The Dow’s Most Diversified Winners: Johnson & Johnson (JNJ) and More

Johnson & Johnson (NYSE:JNJ)
J&J has a concentration in health care, but within that industry, it offers just about everything you could ask for from a health-care company. In an environment in which most health-care companies are narrowing their scope and spinning off or selling off non-core businesses, J&J maintains its three-part business model of consumer products such as Band-Aids, pharmaceuticals, and medical devices. Contrary to popular belief, the consumer space is the least important of the three, with medical devices bringing in the most revenue and pharma being the most profitable.

Johnson & Johnson has struggled for years to overcome problems such as high-profile product recalls, and in its most recent earnings report, J&J made an overture toward breaking up its conglomerate by mentioning the possibility of spinning off its diagnostics unit. But to preserve its AAA bond rating, sticking together may be Johnson & Johnson’s best chance to remain a leader in the industry.

The Walt Disney Company (NYSE:DIS)
Last, Disney has gone well beyond its theme-park and movie roots to become a diversified media giant. With TV networks ABC and ESPN as well as a host of other cable networks, its namesake movie studio, its toy and consumer products division, and its international resorts, Disney continually seeks to grow.

Disney’s scope has given it the ability to make huge acquisitions, with buyouts of Pixar, Marvel, and most recently Lucasfilm having huge implications for its revenue-generating power across its platform of media offerings. As long as people want to be entertained, Disney will be in the driver’s seat to do the entertaining.

Go for diversification
The lesson from these four winning Dow stocks is that sometimes, mixing different types of businesses in a single company can be a smart strategy. Not every well-diversified company will succeed, but those that do can bring big profits for their long-term investors.

The article The Dow’s Most Diversified Winners originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool recommends 3M, Johnson & Johnson, and Walt Disney (NYSE:DIS) and owns shares of General Electric, Johnson & Johnson, and Walt Disney.

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