Johnson & Johnson (JNJ), Oracle Corporation (ORCL), Google Inc (GOOG): Don’t Invest Now Unless You Know Quality

The largest holdings in GMO’s own Quality Fund include Johnson & Johnson (NYSE:JNJ), Oracle Corporation (NYSE:ORCL), and Google Inc (NASDAQ:GOOG). All three have profit margins above 15%, worldwide operations, and strong respective moats. For Johnson & Johnson (NYSE:JNJ), its scale and name brands like Tylenol and Band-Aid lend it power over competitors. Oracle Corporation (NYSE:ORCL)’s advantage comes from the lock-in its customers experience, represented by its near-50% market share in database management. And Google Inc (NASDAQ:GOOG)’s dominance knows no industry bounds. Its search engine holds a 66% market share in the U.S., while its Android mobile phone platform holds 64% market share of global smartphones.

Mean reversion
If large-cap and small-cap U.S. stocks revert to the mean and return less than inflation over the next several years, take solace in the fact that great companies can also revert to their own mean of market-beating returns. Even if you don’t believe in any link between past performance and future performance, noting the high-quality characteristics of a strong competitive advantage, high profit margin, and diverse revenue sources — all of which Johnson & Johnson (NYSE:JNJ), Oracle Corporation (NYSE:ORCL), and Google Inc (NASDAQ:GOOG) have — can help you earn a greater return.

The article Don’t Invest Now Unless You Know Quality originally appeared on Fool.com and is written by Dan Newman.

Fool contributor Dan Newman has no position in any stocks mentioned. The Motley Fool recommends Google and Johnson & Johnson. The Motley Fool owns shares of Google, Johnson & Johnson, and Oracle.

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