Sunday, May 31, 2009

JNJ - the current gold standard for large cap stocks

JNJ is my current gold-standard stock/company. Why buy something else when you can get ~9% earnings/EV, consistent 25-30% ROE, 17-20% net margin, almost no net debt, great brand, great moat, great management, some growth, high expected return on multiple metrics? Any alternative investment needs to beat at least some of the qualities above to be considered at all.

For divvie players, it even has 3.6% yield. ;)

JNJ does not offer multibagger potential. However, it offers potential 20% return per year. It is part of my "safe" large cap holdings that also include PEP, KO, UL, WYE, NKE, MSFT, CSCO, and BRK. None of them offer multibagger potential coming off current levels.

JNJ has not offered high return in last ten years. However, ten years ago JNJ sales per share were 1/2 current, FCF and earnings per share were 1/3 current:

So it is at least 50% cheaper than it was 10 years ago.

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