The Coca-Cola Company (KO), Johnson & Johnson (JNJ), Is the Dour Jobs Report a Sign of Things to Come?

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While there’s only so much meat corporate America can hack off the bone, the recent jobs data reinforces the notion that profits are being realized through drastically lowered expenses, as opposed to huge growth in sales. One month of a poor jobs report likely shouldn’t be taken as an immediate cause for concern, but it does remind us all to not get too caught up in the market’s breaking new highs. It’s an important dose of perspective: we’re still (unfortunately) in the midst of a painfully slow economic recovery.

Several markets are showing strength, including the stock market and the housing market. However, the employment market remains an extremely difficult environment. As a result, adding defense to your portfolio is never a terrible idea. In fact, stocks such as Johnson & Johnson (NYSE:JNJ), The Coca-Cola Company (NYSE:KO), and Clorox are all outstanding companies that, if the market’s fall should continue, might actually get back into value territory.

Keep an eye out for opportunities

Large-caps that were trading for more than 20 times earnings, such as these three, will become much more attractive should the market pull back further. Should these companies’ valuations fall back into similar territory as the S&P 500 Index, at about 16 times trailing earnings, they’d become extremely attractive. Their profits and dividends are sure to keep rising over time, and if you snag them for lower stock prices, their dividend yields will be even higher than they are now (since prices and yields move in opposite directions).

It’s debatable whether American blue chips such as these really deserved to be trading above 20 times earnings, considering their restrained growth as of late. A pullback would present attractive opportunities for investors with money on the sidelines who are tired of earning nothing from traditional bank products. These stocks will soon be going on my watch list in case of a further decline, and it would be wise for many investors to do the same.

Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson.

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