Johnson & Johnson (JNJ) has been having a strong year, trading at near all-time highs despite ongoing developments of its collection of 12,000 pending lawsuits against it over the presence of asbestos in its talcum-based baby powder. The dam may have broken some today, as Reuters has now reportedthat the company has known about potential asbestos contamination for decades. The story has the Johnson & Johnson stock down 11% at the time of writing, which is almost unheard of for such a stable "blue chip" company. The negative headline shouldn't be taken likely, and these findings appear to heighten the likely fiscal damages to the company. Despite this development, we don't see this as a long-term threat to our bull thesis in JNJ.

At first glance, this is troubling for Johnson & Johnson. The company was ruled against over the summer when a St. Louis jury awarded 22 plaintiffs a total nearing $4.6 billion. This taken and multiplied against the vast number of outstanding lawsuits can form staggering numbers. But investors should hit the brakes on panicking.

Of the $4.6 billion awarded, only $550 million was compensatory. The balance was punitive damages. Punitive damages are essentially damages awarded in excess of a claim that are meant to punish the defendant. For example, this St. Louis case featured a calculated amount of damages by the jury that was symbolic of Johnson & Johnson's negligence:

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