This post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
"Johnson & Johnson (NYSE: JNJ) is an a typically defensive industry and has held up much better than most stocks during the past year," says John Reese, who selects the issue has his favorite stock for 2009.
In his Validea -- a newsletter that screens stocks based on the criteria used by legendary investors -- he assesses Johnson & Johnson based on his Warren Buffett and Peter Lynch models.
"The health care and pharmaceutical giant has dipped about 10% over the past year compared to the broader market's 40% plunge.
"In addition, the company has the size ($163 billion market cap) and breadth (250 operating companies and big brand names like Tylenol, Band-Aid, and Neutrogena) to withstand continuing trouble in the economy.
"Johnson & Johnson's price dip this year has only made it more of a bargain according to two of my Guru Strategy computer models, each of which is based on the approach of a different Wall Street great.
"My Warren Buffett model loves JNJ's earnings consistency, with the New Jersey-based firm (a major holding of Buffett's Berkshire Hathaway) having increased earnings in 9 of the last 10 years.
"Johnson & Johnson has also averaged a 25% return on equity over the past decade, a sign it has the 'durable competitive advantage' Buffett is known to look for.
"JNJ also has annual earnings of $12.5 billion, which means it could pay off its $8.4 billion in debt in less than a year, something this conservative model likes to see.
"My Peter Lynch-based model is also high on JNJ. It considers the stock a 'stalwart,' the type of large, steady company Lynch liked to have in his portfolio during downturns or recessions.
"Its yield-adjusted P/E/Growth ratio -- which Lynch used to find growth stocks selling on the cheap -- is 0.98, coming in under this model's 1.0 upper limit. The Lynch approach also likes JNJ's Debt/Equity ratio, a manageable 32%."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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Reader Comments (Page 1 of 1)
1-14-2009 @ 1:13PM
mychell said...
i like to know how to get in to stock,how do i go about doing that?