Johnson & Johnson (JNJ)

(Market Call Minute.) A large, high quality, blue-chip company. Hasn’t done too much because of FX headwinds. Likes what they are doing in Pharma and medical device demand is starting to pick up.

Basically 3 businesses in one. Pharma is 40% of revenue, medical devices is 40% and consumer products is 20%. Were recently outbid for an acquisition of Pharmacyclics. What are they going to do with the $25 billion earmarked for that acquisition? The easy answer is to do a share buyback. The challenge is that on their patent portfolio things are starting to come up and they need to replace that. He thinks they are looking for another acquisition, and you want to look for some clarity on that before going into the name.

For a core holding, you could do a million times worse. It comes down to valuation, but if you’ve built up a position over time, you should do OK. You could leg in periodically on this. His preference would be Medtronic (MDT-N) or Stryker (SYK-N), but a different beast. JNJ would be more geared towards consumer products.

The stock is not as strong because of the strong US$. These huge multinationals have such a significant proportion of earnings coming from outside of the US, that when they are translated back into US dollars, it is a tremendous hit.

A high-quality blue-chip company. Has lagged the market and hasn’t done much in the past year. She sees good organic growth in their Pharma side. A strong pipeline of product launches coming on stream. Medical devices division are reporting seeing increasing utilization rates in terms of hospital additions and surgical volumes. Trading at a very reasonable multiple of 16 times. Dividend yield of 2.99%. Have increased their dividend for 53 consecutive years.

There is no revenue growth whatsoever. You are paying for a company that is gushing cash like nobody’s business. The PE is not outrageous. They are buying back stock. It needs to shrink to improve. He would not be surprised at some financial engineering coming out of the company. They may streamline by selling off some assets.

The healthcare space has been on a tear. JNJ-N has not participated and was one of the weaker stocks. The organic growth was pretty good, but the FX headwinds impacted them.

Just reported and it was great. Did very well, but this is an example of one of those names that is quite exposed to foreign exchange. Because of this they have revised their 2015 estimates downwards. If you are looking at buying, there are 2 things you should consider. 1.) Is their further downside with foreign exchange issues moving forward? It’s too early to say. 2.) What are they going to do with that targeted capital of $20 billion that they were going to spend? He would wait to get some clarity on the foreign exchange. Pays a good dividend.

A wonderful company with exposure to the consumer side and to the healthcare side. From his point of view, it is too rich a valuation. This is one of those companies that if you saw the market get a good crack, it would be a sector in an area where he would be lining up to get into.

GARP investors can own this. Plays into the demographics we see globally. It has lagged because of FX. 20 new products in the pipeline.

We had a nice pullback since December. It has been rumoured they are going to make a major acquisition in the cancer or biotech space. It has a 20% upside with a model price of $21.72, and a 3% dividend.

Good company and very well known. Trading at the market multiple right now at about 16X earnings. Has a very low growth rate with estimates at about 3%-4%. Compare this to the S&P index, where you get 7%-8% earnings growth at about 15.5X earnings.

(A Top Pick Feb 4/14. Up 18.55%.) Has 3 components, consumer products, pharmaceuticals and medical devices and diagnostics. The pharma side has recovered from when their drugs had gone off patent. In the past year or 2 they have had very good reception from some of the drugs they have launched. They have more products coming up, so she likes their pipeline. Yield of about 2.8%. Trading at a reasonable multiple of 16X forward earnings. This is a really good entry point to get into the name.

Prefers GILD-Q and SHPG-Q. JNJ-N is a good company, but not one he owns.

A terrific company. A worldwide seller of a huge number of very popular brands. However, being a worldwide seller is not necessarily to your advantage if you are an American company, because you are repatriating revenues and profits in other currencies, and the US$ is beating all the other currencies into the ground. All the US multinationals are missing on their earnings because of this. When you Buy this, you are getting a tremendous stream of products and a dividend record that is 2^nd to none as well as a record of dividend increases. If you are a long-term buyer, you buy it for the dividend and the increasing dividend.