Johnson & Johnson Stock Is Always a Buy (If You Hold Long Enough)

It's hard to argue that Johnson & Johnson (NYSE: JNJ  ) stock is not a buy. Ever.

To prove my point, I looked at the multi-year chart and picked out some of the peaks. Even if you purchased near the yearly top, you're still sitting on a better return than if you had purchased an S&P 500 ETF.

Date

Johnson & Johnson Dividend-Adjusted Return

S&P 500 Dividend-Adjusted Return

June 27, 2012

34.1%

23.7%

June 8, 2011

40.6%

31.6%

April 9, 2010

49.3%

44.2%

Aug. 8, 2008

43.6%

38.8%

Oct. 20, 2006

56.6%

35.7%

Source: S&P Capital IQ.

Of course, Johnson & Johnson stock is sometimes a better buy than at other times. If you purchased near the yearly lows, you're sitting on an even better returns, trouncing the S&P500.

Date

Johnson & Johnson Dividend-Adjusted Return

S&P 500 Dividend-Adjusted Return

June 1, 2012

45.1%

29.2%

March 18, 2011

60.1%

32.3%

July 23, 2010

67.2%

55.4%

Source: S&P Capital IQ.

Run-up helped
The assumption that you'll be OK buying almost anytime works only if you hold on to Johnson & Johnson stock for long enough. I ran similar calculations looking at the returns through the end of last year, before Johnson & Johnson stock went on its monster run. The results weren't nearly as pretty.

Date

Johnson & Johnson Dividend Adjusted Return Through Dec. 31, 2012

S&P 500 Dividend-Adjusted Return Through Dec. 31, 2012

June 27, 2012

6.8%

8.3%

June 8, 2011

11.9%

15.2%

April 9, 2010

18.8%

26.2%

Aug. 8, 2008

14.3%

21.5%

Oct. 20, 2006

24.7%

18.8%

Source: S&P Capital IQ.

Apart from for the longest holding period -- the exception that proves the rule -- the S&P 500 topped the returns for Johnson & Johnson.

Looking forward
I think the recent run-up is justified, given how pessimistic investors have been over the last few years as Johnson & Johnson dealt with manufacturing issues and recalls. But I wouldn't be surprised if were near a yearly high, given how much Johnson & Johnson stock has increased over the first half of the year.

Fortunately, there are a few upcoming events that could help Johnson & Johnson stock increase in value, or at the very least help prop it up.

Second-quarter earnings are scheduled to be released on July 16. Investors should keep their eyes on Johnson & Johnson's recently launched diabetes drug Invokana. If Johnson & Johnson can persuade doctors to give it a try, there's potential for the drug to compete with Merck's (NYSE: MRK  ) top-selling oral medication Januvia. Taking just a portion of Januvia's multibillion-dollar market would give Johnson & Johnson stock a nice boost.

Investors should also watch Johnson & Johnson's hepatitis C drug Incivo that the health-care giant sells abroad for Vertex Pharmaceuticals (NASDAQ: VRTX  ) . Even though it has to ship some of the profits to Vertex, Incivo is a moneymaker because doctors in Europe haven't started cutting back on prescribing the drug while they wait for next-generation hepatitis C drugs as they have in the U.S., where it's called Incivek.

Johnson & Johnson has one of those in the works, too. Toward the end of the year, look for a Food and Drug Administration approval of Johnson & Johnson's hepatitis C drug simeprevir, which will go up against Gilead Sciences' (NASDAQ: GILD  ) sofosbuvir, which will be approved around the same time. Data from the combinations of simeprevir with its partners' hepatitis C drugs will help investors gauge how well Johnson & Johnson can compete with the all-oral cocktail that Gilead is developing.

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Read/Post Comments (4) | Recommend This Article (14)

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  • Report this Comment On July 01, 2013, at 9:37 AM, marytormey wrote:

    Ethics are a big problem at Johnson and Johnson. J&J will never be able to pay the US government back for the Medicaid and Medicare fraud they committed. We do not want to live in the world J&J is creating, and we do not want to pay for their substandard products anymore.

  • Report this Comment On July 01, 2013, at 11:35 AM, FoolishLonghorn wrote:

    I sold my J&J stock about 18 months ago, and never looked back.

    I grew weary of the constant problems with quality control, possible ethics violations, etc.

    After holding it about 3 years, I essentially broken even on the stock price, and made a bit on dividends.

    Has there been a fundamental change in the way J&J does business, and all of the recalls are behind them? Hard to say for sure, but there had been no significant purge at the top.

    I'll invest in companies where I don't have to fear the next screw-up. Congrats to those of you who stuck it out.

  • Report this Comment On July 01, 2013, at 5:39 PM, altrue1090 wrote:

    The have a game changing drug for depression

    in development. If it works as well as currently described, hold onto the stock.

  • Report this Comment On July 08, 2013, at 12:46 PM, DavidBressler wrote:

    I agree with the article's premise. There are stocks that are great for individual/modest investors that enable an investment strategy that's not like playing a tense game day-in an day-out.

    I'm also pleased to see that 2 of the 3 comments have to do with disappointment regarding the company's "social values". Companies with good values do better (http://elephantspaycheck.com/blueprintbasics/investing-in-al....

    There's a really great power investing by using the power of time and the reliability of increasing dividends, instead of "timing and trading".

    db

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