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.
Investors should also watch Johnson & Johnson (NYSE:JNJ)’s hepatitis C drug Incivo that the health-care giant sells abroad for Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Even though it has to ship some of the profits to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Incivo is a moneymaker because doctors in Europe haven’t started cutting back on prescribing the drug while they wait for next-generation hepatitis C drugs as they have in the U.S., where it’s called Incivek.
Johnson & Johnson (NYSE:JNJ) has one of those in the works, too. Toward the end of the year, look for a Food and Drug Administration approval of Johnson & Johnson’s hepatitis C drug simeprevir, which will go up against Gilead Sciences, Inc. (NASDAQ:GILD)‘ sofosbuvir, which will be approved around the same time. Data from the combinations of simeprevir with its partners’ hepatitis C drugs will help investors gauge how well Johnson & Johnson can compete with the all-oral cocktail that Gilead Sciences, Inc. (NASDAQ:GILD) is developing.
The article Johnson & Johnson Stock Is Always a Buy (If You Hold Long Enough) originally appeared on Fool.com and is written by Brian Orelli.
Fool contributor Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences, Johnson & Johnson, and Vertex Pharmaceuticals and owns shares of Johnson & Johnson.
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