Examining Warren Buffett's Portfolio: Johnson & Johnson

Johnson & Johnson (NYSE: JNJ) opened at $61.84. So far today the stock has hit a low of $61.50 and a high of $61.84. As of 1:35, JNJ is trading at $62.13, up $0.46 (0.7%).

JNJ rose for the second half of 2006 but has fallen for most of 2007 until recently when it has moved to the upside. McNeil Nutritionals, a subsidiary of JNJ, is currently in court defending itself against claims of false advertising of its Splenda artificial sweetener. Warren Buffett holds over 24 million JNJ shares in his portfolio, accounting for approximately 3.1% of his total holdings. Like all of his investments, Buffett believes that JNJ is a stock that will weather its storms well and rise steadily over time. With JNJ trading near its 52-week low currently, now could be a great time to get into this stock at a bargain price, something Mr. Buffet would undoubtedly approve of. The technical indicators for the stock are bearish and steady while S&P gives JNJ a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $55 range. JNJ hasn't been below $27.50 since mid-2004 and has shown support around 60 recently. This trade could be risky if JNJ earnings (due out on 4/17) disappoint, but even if this happens, this position could be protected by the historical support around $58.

Brent Archer is an options analyst and writer at Investors Observer. Do you have any Deadwood in your portfolio? Check out the 18 Warning Signs That Tell You When To Dump A Stock.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about.