Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Pfizer Inc. (PFE), Novartis AG (ADR) (NVS): Will a Band-Aid Be Enough for Johnson & Johnson (JNJ)’s Latest Recall?

Check that bottle of Motrin Infants formula before you give it to a baby.

Johnson & Johnson (NYSE:JNJ) recently announced a recall of around 200,000 bottles of Motrin Infants’ Drops Original Berry Flavor. The problem is that some of the medicine could contain tiny pieces of plastic. J&J said that three lots of the half-ounce bottles — with lot numbers DCB3T01, DDB4R01 and DDB4S01 — could potentially be affected.

Thankfully, no illnesses or injuries have been reported so far, according to the company. Could the recall ultimately hurt Johnson & Johnson (NYSE:JNJ), though?

Is a Band-Aid enough?

This latest incident appears to only be a minor scratch for Johnson & Johnson (NYSE:JNJ). While 200,000 bottles might seem like a big number, it’s not that large compared with past recalls. The company stated that the problem resulted from a manufacturing process at a third-party supplier.

Johnson & Johnson (NYSE:JNJ) moved quickly to issue the recall. The company asked retailers to remove the affected products from store shelves. Customers who already purchased bottles of medication from the affected lots can call for a refund.

Because of the relative small scale of the recall, no reported problems, and the company’s rapid response, there has been no discernible impact on J&J stock. However, yet another instance of quality issues could have some investors wondering if Johnson & Johnson (NYSE:JNJ) needs more than just a symbolic Band-Aid to fix its underlying problem.

Recurring theme

So far in 2013, J&J has already recalled 32 million oral contraceptives, 3.3 million bottles of Tylenol drops, nearly 2 million blood glucose meters, 1.7 million bottles of Children’s Tylenol, and 7,500 hip implants because of various quality issues. Since 2009, the company has conducted around 40 recalls.

The biggest of these occurred in 2010. J&J recalled more than 136 million over-the-counter medications including Tylenol, Motrin, and Zyrtec. This recall did take a toll on shares. It also resulted in the shutdown of J&J’s McNeil business unit’s primary manufacturing facility in Fort Washington, Penn.

After that big recall, Warren Buffett actually added to his position in J&J. However, following further woes — including more recalls and litigation — Buffett dumped most of his shares in the company. He commented in an interview that J&J had “obviously messed up in a lot of ways in the last few years.”

By comparison

Buffett sold a couple of billion dollars’ worth of J&J stock throughout 2012. He probably would have been better off holding on to them. J&J ended up more than 6% in 2012. Shares are up nearly 25% so far in 2013.

Despite the plethora of recalls, J&J handles them well. The company set the standard on how to deal with public relations issues related to product safety with the big Tylenol scare that occurred in 1982. Other companies appear to have learned from J&J along the way.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.