There's an old -- and very appropriate -- investing saw that says, "Tips are for waiters." So I'm not going to bother giving you a stock tip. I do, however, have a stock idea for you.
What's the difference? Well, a stock tip is generally a hush-hush, wink-wink affair where the tipper expects the tip-ee to run out and buy the stock based on the tip alone. A stock idea, on the other hand, is a good starting point, but is in need of further research before it becomes a fully baked investment thesis.
So let's cut the jibber-jabber and get right to today's idea, Johnson & Johnson
To get a better look at how J&J stacks up, let's take a look at how it compares to other companies in the health-care industry:
|
Company |
TTM Net Profit Margin |
TTM Return on Equity |
Price-to-Earnings Ratio |
CAPS Rating
|
|---|---|---|---|---|
|
Johnson & Johnson |
20.5% |
28.8% |
12.2 |
***** |
|
Novartis |
18.5% |
16.3% |
11.6 |
***** |
|
Abbott Laboratories |
18.3% |
29.1% |
13.4 |
**** |
|
Merck |
25.3% |
30.3% |
9.4 |
**** |
|
Pfizer |
17.0% |
12.5% |
12.3 |
**** |
Source: CAPS, Yahoo! Finance, and Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.
As you can see from the chart above, CAPS members like a bunch of the big-cap pharma names. Not only are they all relatively cheap on a P/E basis, but they sport high profit margins and enviable returns on shareholder equity. J&J stacks up well against the rest of the group, with profit margin and ROE among the best, a P/E that falls in the middle of the pack, and, of course, a strong vote of confidence from the CAPS community (five stars).
I have given J&J's stock a thumbs-up in my own CAPS portfolio, but I'm far from alone. CAPS All-Star LatePlay gave a thumbs-up late last month, noting J&J's "excellent fundamentals" and "good yield." Meanwhile, DemonDoug, one of the top-performing members of the CAPS community, has been bullish since October, when he pitched:
This is one of your best long-term bets for the next 10 years. A MUST buy under 60/share, will pay steady dividends that will continue to increase, they produce products in the real economy that are needed, from drugs to bandaids to shampoo to prosthetic implants, JNJ is a must own for any long-term value investor, again, under 60/share.
So what do you think? Is this an idea worth pursuing, or is Johnson & Johnson an overrated stock? Head over to CAPS and let the 135,000-member community know what you think. If you're not sold on J&J but want to take advantage of the collective intelligence of the CAPS community, fans of J&J have also been bullish on Apple
Further Foolishness:
