There's no bigger healthcare company on the planet than Johnson & Johnson (JNJ -0.35%). And the next company on the list trails behind in a distant second place.
Wouldn't it have been great to get in on the ground floor of Johnson & Johnson? Sure, but you'd have to be a medical miracle to still be alive today. The company was founded way back in 1886.
However, there are some people who are still around who could have participated in J&J's initial public offering (IPO). How much money would you have now if you had been in that group and invested $10,000 in J&J? You might be stunned by the answer.
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Time really is on your side
The Rolling Stones had a huge hit in 1964 with the song "Time Is on My Side." Their sentiment was exactly right. Time really is on your side -- at least when it comes to investing.
Twenty years before Mick Jagger, Keith Richards, and the rest of the band released that song, Johnson & Johnson listed its shares on the New York Stock Exchange. The date was Sept. 24, 1944. The price of each J&J share was $37.50.
An initial investment of $10,000 would have bought 266 shares. You would have had $25 left over, since the concept of buying fractional shares was still far in the future back then. By the way, that remaining amount would have been enough for you to buy roughly 167 gallons of gas.
J&J performed very well over the next few years. So well, in fact, that the company issued a 100% stock dividend in 1947. In this case, your initial 266 shares would have doubled to 532 shares.
Over the next four years, Johnson & Johnson declared three other smaller 5% stock dividends. In early 1959, it did a stock split, with shareholders receiving 2.5 shares for every one share owned. J&J's last big stock dividend, a 200% stock dividend, came in 1967. Over the next three decades or so, the healthcare giant had two 3-for-1 stock splits and four 2-for-1 stock splits.
Thanks to these stock dividends and splits (which were fueled by J&J's ever-increasing share price), if you had held onto your J&J stock, you'd now have a whopping 663,120 shares. And that initial $10,000 investment would be worth more than $98.6 million. Yep, time is definitely on your side with investing.
Secrets to J&J's success
But time only works to your advantage when you invest in a company that can deliver solid growth over the long run. A company like Johnson & Johnson. What are the secrets to J&J's success? I think several were evident back in 1944.
Johnson & Johnson provided products that met people's needs. Seventy-six years ago, the company marketed more than 1,200 products, including consumer health items (such as baby lotion and cotton gauze), products used by hospitals (such as surgical sutures), and pharmaceuticals. In 2020, J&J still markets products for each of these markets.
The company also had a global focus. In 1944, J&J operated in 31 countries, including Australia, Brazil, and South Africa. It continues to have a global focus today, with around 260 operating companies in 60 countries.
J&J prioritized its financial performance, particularly its earnings, throughout its history. During the year of its IPO, the company generated sales of $93.6 million with profits of $9.5 million. In 2019, J&J's revenue totaled $82 billion with earnings of $15.1 billion.
The next 76 years
Will an investment of $10,000 in J&J stock today turn into nearly $98 million over the next 76 years? The idea isn't as crazy as you might think. The healthcare stock would need to deliver an average annual return of a little under 13% to pull it off.
Of course, the bigger a company becomes, the harder it is to achieve high levels of growth. J&J isn't growing as quickly as it used to. Some big companies don't adapt to changing dynamics and fall by the wayside. That doesn't seem to be the case for Johnson & Johnson, though.
J&J is still a reasonably good pick for long-term investors, in my view. But if you're looking to make a lot of money, find the stocks of smaller companies that follow J&J's secrets to success -- a focus on meeting customers' needs across the world with a track record of solid financial performance. Buy those stocks. Then wait. The combination of a well-run company and time works wonders.
