|Instrument:JOHNSON & JOHNSON|
Johnson & Johnson is an American multinational company involved in the manufacture and sale of products in the broad healthcare field. Its products are sold through three distinct business segments: Consumer, Pharmaceutical and Medical Devices. The company was founded in 1886 by Robert Johnson, James Johnson and Edward Johnson; and is headquartered in New Jersey, USA.
Johnson & Johnson was an instant success from the very beginning when they started developing improved medicinal plasters, a product that helped reduce hazards in operating rooms at the time. By the turn of the 20thcentury, Johnson & Johnson stood out as the chief advocate of antiseptic surgical procedures. By the 1920s, the company had started an aggressive push for international expansion as well as diversification of its products. In the 1970s, tighter regulations in the healthcare sector saw the company boost its efforts in the consumer goods industry.
Johnson & Johnson operates in a lucrative industry that has continuously attracted fierce competition. To perpetually stay on top, the company has, over the years, made numerous acquisitions of companies such as Ethicon, Janssen Biotech, DePuy, McNeil Consumer Healthcare and Crucell. Johnson & Johnson went public in 1944, listing on the NYSE where it trades under the ticker symbol JNJ. The stock is in the Healthcare sector, under the Drug Manufacturers-General industry.
JNJ Stock History
Johnson & Johnson has had a few stock splits in its history, with the latest one being a 2-for-1 implemented on June 12th, 2001. The stock price history of JNJ is a reflection of a stable, mature company that has consistently met or exceeded its targets and expectations.
Since the mid-1990s, the stock picked up momentum and rose from a split-adjusted price of circa $10 and topped out at circa $65 by April 2002. The company then maintained a sideways trend and the 2008 recession only managed to drag it to lows of circa $50 by March 2009. Since then, JNJ stock has largely maintained an upward trajectory and has managed to print its all-time high (as of November 2020) just above $155 in April 2020.
Johnson & Johnson is regarded as a Dividend King in Wall Street, having increased payouts to shareholders for 57 consecutive years as of November 2020. JNJ has proven to be a fairly safe bet for investors even during market downturns.
How to Trade JNJ Stock
Here are some of the factors to consider when trading the JNJ stock:
- Legislative and Taxation Issues
Johnson & Johnson has operations in over 60 countries and sells its products in over 180 countries around the world. The company operates in a sensitive industry where sudden changes in legislation and taxation liabilities can arise. As a leading global manufacturer of fast-moving consumer goods, Johnson & Johnson has to navigate legislative challenges in areas such as patents, environmental and intellectual property rights. A recent case has been the legal battle with Pfizer who wanted to produce a biosimilar product of Remicade, a drug which in 2016 accounted for about 10% of the company’s revenues.
- Product Rollout
Johnson & Johnson’s success has always been fuelled by the introduction of hit products in the market. But misses in its industry have also occurred and resulted in huge losses for the company, and consequently, lower stock prices. Losses in this space are not only limited to research and development costs, discontinuation of products or recalls, but also potential litigation settlements. Some of the losses the company have incurred include the 2010 recall of Tylenol and the 2020 talc lawsuit. Investors are always keen on the performance of new products rolled out by the company and will react in the market accordingly.
- Raw Materials Risk
Johnson & Johnson has a long list of suppliers from all over the world, and this carries a substantial raw materials risk. For instance, in 2003/4, the company experienced an upsurge in demand for drug-eluting stents. The higher than expected demand inevitably caused supply shortages, which proved costly for Johnson & Johnson, with the company not only losing sales but also market share. There are numerous risk management programs instituted by companies the size of Johnson & Johnson, but exposure to numerous suppliers of raw materials is always an inherent danger.
- Periodic Earnings Reports
The fiscal year calendar for Johnson & Johnson runs from January to December. The company releases quarterly, semi-annual and annual earnings reports to update investors on its business performance. Some of the metrics investors are interested in include revenue, cost of goods sold and dividends. Typically, strong numbers will inspire higher stock prices, whereas weak figures will trigger lower prices. For JNJ investors, the earnings release event is a very important date in the economic calendar.
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Johnson & Johnson Stock FAQ
- Why should I trade Johnson & Johnson shares?
As a broad-based health care company Johnson & Johnson can benefit from some stability in earnings, and a solid base of institutional ownership. Even so, the stock itself is a good vehicle for traders, and many are attracted to the back and forth price action that can often present new opportunities for trading entries. If you’re interested in the profits that can be had from stocks in the health care industry then Johnson & Johnson is a stock you’ll want on your watch list.
- Is Johnson & Johnson the best consumer health care stock for trading?
There are a large number of health care stocks and the sector tends to see some volatility as new products and earnings can cause large moves in stocks. So, we wouldn’t say that Johnson & Johnson is necessarily the best stock to trade in the health care group, but we do think that the stock remains one of the best in the group even as market conditions are constantly changing. That seems particularly true over the past several years, where sideways consolidation has put the stock in a trading range that many traders will be able to benefit from.
- What’s the best strategy for trading Johnson & Johnson shares?
With the range-bound, back and forth nature of the stock over the past several years a strategy that takes advantage of that range is the most effective one for trading in Johnson & Johnson. Watching for the stock to reach the outer limits of the trading band and then trading the other direction in expectation of a reversal that keeps the stock range-bound has been a profitable strategy and unless there is a change in the trading range the stock has seen it will continue to be a sound strategy.