an excellent BQS of 95.
It’s got the lowest yield so far at 1.41%, not that that’s anything to complain about.
Thus far, WMT has both the best fundamental picture and the strongest momentum. The valuation is a bit richer at a 31.2 P/E. But let’s keep going.
(Disclosure: I added to my WMT holdings on recent weakness.)
4. Hershey’s (HSY)
In HSY, we have a Bullish 54 on the Ratings gauge…
And a low-risk 13.46% and a BQS of 89.
Worth pointing out is the fact that HSY is down the most year-to-date and over 30% since May. That makes it the biggest relative discount of all the stocks on this list, and especially attractive to me as its P/E (22.9) is right in line with the sector average of 22.3. That ties it with KO for the cheapest valuation in this list. Its 2.5% dividend yield is just icing.
I haven’t pulled the trigger yet, but I’m looking to begin a position in HSY soon.
5. PepsiCo (PEP)
PEP earns the weakest, but still strong Rating of a Bullish 49…
But a comfortable VQ of just 13.25% and BQS of 94.
PEP’s P/E is at 27.12, a bit above the average S&P 500 stock of about 24.5.
We’re splitting hairs here, but PEP is probably the weakest of this bunch of incredibly strong stocks. Its dividend yield, though, is at an attractive 3.12%.
6. Costco (COST)
Last up, my personal favorite big box retailer, Costco. (Sidebar: I have no idea how they manage to sell such high-quality dog food so cheaply. With two big boys to feed, the prices alone pay for the $60 annual membership fee in about three trips.)
Costco gets a Strong Bullish 66 on the Ratings gauge…
However, it offers the lowest BQS of any stock on this list, and relatively higher VQ at 17.3%.
Again, though, we’re talking about the “worst of the best” volatility and BQS for consumer staples stocks in this list. You can’t go wrong owning Costco here, especially at its relatively cheap P/E of 27.1 and a dividend yield of 3.1%.
All else the same, I’m liking HSY here for the huge discount, WMT as a “buy and hold forever” investment, and MCD for its valuation, strong Ratings score, and yield.
But the larger point you should take from this is that ALL of these stocks are high-quality, essential companies that will very likely outlive all of us — and continue making money hand over fist.
They’re beyond “sleep well at night” stocks. They’re “fall into a coma for 20 years and wake up with a smile” stocks.
And we don’t need to rely on our gut feelings about a suspicious diet fad. We have Ratings by TradeSmith, which pulls a slew of data points on every U.S. stock in the market and tells you, in less than 10 seconds, if your money is going to a good place.
That’s just about as valuable as a robust stock portfolio and a clean bill of health, combined.
To your health and wealth,
Michael Salvatore
Editor, TradeSmith Daily
P.S. Quick note before you run off to trade.
I sign these letters with “To your health and wealth” for good reason.
In my view, health is tantamount to wealth, and vice versa.
As time is our most precious and finite resource, the longer we stay on this planet to enjoy everything it has to offer, the “wealthier” we are. Similarly, the health of your investment portfolio is incredibly important to the longevity of your wealth… ultimately feeding back into your physical health.
I just wanted to share this as part of my personal worldview, given today’s topic.
Far too often, newsletter writers become soulless marketing machines. That’s not going to happen to me. And speaking to you on this level helps avoid that.
So let’s continue this conversation. How do you stay healthy, either in your portfolio or your life? I’d love to know… and I’d bet your fellow TradeSmith Daily readers would as well.
Email me at [email protected] anytime with your thoughts. I’m looking forward to the next “Feedback Friday”…