Value stock: Johnson & Johnson
Like many very valuable companies on earth, J&J had been started a long ago, in 1886 to be exact. In more than 130 years this company had been making products which most of us would not be able to live without today.
A company had given us so much: Listerine, BAND-AID, Johnson’s baby, Tylenol, Nicorette and so many others. Johnson & Johnson is one of the more interesting companies, or their stocks to talk about.
Johnson & Johnson is not only one of the most recognizable brands but also is included in DOW 30, a market index, or Dow Jones Industrial Average containing the 30 large publicly-traded companies of the United States.
So J&J is a big deal and is considered to be one of the leading movers of the stock market. We now shall address why this company started, who started it and what led Johnson & Johnson to its inevitable success.
The company, as mentioned earlier, was started in the late 1800s. At that time, as we all know, the Civil War was up and running. One big problem at that time was healthcare. As the war was happening between the two sides, not only many were being killed but strongly wounded as well.
In fear of infections, surgeons and military medics at that time were quick to perform amputation which used to be so unsterile that the wounded got infections from the procedure itself. So people were completely clueless about the infections at that time.
Like in every other period, some decently bright minds arose who did their research on germs and soon after started preaching the theories and facts to the public.
People had learned and some of those enlightened minds were three Johnsons: James Wood Johnson, Robert Wood Johnson and Edward Johnson.
Two of the brothers had been involved in the civil war themselves so they had seen the problem of not being able to provide wounded soldiers with treatment. One brother as doing an apprenticeship in a medical manufacturing company.
With such backgrounds, young brothers had nowhere to go but start their own company. Robert was actually the one to start the company but James and Edward had very soon joined the younger brother’s venture.
From the beginning, the now Johnson & Johnson were making medical patches which nobody had ever known what they were before. These patches alone, that were named BAND-AID, had revolutionized the medical industry, made people able to heal and protect their wounds from infections.
The company had enormous success from its early products. BAND-AID had become a go-to product to treat zits and nips and pips.
Soon, the famous (infamous today) Johnson’s baby powder was created which used to be included in a necessary package made for newborn babies. Basically a kit. Before Johnson & Johnson came to life, there had already been some medicine and medical tools for treatment.
However, the applications this medicine was given with had been super unsanitary. So Johnson & Johnson had been solving just that at the very start.
J&J built products that would sterilize the medicine available at that time and basically make them a lot safer. It might also be said that Johnson & Johnson had first attached the famous red cross on their products.
And those products had been none other than first ever first-aid kits. And in the beginning, those new first-aid kits were used by the railway workers who had been in constant danger to get hurt being close to the rails.
The amount of lives were being saved after J&J started was insane. Especially after the company released the first handbook.
That handbook was nothing else than an informative guide on how to keep surroundings, wounds and conditions sanitary. A guide on how to treat wounds antiseptically. Years later, in 1950s J&J had made their first tablets and pills which had been an absolute success.
And after Johnson & Johnson’s first acquisitions, the company was now lucky to have stuff like Tylenol on many others. Then, a lot more acquisitions followed and soon J&J had had one of the largest market share pies in the medical industry.
The company growth did not stop there, loads of companies were waiting to be acquired. With Tylenol and its own products, J&J was able to raise money fast.
When the two great wars came along and the US government was going to none other but Johnson & Johnson for help, even more revenue started knocking on the company’s door. Where is war, there is money, especially for such companies like J&J, Coca-Cola, Pfizer and more.
After the wars J&J was just starting to innovate even more. Making joint ventures with other companies and then buying them out.
These joint ventures of Johnson & Johnson had led to creations of such drugs as Pepsid or Mylanta. That followed with acquisitions of brands like Neutrogena, Clean & Clear, Motrin. In the early 2000s, Johnson & Johnson had bought a part of Pfizer for a sum of 16.6 billion dollars.
After this purchase J&J was now able to sell Listerine, Benadryl, Sudafed and loads of other brands. Not to mention Nicorette, Rogain, Lubriderm, Splenda, Neosporin, Aveeno and Visine are now all J&J’s products after large amounts of acquisitions.
What’s even more interesting is that all the consumer products Johnson & Johnson sells are barely making 20% of all the revenue for the company. The real earnings come from medical devices sold to different medical institutions (32%) and especially, sales of pharmaceuticals which make up more than 50% of J&J’s revenue.
That means, J&J is a lot more of a pharmaceuticals company than antiseptic and other appliance provider. It used to be one of the best out there is in terms of drug manufacturing. But there is a darker side of J&J.
It might be said that the major flaws for Johnson & Johnson started in the early eighties. Seven people died immediately after having taken Tylenol.
These horrible events had taken place in Chicago and after a deep investigation the authorities found out about the cyanide that was inside the drug. It is very difficult to say what happened exactly but there definitely had been something fishy going on in the J&J labs.
The drug Tylenol was clearly laced with poison on purpose and no one got caught, even after all these years. Pure homicide.
2010 had also been one of the worst years for J&J. The year started with multiple lawsuits against the company for the active ingredients found in 48 of the subsidiary’s products. That was global by the way.
Soon after, a painkiller for young children made by J&J was discovered to be fighting antibacterial medicine and stopping it from dealing with germs. One year later another wave of lawsuits started flooding in, this time from the company shareholders themselves.
These lawsuits were all about bureaucracy, bribes and more flaws within J&J.
Johnson & Johnson had later been accused by the government for advertising a product that was not suitable for the elderly, even dangerous. The government had soon found the company guilty of false advertising, basically fraud.
That drug “NOT FOR ELDERLY” was called Risperdal. 2016 was the year when Tylenol introduced a woman from Indiana to terrible burns on her body. These burns had appeared all over her body, nearly half of it was covered with wounds.
That half of the woman’s body included her face so she is having trouble with her sight till now.
Clearly, the company had seen great times and terrible times as well. However, we can’t expect such humongous companies to have no bureaucracy, bribes, mistakes whatsoever. The thing is, corporations like Johnson & Johnson had to somehow get to the level they are now.
And it is not at all possible to do that without taking some massive risks, doing mistakes and flaws. But the company had been built by very three bright young individuals who happened to be brothers as well. Vision for a better and sustainable future pays off all the time.
It should be noticed that even during those tough recent years Johnson & Johnson experienced, investors had always been loyal and hopeful that the company would get back to doing good and saving, not taking lives. Many other companies had plunged, their stocks followed.
But J&J is one of those exceptions. People like the company and its stock despite the flaws from the past. One may ask, why do investors feel so comfortable about this company? The answer is simple. Stability and heritage.
Not to mention, Johnson & Johnson is very generous with dividends.
These dividends reach nearly 3% in terms of the yield. The yield might be higher if the stock was not growing so rapidly. However, it is growing and growing fast so the additional 3% to the main annual growth is a great way for Johnson & Johnson to say thank you to the investors.
Mainly, the company has the good and the bad side but the good one overthrows the bad, especially from the investor’s perspective. Warren Buffet has been an investor in this stock for many years as and he had definitely complimented the company in the past.
To conclude, Johnson & Johnson should be kept in everyone’s hearts because of the number of lives it had saved. Especially those lives during the times when nobody had any antiseptics and the soldiers of the civil war were desperate for the right medicine in the battlefield.
What happened in the past few decades is just a drop in the ocean which could not represent the company as a whole. J&J has been around for more than 130 years and clearly represents America and its fight for safety, greatness and, of course, shopping.