Warren Buffett, Tylenol, and Pepcid AC

This past week, Warren Buffett was in the news as his main vessel, Berkshire Hathaway, reported its numbers. More importantly, investors and reporters were more interested in the "Sage of Omaha's" pearls of wisdom. Buffett spoke at length about finding his successor to take over the massive Berkshire portfolio.

As Buffett laid out the investments of Berkshire, one that popped out as a new position is Johnson &Johnson (NYSE:JNJ). The huge consumer giant has seen its stock come down from $64.50 to $62 this past week. Yet the story has increasingly better fundamentals. Last week I highlighted JNJ's strong franchise value. Johnson &Johnson has a vast array of over-the-counter drugs and products used by millions of households every day -- from Tylenol to Pepcid AC to No More Tears Shampoo. JNJ is also a major supplier to hospitals for products like sutures to BAND-AIDS.

JNJ serves the cardiac-care community with a line of stents, basic to drug-coated, ablation catheters and many other devices. JNJ has a line-up of biotech drugs in various stages of clinical trials that will fuel future growth.

With the shares trading at a 15 1/2 PE multiple on expected 2007 earnings per share of $3.90, no wonder Warren Buffett owns shares in the American icon. The way Mr. Buffett invests for the long term, I don't think he needed to reach for Tylenol or Pepcid AC with this past week's market action -- he took it all in stride.

Georges Yared is the author of recently released books Baby Boomer Investing...Where do we go from here? and Stop Losing Money Today.