Eye on Insiders: Johnson & Johnson

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at Johnson & Johnson (NYSE: JNJ  ) over the past year.

Insider Rating

Bullish
Net buying, and most recent buy at higher levels than what the stock trades for today.

Business Description

One of the country's oldest and best-known consumer-products companies.

Recent Price

$59.98

CAPS Stars (Out of 5)

*****

Percentage of Shares Owned by Insiders

0.04%

Net Buying (Selling)*

$62,413

Last Buyer (% Increase)

William Perez, VP, General Counsel
1,000 shares at $60.00 apiece on Aug. 6
(Purchase bolstered direct holdings by 8%.)

Last Seller (% Decrease)

William Weldon, CEO and President
1,893 shares at $57.69 apiece on Feb. 2
(100% sale from 401(k) and ESOP savings plans.)

Competitors

Eli Lilly (NYSE: LLY  )
Novartis (NYSE: NVS  )
Procter & Gamble (NYSE: PG  )

CAPS Members Bullish on JNJ Also Bullish on

General Electric (NYSE: GE  )

CAPS Members Bearish on JNJ Also Bearish on

Microsoft (Nasdaq: MSFT  )

Recent Foolish Coverage of JNJ

3 Stocks That Just Make Sense
P&G Inches Forward
5-Stocks Poised to Pop: Novartis

Sources Form 4 Oracle, Capital IQ (a division of Standard & Poor's), and Motley Fool CAPS. (Data current as of Nov. 4.)
*Open market sales and purchases only of directly or beneficially owned shares.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market of shares owned directly or beneficially. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: Bullish
When Warren Buffett bet $44 billion on Burlington Northern (NYSE: BNI  ) , he was making a broad-based gamble on the recovery of the American economy -- but also on something more basic. Certain consumer products never, ever go out of style. Basic medicines such as Tylenol, for example. We need railroads and trucks to carry Tylenol, Listerine, Band-Aids, Neutrogena soap, and any number of other consumer health-care products Johnson & Johnson makes to wherever they're needed. Buffett knows this, and so do thousands of other investors.

Not all of them are betting on railroads, though; some are betting on the manufacturers. "I like the company, as it's diversity of products helps add stability to the enterprise," wrote CAPS investor tekennedy last month as part of a much longer pitch. "As a market leader within each segment, each of which has a strong future, the company should continue to grow earnings above the average S&P company."

Insiders would appear to agree. There's been net buying over the past year, and some at prices right where the stock traded for as of yesterday's close. For example, board member William Perez in August bought 1,000 shares at $60 apiece. That's a bullish bet, one I'm willing to copy in my CAPS portfolio.

Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate Johnson & Johnson.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand.

Get more of the inside scoop with related Foolishness:

Johnson & Johnson and Procter & Gamble are Income Investor recommendations. Microsoft is an Inside Value pick and  Novartis is a choice of Global Gains.

Fool contributor Tim Beyers is a member of the market-beating Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Procter & Gamble, has recommended a "diagonal call" option on Microsoft, and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


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