Monday, April 30, 2012

More Thoughts on Johnson & Johnson

Last year I posted the following chart and offered some thoughts to go with it.

August 23, 2011
Thoughts on Johnson & Johnson

Click to enlarge.

Here's an updated chart that includes 2011's results.

Click to enlarge.

Note that I've added an exponential trend line for real earnings per share. Are those the trends you'd like to see during a supposed economic recovery?

That said...

Perhaps they come up with a cure for cancer. There's no doubt that would make the company a spectacular investment.

Perhaps they have similarly wonderful things in their pipeline that an investor with time on his/her hands could explore.

Perhaps the exponential trend line failures are merely temporary and are simply due to one-time events.

Perhaps changes in the exchange rate will boost their future results.

Perhaps they have grand plans for acquisitions.

Perhaps they can convert their high grade AAA rating into a low grade BBB rating while simultaneously buying back a @#$%load of shares. Most investors seem to love that. It would certainly boost both sales and earnings per share.

I'm serious. All of those things are certainly possible.

In any event, I shall pass and I am clearly in the minority.

Motley Fool : Johnson & Johnson

Outperform: 13,518 players
Underperform: 486 players

What are the odds that 96.5% of investors are wrong? The math would say 3.5%. I've got a feeling the odds are somewhat higher though. 5%? 10%? I am not at all tempted to short the stock but I would be tempted to short a herd (if given roughly 30-1 odds anyway).

I want to be perfectly clear. I have not dug through the annual reports in detail. Please do not consider this limited research to be anything even remotely similar to due diligence. I can say this though. These charts do not inspire me to dig any deeper.

Source Data:
Johnson & Johnson: Investor Relations


Mr Slippery said...

JNJ stock has been almost flat for 10 years, but the cheerleaders at Motley Fool expect it to hit $90-$100 "over the long haul".

It has severely under performed the S&P over the last 2 years. At least it pays a good dividend.

I am glad to be out of stocks, at least directly. I have a large indirect exposure through a pension fund, which is more than enough exposure.

Mr Slippery said...

Bonus: Triffin goodness from iTulip.

Stagflationary Mark said...

Mr Slippery,

Over the long haul I fully expect a 12 ounce can of soda to hit $100. And that's on sale!

$3 for a 12-pack was a recent sale price.

That's 25 cents per can.

Soda seems to be running a bit hotter than Bernanke's 2% inflation target. Let's call it 4% due to the high commodity to labor ratio there. (I suspect labor is cheap and will stay that way.)

0.25*1.04^153 = $100.93

I therefore predict $100 soda in the year 2165, give or take a few hundred years.

As you can see, I'm leaving myself some room for error in case we slide into a deflationary mess again and/or we hyperinflate.