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rd80 (99.10)

Keep JNJ or Sweep It?

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January 18, 2011 – Comments (12) | RELATED TICKERS: JNJ

I took a swing at Johnson & Johnson as part of a portfolio check-up over the weekend.  I hold JNJ for growing dividend income.  It has been, and still is, a good holding for that, but there were a few other healthcare holdings that stacked up pretty well.

JNJ is the fifth most rated stock in CAPS and sports 5-stars, so I'm guessing some may disagree with the 'sweep it' conclusion.

To make a short story even shorter, I think JNJ is a very good dividend income investment, but there are a couple of other healthcare stocks that look a little more attractive for that role.

Also, I'm curious if people like the 'Keep It or Sweep It' article type.  The first one I did for Cisco rated higher than my usual scribblings.  If it's a dud, I'll sweep it; if people like it, I'll look for more opportunities to keep it.

Will selling JNJ be a mistake?  Should I keep or sweep 'keep it or sweep it'?  Share your thoughts here or at the article.

Disclosure:  Long JNJ, but plan on easing out of it after the Fool disclosure policy no trade window opens for me.

Fool on!

Russ

 

 

12 Comments – Post Your Own

#1) On January 18, 2011 at 8:28 PM, HarryCarysGhost (99.78) wrote:

Hmm, tough call.

I like JNJ and consider it a buy at these levels. But I would probably go with medtronic since I like the growth posibilities going forward, and I would be able to pick up more shares. So it's really a matter of timeframe.

JMO.

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#2) On January 18, 2011 at 8:35 PM, TheDumbMoney (58.76) wrote:

I like it.  It focuses a bit more on comparative analysis, which in retrospect I find lacking in many of my own analyses.  As with most things here, I'd like much more detail, but I undestand the constraints, which is why I like the blogs so much.  I'm not sure I would compare solely to an industry group when deciding whether to keep or sweep, either.  (What if a whole industry is a buy compared with the S&P? -- as in fact I think this one may just be.)  Also, I find that when I write anything about any well known company, I get a lot more reads and recs than if I write about a nothing company, no matter what I respectively write.  So unless you're written about Cisco in the past and gotten lower ratings, I would not take your Cisco result as per se indicative of the potential value of the series.  You asked!  Thanks for the article. 

I own JNJ (5% of portfolio, after dollar cost averaging in); I'm keeping it for now, but I also own Abbot (and just doubled my stake around $47/share) and I have considered buying MDT for at least the last three months.  I believe MDT just lost its CEO or something, which worries me, if I am correctly recalling an analysis I did awhile ago on it, and which was part of why I did not buy it at the time.  Also, JNJ appears to be seeing an abnormally high amount of insider buying right now.  See here.  That is not a sell indicator.  Also, the consumer business is about 26% of JNJ, so a quarter of the company, and not every product is being recalled, though it seems like it.  So you're seeing something that affects maybe 15% of the company (and maybe less, as I'm not sure if the recalls apply internationally, or only in America).  Bad, yes, and the NYT article this week (showing pictures of all the brands together) made the brand damage worse.  Given the long record of the company, I'm not quite willing to sell yet though.  Personally.  I'm thinking seriously about it though.  From where I sit, for example, ABT looks vasly more likely to outperform in the coming year.

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#3) On January 18, 2011 at 8:36 PM, soycapital (< 20) wrote:

I think the stock price is depressed from recent problems and I would not sell mine now. I think they will come out of it before you know it, what do you think? Do you really have a strong desire to buy something else. In this type of market I'd rather hold a solid stock like JNJ. It's hard for me to buy new positions at these levels unless something really jumps out and is strong in a volatile market. I own both JNJ and MDT.

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#4) On January 18, 2011 at 9:08 PM, HarryCarysGhost (99.78) wrote:

Oh and if I owned either of the stocks I would just leave them alone.

Sorry, I was taking the view of opening a new position, since that would be the case for me.

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#5) On January 18, 2011 at 9:32 PM, Valyooo (99.82) wrote:

MHS > JNJ

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#6) On January 18, 2011 at 9:51 PM, Mary953 (40.07) wrote:

I looked at both CSCO (your previous outing) and JNJ since both were part of the hold for dividends part of my RL portfolio.  I would  keep them both if I was in a buy and hold situation for a while.  Right now, I am doing more active trading.  As part of that, the stocks that are doing the best stay while those that are not pulling their own weight are replaced.  Within a more aggressive portfolio, CSCO is in, JNJ is out.

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#7) On January 18, 2011 at 10:19 PM, nuf2bdangrus (< 20) wrote:

Why not sell slightly OTM calls against it every month?  It will increase your yield, and unless we have a strong pullback, JNJ will simply meander.   I like ABT better from a valuation perspective.

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#8) On January 18, 2011 at 10:23 PM, rd80 (99.10) wrote:

@HCG - This was a tough call.  Even with all the recalls, JNJ is a solid dividend growth company and I would have no concerns with keeping it, just that I thought MDT, BDX and ABT looked a little more promising. 'course, I could be wrong - been known to happen. 

Of the bunch, I liked MDT's numbers but BDX's business model best - sell disposable stuff that any healthcare facility or practice needs.

@dumberthanafool - I had considered opening the contenders up to dividend growth stocks in general- PG would have been an obvious comparison - rather than staying in healthcare .  As you mention, the constraints of a short article make it tough to cast a really wide net.  In this case JNJ is my only healthcare holding and I want to keep some market exposure there.

MDT did have a CEO change last year.  That's one of the things I want to spend a little more time on before making the swap.

@soycapital - I think JNJ has been marked down some from the recalls, but really not that much.  It's valuation is in line with its peers.  I'm not in a big hurry to sell, but I do think MDT, BDX and ABT all have a little bit better prospects.  As above, I could be wrong.

@Valyooo - MHS didn't make the cut for the contenders because I was looking for dividend growth stocks in this case.

Thank-you all for the comments. 

 

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#9) On January 18, 2011 at 10:44 PM, rd80 (99.10) wrote:

@Mary953
Within a more aggressive portfolio, CSCO is in, JNJ is out.

I wouldn't call my portfolio 'more aggressive', but that's where I'm headed.  I picked up most of my JNJ at under $60 over the past couple of years and just don't see it doing much more than churning out the dividend for some time.

@nuf2bdangrus - Good thought on selling covered calls, hadn't really considered that.  But, with ABT looking like a better value, why not just swap JNJ for it - or one of the others that looks like a better value? 

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#10) On January 19, 2011 at 10:53 AM, ikkyu2 (99.51) wrote:

JNJ certainly spends a lot on R&D compared to some of its more commodity oriented peers such as US Surgical, Baxter, B-D, etc.  I don't see how they, or any healthcare sector stock, benefits from the current macro trends; healthcare tends to underperform when the money supply/fiscal policy is expanding.

I wouldn't mind your taking your next swing at C.  I'm having trouble parsing their latest earnings report. 

  

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#11) On January 19, 2011 at 12:07 PM, Mary953 (40.07) wrote:

rd80 - Perhaps I should have made it more obvious that the agressive/passive nature of the stock is in my reaction.  I go through phases where I pay a great deal of attention to the day-by-day stock market - so I can take a more active (agressive?) role in my choices.  For a while, this usually pays off.  Eventually I hit overload and have to step away to put things back into perspective (a more passive phase on my part) at which time I head for the mid to large cap growth plus dividend stocks.  JNJ is a favorite for those times that I need to clear my mind and get back on track.

To borrow from the nuclear industry, I am after controlled criticality.  If I seem to be spinning off into a criticality accident, it is time to pull back and slip a few control rods into place.  JNJ is an excellent control rod to allow me to get a handle on things again,.

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#12) On January 19, 2011 at 10:19 PM, rd80 (99.10) wrote:

@Mary - I like the control rod analogy for JNJ.  I also like to think of it like ballast in a sailboat - helps keep things under control in rough weather; slows things down when it's nice.

@ikkyu2 - I saw your post on Citi, started to reply, then stopped 'cause I have trouble wrapping my head around credit value adjustments.  I'm pretty sure it's essentially mark-to-market applied to derivatives and liabilities.  I can't comment much on future articles, but have been kicking a Citi idea around.
I'm convinced that not even the accountants who put bank earnings reports and filings together understand what's in them.

 

 

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