Johnson & Johnson (JNJ)

(A Top Pick Dec 28/22, Down 9%)

Recently sold shares. Spinoff of consumer products business has not gone well. Stock not performing well. Recent litigation is a big worry. 

Medical devices are an important area that keeps people out of expensive hospitals, improves quality of life, and reduces reliance on drugs. Great advances, which will grow over the years. You want to be in this area. He owns SYK and JNJ in the space.

Looking back on 2023: JNJ has one of the best pharma pipelines in the business. However, he sold it because he got tired on their many lawsuits over baby powder (having traces of asbestos, allegedly). Originally, he concluded that the company didn't know about the asbestos, but then the lawsuits piled up. JNJ offered to settle with claimants. He bought this for the fundamentals, but then it became about the settlements amounting to billions. There are easier ways to make money. He eventually sold.

Has long owned this. Got upgraded today. Pays a 3% dividend yield and trades at 15x forward PE. Healthcare will improve in 2024.

Lots in pharma going off-patent around 2025, but pipeline's pretty good. Medical devices suffering from weight loss drugs meaning fewer joint replacements, but this fear is overdone. Talc litigation overhang, stock should lift once gone. Attractive multiple of 15x, AAA balance sheet. Yield is 3.2%.

The dynamics have changed. They sold off the personal care division and can now spend money on pharma and medical devices. They pay a good dividend which is increased regularly. The lawsuits including the one related to talcum powder holds it down but it trades at a good multiple,

Has sold shares in company. Does not own anymore. Breakdown in support. Moved on to greener pastures. 

It is now left with the pharmaceutical and medical devices divisions. The overhang is some litigation but it has a triple A balance sheet and recent earnings are good. The yield is good and it is attractively priced so buy for both growth and income.

They're having a terrible year, but the PE is now cheap. They sold off their consumer division. Their last quarter they beat earnings: medical devices grew 10% and pharma 4.5%. Will continue to grow. Have a lot of cash. Have raised their dividend for 45 years, which will continue. One issue is their talcum powder [lawsuits over their talcum causing cancer], but they will appeal the ruling. Their psoriasis drug is coming off-patent, but they have enough in their drug pipeline to make up for that.

A trade, because it's stuck in a trading range, between $160-180.

A growth story. Split off consumer business, so can now focus on pharma and medical devices, which both had high growth profiles. Stock should re-rate. Dividend aristocrat. Yield is 3.02%.

(A Top Pick May 26/22, Down 8%)

He targets $193.75 or 21% higher. It pays a 3% dividend yield. It will likely outperform in a market downturn. Is waiting for them to spin off their vaccine business. Many positives here. A great defensive name.

It boils down to the talc-asbestos lawsuit, an overhang that led him to sell his shares earlier.

It sold off the personal care products division and kept the pharmaceutical and medical devices ones. He likes these two areas that they have kept and there is the opportunity for decent acquisitions in both. There is a law suit but these can take a long time in the U.S. and often get settled out of court. It has a good balance sheet, has regularly increased its dividend for a long time, and is cheap at 14X earnings.
Buy 10  Hold 17  Sell 1