ATML Earnings Action

Johnson & Johnson (JNJ) is well off its 52-week high of $72.76 that it hit in early September, currently trading in the mid-$50’s. Funds have sold the stock off, but the trade should reverse and investors might want to take a look at it now that its premium that risk averse investors assigned to it has disappeared with the stock valued at just 12.1x 2009 earnings of $4.66 a share. Johnson & Johnson has also been hit by a couple events – a late October surprise downgrade from a JP Morgan analyst, possibly some overhang from its billion dollar Mentor acquisition and tender offer for Omrix, and the rejection from the FDA of a new-drug application for skin infections. But in the context of the big picture, those news items are not significant. What matters is that the consumer health care products company is safe haven that offers long-term earnings stability, a healthy 3.2% dividend yield and a reasonable valuation. That’s a good combination in a volatile, recessionary market environment.