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.
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.
