Band Bets on Band-Aids
01/02/2004 12:00 am EST
Richard Band, a self-proclaimed "New England skinflint" is the epitome of the fundamentally-based, contrarian value investor. His approach is common-sense, low-risk, long-term and understandable. Not surprisingly, his top pick for 2004 is a high-quality, financially-solid firm in the out-of-favor drug sector, Johnson & Johnson.
"With more than $40 billion of annual sales, Johnson & Johnson (JNJ NYSE) boasts an awesomely diversified product line—from Band-Aids and dental floss at the low end to razzle-dazzle biotech pharmaceuticals and drug-coated stents (to relieve coronary artery blockage) at the high end. What a financial record, too! JNJ has increased its earnings 44 years in a row (soon to be 45) and its dividends 41 consecutive years."
"In fact, it’s the only company I know of that has grown its profits at a double-digit rate for more than a century. Despite these strengths (and a triple-A credit rating, one of only eight left in corporate America), JNJ shares are trading at the same forward P/E as the S&P 500 index. Just average. Yet JNJ’s balance sheet and growth prospects rank far above those of the average S&P stock. In today’s lofty market, that’s my definition of a bargain."