As you know, we are an active holder of Johnson & Johnson (JNJ) in our core portfolio for its amazing dividend track record, in this complete quarterly review, since 1975. It now appears we could see some significant capital appreciation as soon as today.
I recently wrote this article on the potential for a break-up into 3 components that Goldman Sachs (GS) suggested with a post break up value of about $76.00/share for JNJ. Now it appears that we could be heading in that direction anyway.
If the pre-market is any indication of where the stock is headed today, it appears that we could see $64.50/share and perhaps even $65.00 if the trend continues.
Yesterday we saw a rise of almost $1.00 based on the news that regulatory agencies approved the Synthes, Inc. acquisition as noted in this article:
"Johnson & Johnson (JNJ) today announced that it has received U.S. regulatory clearance for its proposed acquisition of Synthes, Inc. This completes all regulatory approvals required to close the transaction. Johnson & Johnson expects to close the transaction with Synthes on June 14, 2012, subject to the satisfaction of customary closing conditions on that date, for a total purchase price of approximately $19.7 billion in cash and stock."
The acquisition will be accretive to JNJ's revenues and bottom line almost immediately and obviously Wall Street is applauding this acquisition.
Not only that but JPMorgan Securities has just upgraded shares to overweight from neutral in a rare upgrade on JNJ. The first one in 4 years actually! You can read the breaking news in Reuters.com press release of this morning.
"The good news is that fundamentals are on the upswing at J&J," analyst Michael Weinstein said, upgrading the stock to "overweight," JPMorgan's top rating.
JPMorgan also increased it's price target from $69.00/share to $74.00/share
The press release also notes:
"Separately, Jefferies & Co and Raymond James lifted their ratings on J&J's stock, after the company said it expects the $19.7 billion purchase of Swiss medical device maker Synthes to slight boost profit this year.
Jefferies now rates the stock "buy," while Raymond James rates it "outperform"."
Recent developments have further given me reason to suggest that everyone take a good look at JNJ right now. Not only for its dividend track record, but also for an anticipated capital appreciation, both short and long term.
The news is very good here.
Disclosure: I am long JNJ.