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Johnson & Johnson (JNJ) Stock Is Always a Buy (If You Hold Long Enough)

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It’s hard to argue that Johnson & Johnson (NYSE:JNJ) stock is not a buy. Ever.

To prove my point, I looked at the multi-year chart and picked out some of the peaks. Even if you purchased near the yearly top, you’re still sitting on a better return than if you had purchased an S&P 500 ETF.

Date Johnson & Johnson Dividend-Adjusted Return S&P 500 Dividend-Adjusted Return
June 27, 2012 34.1% 23.7%
June 8, 2011 40.6% 31.6%
April 9, 2010 49.3% 44.2%
Aug. 8, 2008 43.6% 38.8%
Oct. 20, 2006 56.6% 35.7%

Source: S&P Capital IQ.

Of course, Johnson & Johnson stock is sometimes a better buy than at other times. If you purchased near the yearly lows, you’re sitting on an even better returns, trouncing the S&P500.

Date Johnson & Johnson Dividend-Adjusted Return S&P 500 Dividend-Adjusted Return
June 1, 2012 45.1% 29.2%
March 18, 2011 60.1% 32.3%
July 23, 2010 67.2% 55.4%

Source: S&P Capital IQ.

Run-up helped
The assumption that you’ll be OK buying almost anytime works only if you hold on to Johnson & Johnson (NYSE:JNJ) stock for long enough. I ran similar calculations looking at the returns through the end of last year, before Johnson & Johnson stock went on its monster run. The results weren’t nearly as pretty.

Date Johnson & Johnson Dividend Adjusted Return Through Dec. 31, 2012 S&P 500 Dividend-Adjusted Return Through Dec. 31, 2012
June 27, 2012 6.8% 8.3%
June 8, 2011 11.9% 15.2%
April 9, 2010 18.8% 26.2%
Aug. 8, 2008 14.3% 21.5%
Oct. 20, 2006 24.7% 18.8%

Source: S&P Capital IQ.

Apart from for the longest holding period — the exception that proves the rule — the S&P 500 topped the returns for Johnson & Johnson.

Johnson & Johnson (NYSE:JNJ)

Looking forward
I think the recent run-up is justified, given how pessimistic investors have been over the last few years as Johnson & Johnson (NYSE:JNJ) dealt with manufacturing issues and recalls. But I wouldn’t be surprised if were near a yearly high, given how much Johnson & Johnson stock has increased over the first half of the year.

Fortunately, there are a few upcoming events that could help Johnson & Johnson (NYSE:JNJ) stock increase in value, or at the very least help prop it up.

Second-quarter earnings are scheduled to be released on July 16. Investors should keep their eyes on Johnson & Johnson’s recently launched diabetes drug Invokana. If Johnson & Johnson can persuade doctors to give it a try, there’s potential for the drug to compete with Merck & Co., Inc. (NYSE:MRK)‘s top-selling oral medication Januvia. Taking just a portion of Januvia’s multibillion-dollar market would give Johnson & Johnson stock a nice boost.

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