Johnson & Johnson is about as close to a “buy and hold” name as Cramer will ever get. He was a fan back in the days when he worked at Goldman Sachs, stayed loyal to the company while running his hedge fund and has been recommending the stock on Mad Money for the past four years. Still, if the company’s fundamentals changed at all, he’d sell J&J in a heartbeat.
That’s why Cramer doesn’t endorse “buy and hold” investing. When a stock isn’t working, he said, dump it. You can always buy it back later at a better price. This type of active money management is what smart investors do. So ignore the “professionals” who want you all in all the time. That’s just irresponsible.
But back to J&J . This is a strong health-care company with the ability to increase its dividend. That quality, above almost all others in this market, is what we want because earnings estimates can’t be trusted right now. A company that can throw more cash at shareholders, even in this recession, is worth consideration. And J&J qualifies.
Johnson & Johnson has increased its dividend for 46 years in a row, the last bump of 11% coming in early 2008. Considering the company’s cash-rich balance sheet, Cramer expects another increase this year as well.
The Mad Money host also likes J&J’s acquisitions of Mentor and Omrix. And while two big drugs lose patent protection this year, there’s still a product pipeline that bodes well for future earnings. Besides, Wall Street has been anticipating the patent losses, so that is already baked into the stock.
Another plus: J&J earns 49% of sales from overseas. That means the weaker dollar in international markets translates into more profits here at home.
The stock has plunged to $52 from $72, bringing the dividend yield up to 3.5%. Cramer likes that as an entry point, and he recommends buying more JNJ on the way down. This is a great long-term investment, he said. But remember to cash out the second it’s no longer working.
Cramer's charitable trust owns Goldman Sachs and Johnson & Johnson.
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