Has Johnson & Johnson (JNJ) Become the Perfect Stock?

Most investors think of Johnson & Johnson’s consumer products as the leading edge of its massive health-care business. But what elevated J&J into the ranks of the Dow Jones Industrials is its diverse set of larger segments, which include both pharmaceutical development and medical-device manufacturing.

In fact, J&J’s pharmaceutical business is well-poised to challenge other industry leaders. With the company having relatively little exposure to patent-cliff issues, J&J is taking aim at rivals’ blockbuster drugs. For instance, its Invokana drug to treat Type 2 diabetes proved itself against Merck & Co., Inc. (NYSE:MRK)‘s Januvia, giving it the inside track to become the first FDA-approved SGLT2 inhibitor. Meanwhile, sales of J&J’s anti-inflammatory Stelara hit $1 billion in 2012, and with the drug showing significant improvement compared to Amgen, Inc. (NASDAQ:AMGN) and Pfizer Inc. (NYSE:PFE)‘s Enbrel, it has even more potential to grow.

The big question facing J&J, though, is whether it should follow the trend of other major pharmaceutical companies and break itself into its component parts. For the most part, CEO Alex Gorsky seems to like the company’s conglomerate nature, although he may be open to minor strategic moves such as selling off its diagnostics business.

For J&J to improve, it needs to get its earnings growing a bit faster and produce a little more dividend growth. Blockbuster drugs might be just the ticket to the success J&J needs to get closer to perfection.

The article Has Johnson & Johnson Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson

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