While following blindly in the footsteps of billionaires is risky, it's always interesting to see which stocks elite investors are buying. According to the latest 13F filings, seven billionaires tracked by The Motley Fool made bullish moves by buying call options, shares, or both, of the blue-chip healthcare stock Johnson & Johnson (JNJ 1.13%). Armed with this insight, let's consider if J&J is also a good buy for everyday investors.
J&J maintains a cutting-edge approach to healthcare while keeping the big picture in mind
Unlike many of its peers, J&J's been able to achieve fairly steady top- and bottom-line growth through the years, while simultaneously maintaining a rock-solid balance sheet. For instance, J&J is forecast to grow its top-line by a healthy 4.6.% in 2017, despite the loss of exclusivity for the top-selling arthritis drug Remicade that it co-markets with Merck. Also, its hep C market share took a massive hit following the launch of Gilead Sciences' Harvoni.
Perhaps the best part is that J&J's management hasn't turned to costly M&A's to replenish its product portfolio, giving the company a more-than-reasonable debt-to-equity ratio of 32.4% at last count. The industry's average debt-to-equity ratio, by contrast, currently stands at 84.8%.
Instead of high-dollar M&A deals, J&J has relied on its internal pipeline and external research partnerships to maintain its cutting-edge approach to healthcare. Over the last two decades, for instance, the company has invested approximately $200 billion in its internal and external pipeline. The payoff is that J&J's late-stage pharma pipeline currently sports 10 product candidates with blockbuster potential.
On the medical device side of things, J&J is presently restructuring this unit to both save money and reorient it to higher growth areas like minimally invasive robotic surgery. The reason this pivot is noteworthy is because the robotic-surgery market is forecast to grow at a CAGR of 22.2% over the next five years, according to a report by Markets and Markets.
As robotic surgery is a notoriously difficult space to enter within a reasonable time frame, J&J teamed up with Alphabet last year to form the independent surgical solutions company known as Verb Surgical. The stated goal of this joint venture between Alphabet and J&J is to bring a robotic surgical system to market in record time. While such a goal may seem like a lofty ambition, it's being backed by two of the brightest stars in medical and technological innovation.
Is J&J a good buy?
Aside from its stellar track record on the R&D front and low debt level, J&J sports an amazing 54-year history of consecutive increases to its dividend. Bottom line, J&J's combination of industry-leading rates of innovation, a solid balance sheet, and a rich shareholder rewards program may make it a great stock for both everyday investors and billionaire superinvestors.
J&J's sheer size and diversity makes it one of the safest picks in the healthcare sector right now, meaning that it might not be a bad idea to take a cue from J&J's billionaire investors.