Recent Buy – Johnson & Johnson

JNJ

Another purchase in my portfolio to close out this quarter. I added to my position in Johnson & Johnson (JNJ) with 15 shares @ $98.50. The stock yields 3.05% adding $45 to my annual dividend income.

Recent Buy Decision

  • Johnson & Johnson barely needs an introduction as it is one of the best known brand names in the world. The company is a well diversified healthcare giant with three major segments – pharmaceuticals, medical devices and consumer goods.
  • A global giant, sees revenue diversification breakdown of: 45% from US, 26% from EU, 18% from Asia-Pacific, and 10% from the rest of the world
  • JNJ came under a lot of pressure in 2014 with record recalls and lawsuits. As expected, JNJ has turned things around and the company now runs more efficiently with better QA in order to avoid similar mistakes.
  • One of only three companies having a AAA rating from S&P (the other two being Microsoft (MSFT) and Exxon-Mobil (XOM))
  • My healthcare diversification had shrunk – with only Amgen Inc (AMGN) making my other healthcare exposure. I decided to add here as the sector is recession-proof and is seeing robust inflation
  • JNJ expects to launch 10 new drugs by 2019, each with a $1B potential
  • A dividend champion, with 53 consecutive years of dividend raises, and 31 consecutive years of adjusted earnings increases

Risks

  • Operating in the healthcare/pharma sector, the company always runs the risks of FDA non-approval on new drugs
  • Patent expiry could see some revenue erosion/increased competition from generic drug makers
  • The strong US dollar provides a drag on international earnings
  • More QA issues resulting in product recalls as we saw in 2014

Valuation

  • A blue chip name that almost always trades at a premium, getting a 3%+ yield is at an attractive valuation currently
  • The P/E, P/B, PEG ratios etc are all in a decent range based on historical valuation

JNJ-FastGraphs-Jun292015

Further Reading

Full Disclosure: Long AMGN, JNJ. My full list of holdings is available here.

44 thoughts on “Recent Buy – Johnson & Johnson

  1. Awesome buy R2R. Can’t go wrong with this buy for sure. Hold it Forever. Simple. I like simple. Keep it up bud and so many companies and always so little capital. LOL. Isn’t that always the case? 🙂 Take care my friend and Happy Canada’s Day!! Life’s great!

    • You said it, DH. This is a forever hold company – cant go wrong with it. One of the best companies out there….I hadnt invested in JNJ since my first purchase in 2013…good to add to my position.

      Happy Canada Day to you too.
      R2R

    • I just wish I had a huge position built up when I first started investing….still a good buy at these levels. I will continue to build my position over the coming years.

      Thanks for stopping by
      R2R

  2. I love JNJ. Although I’m selectively reinvesting dividends, JNJ and KO are a couple of companies I just let automatically DRIP every few months. Over 50 straight years of dividend increases plus the factors you mention are as safe as you can get in my book.

    • Invest-and-forget….companies like JNJ (and KO) require minimal monitoring. Rest assured, the management will take care of business and stay competitive.

      Great to hear from you after a long time. Welcome back to the blogging world.
      R2R

  3. Excellent buy! I would like to load up on JNJ except that I need to build up other positions in my portfolio.
    Jnj is definitely a set and forget company.
    D4S

    • Theres probably better values out there….and I dont blame you for looking elsewhere. I am starting to deploy some of the cash that Ive been sitting on for a while.

      Happy investing
      R2R

  4. You can never go wrong with JNJ. I think it’s the only consumer staple that’s attractively priced right now.

    Sincerely,
    ARB–Angry Retail Banker

    • Its a company every long term investor should own. JNJ will do very well for your portfolio – looking forward to have you as a fellow shareholder in the future.

      Your blog is new to me…will stop by and check it out

      cheers
      R2R

  5. Strangely enough, I just bought my first stake in JNJ today, 14 shares. It was yielding higher than CTWS, which was competing for my next tranche of free dollars. I looked and JNJ was yielding higher, which almost never happens, so it was an easy decision.

  6. Great buy R2R. I would be adding at these levels, except I recently did…..and would rather average down. That being said, Johnson & Johnson was one of the stocks (and corresponding prices) I mentioned in today’s post.

    Hope you have a great week personally, and great opportunities financially!
    -Bryan

  7. Hey R2R,

    This is a great buy dude! JNJ is just one hell of a company and all investors I know seem to love it… Honestly I think it may be my first purchase on the NYSE…

    Best regards
    DB

    • Didnt realize that all your holdings were in the Cdn market. I invite you to check diversify outside by investing in the US market…yes the US$ is expensive, but the dividends received in US$ will even things out. Some sectors like healthcare dont really have coverage on the TSX – so, US markets are the way to go.

      Happy investing
      R2R

  8. You can almost never go wrong with a buy like this. I keep contemplating adding to my position in JNJ, but I’m already pretty heavy in this one stock. We’ll see what happens. Good job and thanks for sharing!

    – HMB

  9. JC says:

    Great buy here R2R! There’s almost never a bad time to be buying JNJ if the valuations in check. JNJ is really high on my potential buy list but unfortunately my investment capital is a bit light but my investment ideas are high. That’s not exactly the kind of problem I like to have.

    • Its at a decent valuation, JC – although I wouldnt really call it a screaming buy. But thats what we get with a company like JNJ – almost always a premium. I am happy to pay for it though!

      R2R

  10. Solid buy R2R….JNJ is certainly a forever stock in our book. At current prices, it’s looking pretty attractive too! We bought JNJ early this year at somewhere near $99 dollars. If prices remain at these levels deep into July, we might be averaging down our previous buy this coming month.

    Thanks for sharing the buy. Best wishes! AFFJ

    • Good idea to average down if you can, AFFJ. I first bought JNJ in 2013 and hadnt added since….finally decided to pull the trigger on this one. I hope to keep adding through the years.

      Best
      R2R

    • Jason,
      Im hoping to build my position just as you have….its one of the best companies out there, and almost always trades at a premium. So a 3% yield sounds great to me.

      Thanks for stopping by
      R2R

  11. wow, JNJ under $100 is totally worth it. As the share price will continue to appreciate, dividends will keep coming like clock work. Awesome buys!! Thanks for sharing!

    • Looking forward to see you as a fellow shareholder, DW. I believe every investor should own JNJ as its one of the best companies out there. The credit rating sure reflects that as well.

      Best
      R2R

  12. Great buy. I keep watching JNJ. I’m waiting for a little more of a dip hopefully into the $97’s. Having said that I am not sure why, your entry price is very good. Keep up the good work.

  13. Fantastic buy! Sub-100 JNJ is a no brainer, and I would love to initiate a position soon at these levels. I’m still thinking that we will have a significant drop in the market soon with the Euro mess, so I’m hoping that opens up even more value.

    • We could see more correction in the future, Agent. I decided to put some capital to work for now and will be looking to add more if and when that happens.

      Thanks for stopping by. Its been a while since we heard from you…hope things are well.
      R2R

  14. Great buy R2R,
    I cut some of my energy positions for tax loss purpose and I might get back in after the 2 months allowable time frame, hopefully I can get in before the ex-date. For the meantime I would most likely buy JNJ for my next purchase. Thanks for sharing!

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