Johnson & Johnson (NYSE:JNJ)

JNJ has to resolve its quality issues. How deep are its problems? We just don't know. Has management taken their eye off the ball? What's next?

JNJ is a good investment because it does not depend on reviews of brokers and experts such as Zacks. Take for example NKBP: Zacks gives it as "strong buy" for the past nine months, in fact NKBP continues to fall

Solid management and steady growth over a long time frame. They don't make BIG mistakes.

My first pick for my CAPS page in Johnson and Johnson ($JNJ). JNJ is one of those fantastic cash generating companies. They are pretty close to being models of consistency: 12% earning growth (10 yrs), 11 % FCF growth (10 yrs), 10 years of raising book value (this for me is a big plus), ROE over 25% annual for 10 years, 15bn of cash sitting around. In other words: they are very good at running their business.

Yeah, but are they cheap?

In order to find this, I need to determine their fair value and then I need to see if the pitch coming from the mound is attractive (ie: lower than my perceived fair value.)

For a company that has such a good track record a DCF model can be helpful in seeing if it is cheap. In my DCF models, I normally like to use a higher discount rate (like around 15%) mainly to build in more margins of safety, but for more of what I perceive to be a steady company, I don't feel nervous using a lower rate (like around 12%.) Especially if they have a dividend (and especially if that dividend is at a nice juicy 3%.) I also tend to lean more towards using the FCF growth over 10 years as the growth rate rather than the earnings growth rate. (I'd love to know if this is smart, or totally stupid.)

So if you plunk all these numbers into a DCF

EPS: $4.75
Growth rate: 11%
Terminal Growth Rate: 4%
Discount Rate: 12%
Book value: $7.9

You get the intrinsic value of roughly $75 a share. JNJ currently trades at $62.56. Seems that a model company is selling at a 15% off price. Mix in a 3% and this seems like a pretty smart choice.

Pretty smart, but not "blow your socks off." Smarter people than me will be able to allocate their capital in a much better value play than I can. And I want to be one of those people one day that can learn how to find those sorts of things But for now I can't resist owning something as fantastic as JNJ--and have them pay me annually--at what I perceive to be a 15% discount. CAPS worthy. (That being said, a 15% margin of safety isn't very big. It's actually less than I am normally comfortable with, but not for JNJ.)

I'd love some feedback. Check me out at batting450.wordpress.com

Teledyne has a wide market spread. That affords it a nice cushy stance on the market. I don't expect its stock prices to flighty, but I do expect its bottom side to be sticky up.

hold rated 5 star mb (8) to replace teva

Cash is king!

good JNJ but News and estimates lying on NKBP

Current product problems will go away as all thing eventually pass. Great moat and great products. Buffett reloaded his stack in them. Nice dividend

Great financials, strong dividend, diversified product line, international expansion, low valuation.

Value.

They have had North America's trust for a generation,,and will most likely have it for a couple more!

moat, leader, temporary problems

A good business, good valuation, and good dividend yield.

JNJ is a all around solid company. Has increased.dividends over the last 25 years plus, and has a great business model. Will outperform the market for years to come.

It has out-done S&P for 10 years, why change now?

Probably not a good CAPS pick, but great to own in RL. If you're ever upset about the price of drugs, buy JNJ and make it work for you.

Long in RL.

I love JNJ Products i'm using them for my baby and my mom used them on me. I doult that we will stop using their products for years to come.

Great value, well-run business, excellent brand