Summary
A recent article says JNJ should be sold because the talc lawsuits represent too big a danger at the current price.
The threat to J&J from the talc lawsuits is overblown and manageable for a company of this size.
The dividend is safe, well supported, and growing and justifies a price around $138.
Figure 1 Source
What news has people up in arms recently?
Stone Fox Capital recently published another in his series of articles trying to generate doubts about the performance of Johnson & Johnson (JNJ). This time he focuses on claims that J&J’s growth doesn’t warrant what he terms as a premium valuation, that the payout ratio is collapsing because the company didn’t buy back as many shares this quarter as it did the last time prices were this low, and finally the claim that the lawsuits over talc powder leave the company in a weak position.
I suppose Stone Fox Capital thinks that the third time is the charm for his recycled claims. But that fact is that the company is doing fine and there is no reason to sell in a panic. Being long JNJ, I would certainly like the opportunity to pick up more shares after a panic induced sell off, but the fact is that Stone Fox Capital hasn’t been seeing things clearly and his third repetition is no better.
