Johnson & Johnson: Damaged Forever?

Things aren’t looking good for Johnson and Johnson. What can we expect next?

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  • Second time this year in 2018, JNJ (Johnson&Johnson) has been targeted for it’s knowledge of asbestos in its world-famous talc baby powder.
  • Will thse issue conintue to occur? Should investors be concerned for the company’s reputation?

JNJ ( Johnson & Johnson, $133.10) stocks tumbled down 10% Friday 14th, 2018 as the company has been handling their pressures of the public knowing of asbestos in it’s baby powder. Some investors are concerned for how the issue is going to be managed and if this will effect their next earnings report. Yet, other investors aren’t concerned since the company is vastly know for their award-winnning products and their loyalty to their customers. However, this is not the first time they been hit with public shame for asbestos this year.

What Happened?

 

July 12th, 2018, JNJ was also hot in the news for being sued by 22 women for receiving cancer and /or poisoning for asbestos found in their famous talc baby powder. But should JNJ be shamed for this? Does this make JNJ a bad company?

According to mesothelioma.com, Trelomite, also known as amphibole asbestos, is created in the same nature as talc. Tremolite is often found in the same mines as talc and without special quality testing, it can contaminate the talc. However, talc can not only be used in baby powder but chewing gum, oils, makeup cosmetics, hair products, and more.

Read: Tariffs: What Are They? How Are They Affecting My Portfolio?

JNJ’s lead attorney, Bart Williams had more to say on the issue,

Johnson & Johnson doesn’t believe it should be intimidated into removing a product that’s been out over 100 years, that has diapered hundreds of millions of babies around the world, simply because plaintiff lawyers have put a target on the back of Johnson & Johnson.We believe in the product. The product works. The product is beloved. The best scientists in America have reviewed it again and again.



Does this event make JNJ a bad company? Investors and customers still believe in the company and await its next press release.

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Information Attained:

CNBC.com, Mesothelioma.com, Factsabouttalc.com, Cnn.com

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Cheap Stocks

I get it. Our economy is awful, we can barely hold a $1,000 emergency fund and investors have transferred from value investing to looking for something that will have our “bang for our buck” kind of deal. However, just because a stock is “cheap” doesn’t mean that is it necessarily a good buy. It may be best to hold on to your savings for the more expensive index funds stead of buying the penny stock.

Stop trying to get rich quick from the stock market, It won’t work in your favor.

There are many stocks you can find under $5 dollars, but keep in mind that the lower the dollar, the higher the volatility. Investors who ignore the company’s financials and selling product, only care about how much money they can make. Stop trying to get rich quick from the stock market, It won’t work in your favor.

Besides the fact you feel special holding 1,000 shares of a stock that can cost a little as $0.0032, what value does the company hold long-term? Wealthy investors don’t care about the price of the stock, they care about consistency. What is the company competitive advantage? What are their competitors and the amount of money they spend on research and development?

May I encourage you to look deeper into every company you are investing in. Your due diligence is the only way that makes each investment the right investment. Every investor is responsible for his or her gains and loses, so choose wisely.

Loyalty Dosen’t Always Win

“Do What You Love” Is a phrase we may hear often. But when it comes to the markets, investing in what you “love” may pull you into losing hundreds or even thousands of dollars. Just because you like shopping at a particular retail store, doesn’t mean that the company will survive in the stock market. Let’s look a couple examples of companies who are failing miserably on their balance sheets.

GPRO (Go Pro, $5.55), a company that engages in manufacturing cameras and camera accessories (wearable sports camera) is a very well known company that people love. Advertised with several players from the NFL, GPRO used to be on the rise, however from the highest stock price climb of $86 (in 2014) has now descended to a penny stock of $5.55. As well as an operating income of a negative of -$163,000,000 and net income of negative -$183,000,000, it’s nearly impossible to continue to see this company as a long term investment if financial changes aren’t a priority.

LB (L Brands, $36.10), is a popular company that engages in ownership of famous retail companies known as Victorias Secret, Pink, Bath&Body Works, La Senza and Henri Bendel. From a stock drop price of $20 since 2015, LB is losing free cashflow and has made a decline of almost 30% in opereating cash flow from 2017. From recent sexual-bias ads that are unapealing to new investors, LB may need to make some changes in order to improve positive cash flow returns.
These are only two of of many companies who have poor managibility of their finances and business operations (Tesla, Southwest Airlines, General Motors and more), . Any company can have a great product to sell, however if they cannot manage their finances, it is doomed to total debt. But good marketing and a pretty desplay can sell anything, this is a case that shows you that loyalty dosen’t always win.

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