Monday, September 24, 2012

Johnson and Johnson 2

On my other blog I am today writing about Research Information Sites. I am doing this blog entry due to a question on what are some of the sites I get my information from...continue...

I do not own this stock (TSX-JNJ). This is one of the very few US stocks that I follow. I held it for a short time, buying it in June 2005 and selling in June 2006. I did not think that I would ever make much, if any money on this stock. I had a loss of 16.82% on this stock.

As far as I can see on insider trading, over the past 6 months there was some $24.6M of insider buying and some $23.9M of insider selling. Insiders have options. They seem to have issued in 2012 some 9.5M options shares worth $660M. There are a number of insiders who own shares in this company worth in the millions of dollars. For example, the CEO has some 0.4M shares currently worth around $28M.

There seems to be around 2,358 institutional holders who own some 68% of this company's outstanding shares. Over the past 3 months they have increased their shares by 3.4%. This is a positive.

The 5 year low, median and high median Price/Earnings Ratios are 12.11, 13.90 and 15.69. The current P/E Ratio is 19.69 based on stock price of $69.25 and 2012 earnings of $3.52. This would suggest that the stock price is a little high.

If you look at Adjusted EPS and the current P/E, you get a current one of 13.69 with 5 year low, median and high median P/E based on Adjusted EPS at 12.16, 13.96 and 15.76. This suggests a reasonable price. However, I cannot duplicate how the company comes up with the Adjusted EPS and at the very least they seemed to have changed the way it is calculated over the years. I would be a bit shy on depending on this. Sites seem to be using the Adjusted EPS as the EPS. They are not the same.

I get a current Graham price of $41.75. The 10 year low, median and high median Price/Graham Price Ratios are 1.71, 1.85 and 1.99. The current P/GP Ratio of 1.66 would suggest that the current stock price is relatively low.

I get a 10 year Price/Book Value Ratio of 4.64 and a current P/B Ratio of 3.15. The current P/B Ratio is only 68% of the 10 year ratio and this suggests that the current stock price is relatively low.

I get a 5 year median dividend yield of 3.43% and a current dividend yield of 3.52%. The current one is higher than the 5 year median by around 2.7%. This current dividend yield being a bit higher than the 5 year median suggests a relatively reasonable current stock price.

My stock price tests gives rather mixed results. In that case, I would suggest that the dividend yield tests might prove the most important and that suggests a relatively reasonable current stock price.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The consensus recommendations would be a Buy. (See my site for information on analyst ratings.) The 12 months stock price target is $73.50. This suggests a 12 month total return of 9.66%, with 3.52% from dividends and 6.14% from capital gains.

If you like technical analyses look at Trader Robotics. JNJ is the second stock he analysis in this video.

Even analyst with Buy recommendations do not seem to be very enthusiastic about this stock. They are looking for returns of 8 to 9%. One analyst says that the stock has underperformed the market. Another one remarks that dividends should continue to increase.

The blogger, Seeking Alpha, has an interesting 4 part report on this stock. The first part gives an overview of this company. The second part talks about existing products. The third part talks about the company's drug pipeline and the fourth part analysis the company's financial statements.

The Dividend Monk has also produced a recent posting on this stock. He calls for cautious optimism at $68 a share. See his analysis on this stock.

This stock probably has a reasonable stock price on a reasonably safe stock. You might probably make more on it that what you can earn at current interest rates.

Johnson & Johnson is engaged in the manufacture and sale of a broad range of products in the health care field in many countries of the world. The company's worldwide business is divided into three segments: Consumer; Pharmaceutical; and Professional. Its web site is here JNJ. See my spreadsheet at jnj.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. I own a couple hundred shares. I think this one is a staple for the portfolio to increase US exposure but I wouldn't make a big purchaes at today's prices.

  2. A lot of Canadians think of this company as a staple US stock to buy. I must admit I am not keen on foreign stocks in general. I think that I can find enough diversity in stocks on the TSX. Problem with foreign stock is that you may not have a chance to know them as well as Canadian stock. However, that is not a problem with JNJ.