Johnson & Johnson (JNJ)

This has had fairly low volatility. They are diversified between Pharma, consumer products and medical devices. Diversity helps them, but also hurts them in that it is difficult to focus on 3 business lines that are quite different. It has had a decent year, up about 15% year to date. Trading at around 19X, and you are getting a 2.5% dividend yield. Just made a large acquisition, so you may want to wait to see how that is digested. Consider buying only a half position now.

This is fairly valued right now. He doesn’t own this because two thirds of the businesses are doing well, but the consumer side is falling away. The pharmaceutical side has been doing well. The dividend growth is only in the 6%-7% range. The stock is trading at a big multiple that could come under pressure.

(A Top Pick Aug 4/16. Up 9.33%.) Sold this a while ago as he felt it was trading at the high end of its multiple range.

Healthcare has very solid growth. This stock has done very nicely, particularly since the beginning of this year. You are paying for 17X forward earnings and getting mid to high single digit growth. However, he likes biotech a little more which gives you a little more growth.

There are 5 key groups in this market, and healthcare is right in the centre and at the top. Within healthcare, he really likes devices and equipment. He also really likes healthcare services as well as biotech. This company fits right in the middle of all of that. A great company to hold in this market. You’re going to get a strong growing dividend yield, and they have good strong earnings, and there is a tailwind from the sector.

The only problem this company has is that the pharmaceutical side is doing very well, but medical devices and consumer products are kind of treading water for the time being. Worldwide sales were $18 billion, up 1.6%. The US operations were sluggish. They have to keep selling overseas to keep priming the pump. Consumer revenues were up .8%, and organic growth declined 2.3%. Pharmaceutical sales grew 1.4%, and medical devices were up. Not his health care stock of choice, but there is nothing wrong with people investing in this. If you are buying this for the 1^st time, he would just go in for a half position.

A large, global, pharmaceutical company. The primary reason she likes this is that their pharma division is doing really, really well. They’ve had a very successful 5 years, and suspects they have a strong enough pipeline to keep that growth going. Recently acquired a Swiss pharmaceutical company which has leading products in heart disease. AAA balance sheet. Dividend yield of 2.7%. (Analysts’ price target is $130.)

He likes this. Had a disappointing 1^st quarter and it stumbled. Thinks it will recover pretty quickly. If you are looking out 3-5 years, it is definitely a long-term hold.

Recently missed on revenues and the stock sold off a bit. They actually beat on the earnings per share. This company has 3 solid lines of business, pharmaceuticals, consumer products and medical devices. There should be significant earnings growth this year. They did a significant acquisition last year which should be coming into earnings this year. Trading at about 20X earnings. Dividend yield of 2.6%. (Analysts’ price target is $130.)

One of these great franchise stocks. It is so big, that it is dominant in quite a number of categories. You are going to make 5%-6% per annum over the long term. It is a bond substitute. A fine stock to just Buy and hold forever. You are probably not going to make substantial returns, but you can sleep at night.

The pharmaceutical group rolled over in the midwinter of 2015, as Hillary was making her comments about drug companies, so the group was under pressure significantly right through until the end of 2016. What is interesting is that there are new sectors that are starting to kick in gear, and one of them has been healthcare, pharmaceuticals, biotech and healthcare devices. This one looks great. It just made a new high and pulled back a couple of dollars. It is one of the leading stocks in the group. It gives you a nice yield. Expects there are a lot of refugees from the bond market that will be pulling money out as interest rates go higher, and will be looking for companies that can generate a steady stream of growing dividends. This company fits that bill.

Hold or sell? With the sectors it is in, consumers, pharmaceuticals and products, it is a bit of a healthcare conglomerate. Given that the demographics are trending in the right direction and drug prices being a little less political than it was, he is constructive on healthcare. If you had to pick one stock as a barometer to all various sectors in healthcare, this would be a good one.

Their consumer line is very small on a relative basis, sub 10%. The company is fully diversified. A $325 billion market cap. You are paying a little bit lower than a broader market multiple. They have the ability to really commercialize a drug. Their recent acquisition of Actelion sounds like it is earnings accretive slightly this year and above market growth next year, with greater exposure into the lung market.

They have done well in the pharma side. They just announced the acquisition of a Swiss based pharma company. They grow organically also. They have identified about 10 products they are going to launch in the next three years that have about $1 Billion each. They trade at 16 times earnings and have increased their dividend for 54 consecutive years. (Analysts’ target: $126.32).

Merck (MRK-N) or Johnson & Johnson (JNJ-N) for safety? For safety, he would attribute that more to this company. They have a great yield of about 2.8%, but keep in mind that as a Canadian investor, you do not get the dividend tax credit. This company has the pharma, medical devices and consumer products. The bet you are making is that they are going to be able to turn around the recent acquisition of the devices business, and that is a big bet, because they spent a lot of money. Expects some share price volatility over the next 6-18 months.