Fund Manager to Warren Buffett: Don’t Sell J&J

Johnson & Johnson
Johnson & Johnson

Warren Buffett sparked a debate Monday when he said that if he had to sell any equity to raise capital it would be Johnson & Johnson. After all, a laundry list of embarrassing product recalls has prompted CEO William Weldon’s exit.

On the other hand, the stock is up about 8 percent year to date, and portfolio manager Les Funtleyder of Miller Tabak Health Care countered Buffett’s comments, calling J&J a “buy.”

“If you presume the economy improves just modestly, we should see upside from J&J. Being the bellwether, they will benefit disproportionately,” argued Funtleyder.

The $177 billion company is considered a “bellwether” because it makes everything from Band-Aids to prescription drugs and medical devices.

“J&J is a good company,“ said Funtleyder. “They have significant upside, once they resolve their over-the-counter drug problems, as well and some of their medical device issues.”

In January, the company reported fourth-quarter earnings and revenue that beat Wall Street’s expectations.

So the question is, will the next CEO — Alex Gorsky — solve these problems and win back consumer and investors’ trust? Funtleyder has every confidence he'll turn things around.

“Gorsky is coming in at a good time because utilization of medical equipment is going up, related to the economy,” he said.

Gorsky is currently head of Johnson & Johnson’s medical devices and diagnostics business. He takes the CEO helm as of April 26, and Weldon will remain the company chairman, according to the company.

Additional News: Johnson & Johnson CEO to Step Down After Recalls
Additional Views: J&J ‘Obviously Messed Up in A Lot of Ways’: Buffett

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Les Funtleyder does not personally own J&J stock, but Miller Tabak Health Care includes the stock in its Transformation Fund.