Summary
- Johnson & Johnson is a rock-solid business.
- The company has an impeccable track record of cash generation and dividend payments.
- The baby powder controversy and competition from biosimilars are generating uncertainty around Johnson & Johnson.
- Those uncertainties are already incorporated into valuation levels.
- Short-term risk could be creating a buying opportunity for long-term investors.
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Johnson & Johnson (JNJ) is a remarkably sound business, both in terms of fundamental quality and financial performance. The stock is facing some uncertainties lately, but those uncertainties are already incorporated into valuation levels to a good degree. At current price levels, Johnson & Johnson looks like an attractive investment when considering both the downside risk and the potential reward in the years ahead.
A Fundamentally Sound Business
Johnson & Johnson comes second to none in the healthcare sector. The company has remarkable fundamental strengths thanks to its intellectual properties and brand recognition across drugs, medical devices, and consumer products.
The business model is well diversified, the pharmaceutical segment produces nearly 45% of revenue, with medical devices generating 35% and consumer products bringing in nearly 20% of sales at the whole company level. Global scale, a massive distribution network, and abundant resources to invest in marketing and R&D make of Johnson & Johnson a competitive fortress.
