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Old Trader is a 63 year old private investor, managing a retirement portfolio constructed to a) generate a high current yield, b) preserve capital, and c) increase capital. His methodology involves taking a "top down" macro view to identify favorable trends, and then engage in... More
  • Is JNJ Becoming a Two-Legged Stool? 12 comments
    Dec 9, 2010 9:29 PM | about stocks: JNJ

     

    JNJ has been a core holding in my portfolio for a number of years. Financially strong, a share-holder friendly management that’s committed to a growing dividend, and well diversified across the medical field, as well as geographically…..what’s not to like?

     

    I was, and still am, of the opinion that JNJ’s spread across drugs, medical devices, and OTC consumer products provided the stability of a 3 legged stool, as its sales were pretty evenly divided across all three of the segments, providing something of shield from weakness in a given sector. I must admit that I’m starting to get more than a bit concerned about JNJ’s recent string of missteps in their consumer, OTC segment. The latest recall by JNJ’s McNeil Consumer Healthcare unit of Rolaids products comes in the wake of earlier recalls of Tylenol, Benadryl, and Motrin, attracting the attention of various government agencies, and bodies.

     

    Reputations take years, and years to build, but can be destroyed in short order. JNJ’s response to the old Tylenol tampering affair, years ago, was arguably a classic example of how a company should deal with an adverse event, even though JNJ had not done anything wrong. I’m not suggesting that JNJ is ignoring the situation at their McNeil division, but I think that its time that JNJ make some sweeping and well publicized changes there, as a way of getting in front of the situation and reassuring their customers, as well as their shareholders.

    Disclosure: Long JNJ




    Disclosure: I am long JNJ.
    Themes: Dividends, Income Stocks: JNJ
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Comments (12)
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  • doubleguns
    , contributor
    Comments (8728) | Send Message
     
    Old Trader I agree. Presently this is a PR nightmare. They need to get in front of this and "FIX" the problems like they did with the tylenol tampering.

     

    They have lots of products and public trust but need bold swift moves that the public can feel good about and "DO" fix the problem. Nothing more humiliating than having the problem resurface after you have claimed to have fixed it.

     

    I am sure they will be back but will it be with a black eye and fat lip or broken arms and legs.

     

    Time is not on their side. They need to get with it....real soon.

     

    The PR guy needs to get with it "NOW"!!
    10 Dec 2010, 09:44 AM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Author’s reply » DG,

     

    It sounds like we're definitely on the same page on this one. I guess that the bottom line for me, is that after literally decades of great management, they suddenly developed a terminal case of the "stupids", doesn't seem likely.
    10 Dec 2010, 10:11 AM Reply Like
  • robert.b.ferguson
    , contributor
    Comments (10550) | Send Message
     
    Old, Trader: Greetings. While I have never owned J&J I have always thought of them as a well managed company until recently. Your observations are spot on. Thanks for the post.
    10 Dec 2010, 02:26 PM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Author’s reply » robert,

     

    Nice to "see" you again, and thanks. Actually, depending on one's risk tolerance, it might be worth taking a nibble, if one's willing to wait a bit to see the "proof in the pudding".
    10 Dec 2010, 11:12 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5816) | Send Message
     
    I've owned JNJ off and on for years, but gave up on it when they got bad PR on Resperidol. It appears they were paying Doctors to prescribe it, and while the practice as conducted was demonstrably not illegal it struck me as bad ethically.

     

    When a reputation goes bad it can be brutal, witness Toyota's troubles which were less their fault than what JNJ is experiencing. It's ironic that Tylenol was where it started, after the tampering incident years ago where they just defused the whole thing and scored a lot of points, turned it into a triumph.

     

    I don't plan to invest in JNJ again until I hear a mea culpa from top management and see firm and final corrective action.
    27 Dec 2010, 10:09 PM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Author’s reply » Tom,

     

    Well, there'll soon be a change at the top, so it'll be interesting to see how things play out. Its my understanding that the current CEO was more of a strategic "big picture" guy, which might have been a part of the problem.
    27 Dec 2010, 10:14 PM Reply Like
  • Mayascribe
    , contributor
    Comments (10730) | Send Message
     
    OT: I'm with you and Tom about vaunted J&J. The stock did hold up pretty well as a safe play during the recession lows, but it hasn't done much since. The CEO is, or better be, a lame duck CEO, as he has done a horrible job running this once darling to own.

     

    With a merely decent 3.5% yield, I will be selling my shares early next year, and putting those funds into something that holds a growth story, as well as paying a better dividend.

     

    (JNJ) tops my list of stocks I own that will be getting the boot next year.

     

    "Two-legged stool." Humorous!
    27 Dec 2010, 11:09 PM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Author’s reply » Mayascribe,

     

    At this point, I haven't decided whether to bail, or not. For certain, I'll stop reinvesting the dividend. I don't have any other exposure in healthcare/pharma stocks, but ABT, GSK, or TEVA spring to mind, as possible replacements, should I decide to make a move.
    28 Dec 2010, 12:12 AM Reply Like
  • Mayascribe
    , contributor
    Comments (10730) | Send Message
     
    I hold some Sanofi Aventis (SNY) and Abbott Labs. I agree that Glaxo and TEVA are also good replacements for JNJ.

     

    In the riskier part of my portfolio I own a fairly significant position (for me) in Novavax (NVAX), a small position in Zalicus (ZLCS) and ImmunoGen (IMGN)...all which are up 20 plus percent from fairly recent entered positions. The top dog though is Cardica (CRDC), up 70.27% since I established <sigh> a small position on November 29th.
    28 Dec 2010, 12:42 AM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Author’s reply » Nice work on the more speculative portion of your portfolio! (Not to diminish the more "mainstream" holdings, *s*).
    28 Dec 2010, 12:50 AM Reply Like
  • Tom Au, CFA
    , contributor
    Comments (6788) | Send Message
     
    (JNJ) has always struck me as a "marketing" company at heart. They have some serious problems, but consumer products are the easiest to fix.

     

    I'd be a lot more concerned if the problems were in one of the other two segments.
    28 Dec 2010, 09:02 AM Reply Like
  • Old Trader
    , contributor
    Comments (5726) | Send Message
     
    Author’s reply » G&D,

     

    I hadn't really thought about it, before, but can see how it could be said that JNJ is more of a marketing firm at its core. I'd agree with your assessment that screw-ups on the consumer side are easier dealt with, than in their other segments.
    28 Dec 2010, 09:39 PM Reply Like
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