If you’re looking to buy a solid healthcare stock, look no further than Johnson & Johnson [[JNJ]] , which closed yesterday at $71.20. It has been a rather boring stock of late, but as I highlighted in yesterday’s post, it is on the move and hitting new highs.
JNJ is a diversified healthcare company that had 40% of revenues from drugs, 36% from medical devices and 24% from consumer related products, in 2007.
Currently, they are in “growth strategy mode” and have committed to finding new growth opportunities in healthcare, of which they only have participated in, and sold products to only 30% of the total $4 trillion global healthcare market. So, 70% of the total market has not been tapped into by JNJ.
June quarter sales were up almost 9% to $16.5 billion, with the medical device business reporting over 12% revenue growth to just over $6 billion.
In addition, they are sitting on about $13 billion in cash and are one of the few companies that have a AAA credit rating. Expect them to grow via acquisitions.
This company is a cash cow, generating over $12 billion in free cash flow last year and has a low debt to equity ratio of about 19%.
JNJ is a solid core holding for the healthcare allocation of a portfolio.
Disclaimer: Investing involves risk. Don’t forget—you can, and sometimes will, lose money faster than if you walked the streets of Mexico City, wearing a shirt made of $100 bills.
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