For investors, 2022 was a dreadful year. The S&P 500 was down almost 20% and the Nasdaq lower by a stunning 33%. But what a difference a year can make. Through Wednesday, the S&P 500 was up 19.42% and the Nasdaq an astounding 36.06%. With the market rolling again, financial news talking heads and portfolio managers pitching their products like carnival barkers are everywhere, just like in the good old days.

However, just 10 companies have made up over 90% of the gains in the S&P 500, and nine of the heaviest-weighted stocks in the Nasdaq 100 have accounted for almost all its gains. You may be wondering what these stocks have in common. They are almost all technology stocks, and it is likely that the technology sector continues to drive the upside for the rest of the year.
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In a new and somewhat worrisome report, J.P. Morgan sees some serious storm clouds on the horizon. Those getting all fired up about the market running to new all-time highs in the not too distant future may want to tap the brakes some. The report noted this about the current state of the stock markets:

The equity rally over the past 2 months implies macroeconomic scenarios that are even more positive than a soft landing. We maintain that this market action is largely a result of mechanical re-risking, due to the decline in volatility and emergence of the AI-themed mega cap rally. For instance, the level and increase of stock concentration in S&P 500 now is at 60-year highs. This could be indicative of a bubble, and other anecdotal evidence points to an AI-driven bubble as well.

While the J.P. Morgan team is fully aware that artificial intelligence is a transformative technology and will stay relevant, it also feels AI has fed the hype for the recent big rally. The report also said this about the rest of the year and beyond:

We remain of the view that the delayed impact of the global interest rate shock (real estate, consumer credit, quantitative tightening and liquidity, etc.), steady erosion of
consumer savings and post COVID pent up demand, and deeply troubling global geopolitical context will result in market declines and re-emergence of market volatility. We acknowledge that we cannot time this inflection near term, but there are no data points that would prompt us to change our methodology or conclusions.

While the good news for growth investors and our readers is that there are still solid opportunities in technology, the bad news is that companies that have driven the huge year-to-date gains, like Nvidia and Meta Platforms, are very overbought and likely due to consolidate some.

We screened our 24/7 Wall St. growth and income portfolio looking for solid ideas that are Buy rated, pay good and dependable dividends, and offer growth if the market continues higher, but also a degree of safety if the warning signs the J.P. Morgan team sees become reality. However, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

This is a top pharmaceutical stock pick across Wall Street. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
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One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of 2020.

AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.

Investors receive a 4.18% dividend. Wells Fargo has a Wall Street high target price of $195. The consensus target is lower at $165.17, and AbbVie stock closed on Wednesday at $141.90.

Altria

This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.

Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. Many feel the company will be selling this position, especially after the JUUL debacle, which cost the company billions in losses, and the recent brouhaha over Bud Light. The company is also rolling out its own heated and vapor products such as Marlboro HeatSticks and IQOS, both of which are slowly being expanded across the United States.

Note that Altria has increased its dividend for 53 consecutive years.

Shareholders receive an 8.23% dividend. The Jefferies price target for Altria stock is $58. The consensus target is $44.64, and the shares closed on Wednesday at $45.56.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up nicely. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide. The company sports a sizable dividend and has a solid place in natural gas and liquefied natural gas (LNG).

The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with LNG; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operates a gas-to-liquids plant.
Chevron’s Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses and fuel and lubricant additives. It is also involved in the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.
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The company stated recently that it is considering producing lithium for electric vehicle batteries, and while that will never replace any of its core business, it is another way to continue to generate the remarkable cash flow the company produces.

Chevron stock comes with a 3.86% dividend. Raymond James has set a $208 target price, well above the consensus target of $185.13 and Wednesday’s $161.34 closing share price.

Citigroup

This top bank has rallied nicely off the lows and Warren Buffett bought $2.5 billion worth of stock back in the summer of 2022. Citigroup Inc. (NYSE: C) is a leading global diversified financial service company that provides consumers, corporations and governments a broad range of financial products and services.

Citigroup offers services such as consumer banking and credit, corporate and investment banking, securities brokerage, transaction services and wealth management. And it operates and does business in more than 160 countries and jurisdictions in North America, Latin America, Asia and elsewhere.

Trading at a still cheap 7.0 times estimated 2023 earnings, Citigroup looks very reasonable in what remains a volatile stock market and in a sector that has dramatically lagged. Citigroup posted first-quarter earnings and revenue that each surpassed Wall Street expectations, thanks to a rise in fixed-income trading.

The dividend yield here is 4.30%. The $75 Oppenheimer price target is a Wall Street high. Citigroup stock has a consensus target of $55.76, and shares closed on Wednesday at $47.49.

Kraft Heinz

Even in bad times, everybody has to eat, and Kraft Heinz Co. (NASDAQ: KHC) always stands to benefit. The company was formed almost six years ago in the merger of H.J. Heinz and Kraft Foods. The company is a leading global food company, with $25 billion in annual revenues generated by such well-known brands as Kraft, Heinz, Oscar Meyer and Maxwell House. It is also one of America’s most trusted food and drink brands.

The company is the third largest food and beverage manufacturer in North America and derives 76% of revenues from that market and 24% from overseas. The company’s other brands include ABC, Capri Sun, Classico, Jell-O, Kool-Aid, Lunchables, Ore-Ida, Oscar Mayer, Philadelphia, Planters, Plasmon, Quero, Weight Watchers Smart Ones and Velveeta.

Note that Buffett holds a big position in the stock at Berkshire Hathaway.

Kraft Heinz stock investors receive a 4.40% dividend. BofA Securities has a price target of $50. The $38.99 consensus target is closer to Wednesday’s $36.36 closing share price.

This top pharmaceutical stock was one of the biggest winners in the COVID-19 vaccine sweepstakes. Pfizer Inc. (NYSE: PFE) discovers, develops, manufactures, markets, distributes and sells biopharmaceutical products worldwide.
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The company offers medicines and vaccines in various therapeutic areas, including the following:

• Cardiovascular metabolic and women’s health under the Premarin family and Eliquis brands
• Biologics, small molecules, immunotherapies and biosimilars under the Ibrance, Xtandi, Sutent, Inlyta, Retacrit, Lorbrena and Braftovi brands
• Sterile injectable and anti-infective medicines and oral COVID-19 treatment under the Sulperazon, Medrol, Zavicefta, Zithromax, Vfend, Panzyga and Paxlovid brands.
• Pneumococcal disease, meningococcal disease, tick-borne encephalitis and COVID-19 under the Comirnaty/BNT162b2, Nimenrix, FSME/IMMUN-TicoVac, Trumenba and the Prevnar family brands
• Biosimilars for chronic immune and inflammatory diseases under the Xeljanz, Enbrel, Inflectra, Eucrisa/Staquis and Cibinqo brands
• Amyloidosis, hemophilia and endocrine diseases under the Vyndaqel/Vyndamax, BeneFIX and Genotropin brands

Shareholders receive a 4.46% dividend. Pfizer stock has a $75 price objective at Cantor Fitzgerald. The consensus price target is $46.09, and shares ended Wednesday’s session at $37.21.

Verizon

This top telecommunications stock offers tremendous value at current levels. Verizon Communications Inc. (NYSE: VZ) is one of the largest U.S. telecom companies. It provides wireless and wireline service to retail, enterprise and wholesale customers.

Verizon’s wireless network serves approximately 120 million mobile connections with 115 million postpaid subscribers. Verizon’s wireline business has undergone a period of secular decline due to wireless substitution and cable competition.

The company also provides converged communications, information and entertainment services over America’s most advanced fiber-optic network, and it delivers integrated business solutions to customers worldwide.

Verizon has been hit hard over concerns over lead landline issues, but the company posted solid second-quarter results as it reported an unexpected increase in wireless subscriber numbers.

Investors receive a 7.62% dividend. Cowen’s $49 price objective is higher than the consensus target of $37.16. Verizon Communications stock closed on Wednesday at $34.34.

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While none of these stocks are likely to turn up on Reddit’s WallStreetBets stock bulletin boards, and most are unlikely to make a splash like big AI headlines, they are all very well suited for what could be a very ugly rest of the year and into 2024. These companies should hold their ground much better in a potential stagflation environment, like the one we are potentially close to now and could likely remain in for some time to come.

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