Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger"Our portfolio has been notably light on pharmaceuticals and consumer products; we're rectifying that by buying Johnson & Johnson (JNJ)," says Gregory Dorsey in Leeb's Income Performance Letter.
"Getting a handle on exactly what the 122 year-old company markets is no easy task, given the broad scope of its product line-up. And to say that J&J has been a resounding success on the corporate
stage would be an understatement.
"Through its more than 250 operating businesses, the parent company lays claim to being, among other things: the world's premier consumer health company, the largest medical devices and diagnostics company, the third-largest biologics company and the sixth-largest pharmaceuticals company.
"While acquisitions have played an important role in making the company what it is today, J&J has also achieved these milestones through internal growth. It boasts 75 consecutive years of rising sales.
"This year its revenue should top $64 billion, and sales are likely to increase at a steady 10% annual pace during the next five years.
"Keep in mind that our estimate may prove to be conservative if the company continues to make great strides in rapidly growing emerging economies, such as China and India, which currently account for only about a fifth of the company's overall sales.
"Along with its triple-A rating from S&P, we like the fact that J&J is a favorite of legendary value investor Warren Buffett, who owns nearly 62 million shares via his Berkshire Hathaway, putting us in good company with this stock.
"Of course it certainly doesn't hurt that J&J is trading at low multiples to its earnings and sales relative to its historic norms, and to its peers. We also like the defensive nature of the stock: Come what may
in the global economy, J&J is likely to continue to attract consumers to its product lines.
"As with its steady sales gains, J&J can be relied on to increase its dividend payout year after year. This year marks the 46th consecutive year of dividend hikes from the company. During the past five years, that income stream has risen at a 15% annual rate, a trend we expect will continue for many years to come.
"In the meantime, the stock currently yields an above-average 2.7%, making it an excellent total return vehicle. We're putting the stock in our portfolio and we hope you do the same."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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