It also has been a good performer since Berkshire got rid of 95% of the shares it once owned. Year to date the stock is up 21%. Mr. Buffett may have thought that Johnson and Johnson was overpriced and he could do better elsewhere. Its current P/E is about 23, a bit higher than the overall market and its recent past. Primarily considered a defensive stock and well known for its consistent dividend growth, Johnson and Johnson (NYSE:JNJ) may be under short-term selling pressure going forward if the Fed eases off its bond buying program, and forces interest rates to creep up. Income investors may look elsewhere.
Still, with earnings and cash flow projected to grow, a strong management team in place, and a record of payout increases spanning a half century, the stock may be worth holding onto in your portfolio.
There is another famous saying that could apply to this situation: “beauty is in the eye of the beholder”. An investor buying two stocks, CVS Caremark Corporation (NYSE:CVS) and J&J, that were discarded by Berkshire Hathaway, may be the one uttering that phrase in the future. In addition, it may be wise to consider Berkshire Hathaway shares as well.
Mark Morelli owns shares of Johnson & Johnson. The Motley Fool recommends Berkshire Hathaway and Johnson & Johnson. The Motley Fool owns shares of Berkshire Hathaway and Johnson & Johnson. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Should You Buy Stocks Discarded By Warren Buffett ? originally appeared on Fool.com and is written by Mark Morelli.
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