Summary
Reuters released a sobering report claiming that Johnson & Johnson had concealed knowledge that its baby powder contained asbestos and intentionally avoided disclosure.
Regardless of whether or not Reuters' allegations turn out to be true, the stock shed around 10% during Friday's trading session, a loss of over $30 Billion in market capitalization.
I summarize the story, highlight the risks of buying the dip of Johnson and Johnson, and explain why I'll be sitting on the sidelines with my capital.
Investment Thesis
When negative news surfaces and sends a company's stock price falling, it can become tempting to consider an investment in the company's stock. Buying the dip is akin to making a bet that the market's immediate reaction was overblown.
Reuters released a report (linked here) aptly titled Powder Keg that accuses Johnson & Johnson (JNJ) of taking steps to hide knowledge that its talcum baby powder contained asbestos, and misleading regulators to accomplish this goal.
Whether one is bullish or bearish on the stock, and whether or not one believes the report is accurate, the story is worth reading. Johnson and Johnson issued a statement denying the allegations. Only time will tell if the Reuters write-up is either compelling investigative journalism or a wonderfully spun web of lies.
