Curing One Headache and Creating Another

On this day in economic and financial history...

On Jan. 16, 1959, Johnson & Johnson (NYSE: JNJ  ) acquired McNeil Laboratories. This added Tylenol, then a prescription-only pain reliever, to Johnson & Johnson's growing stable of health products. The $33 million acquisition of a company with $11.4 million in sales was savvy enough, but the real coup became clear when Tylenol was approved for over-the-counter sales the following year.

Two decades later, Tylenol became the top brand in the health and beauty category, passing Procter & Gamble's Crest toothpaste. Johnson & Johnson survived a devastating series of Tylenol tampering murders with a brilliant public response. Johnson & Johnson had plenty to celebrate for the 50th anniversary of its acquisition. Tylenol is now part of the company's over-the-counter pharmaceuticals and nutrition segment, which generated $5.6 billion in sales in 2009.

Long-distance pipes
On Jan. 16, 1951, the turn of a valve at a metering station in Manhattan marked the opening of the Transcontinental Pipeline (or Transco), at the time the world's longest natural-gas pipeline at 1,671 miles. It's no longer the longest, but it remains an important part of the Northeast's energy infrastructure, delivering up to 9.6 billion cubic feet of natural gas per day from the Gulf Coast to the Mid-Atlantic and Northeast through a total transmission infrastructure of 10,200 miles. The pipeline is currently operated by Williams Partners (NYSE: WPZ  ) , a segment of Williams Companies.

Bailout redux
Bank of America (NYSE: BAC  ) went back to the bailout trough for a third time on Jan. 16, 2009. The besieged megabank had received $15 billion when the Troubled Asset Relief Program was originally created in October 2008 and another $10 billion that had been originally targeted for Merrill Lynch a week before its latest infusion. The third time around, Bank of America picked up another $20 billion. This bailout came with a backstop, as the Fed promised to support Bank of America for up to $118 billion in losses should more of its toxic real-estate portfolio go south.

Between Bank of America and Merrill Lynch, the new banking behemoth lost $17.1 billion for the fourth quarter of 2008. Merrill's results weren't included in Bank of America's quarterly report, but they undoubtedly unmoored the company from any sense of stability. Despite the deep impact of these losses, Bank of America refused to completely eliminate its dividend, instead cutting it to the smallest possible level -- just one penny per share.

Bank of America had joined the Dow Jones Industrial Average (DJINDICES: ^DJI  ) 11 months before receiving this bailout, replacing Altria. It is rare to see any replacement perform as badly as this one; over those 11 months, the Dow dropped 33%, dragged down by Bank of America's horrendous 82% decline, while Altria lost only 20%. In the year following this bailout, Bank of America doubled off its lows -- but that only brought its total loss back to 59%. Bank of America quickly repaid its bailout money, via a combination of cash on hand and convertible securities, by the end of 2009. That act has yet to to restore faith in the megabank's stability. Despite doubling in 2012, Bank of America remains 70% below its closing price on the day it joined the Dow.

Bank of America was worth nearly $40 per share before joining the Dow. Today it's worth less than a third as much despite huge rallies over the past two years. Can Bank of America claw its way back to precrash levels, or is this the best bank investors can get? You can find out everything you need to know about this big bank's future in our exclusive Bank of America premium research report. We've got the detailed analysis you need to make an informed decision, and you'll also get a year's worth of updates on Bank of America's progress. Click here to subscribe now.


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