Johnson & Johnson is an incredibly popular household brand, but many seasoned investors have been giving it the cold shoulder due to a recent asbestos scare that led the company’s stock to briefly plummet. Despite many fears that Johnson & Johnson would struggle to amend its brand image following that disaster, however, the company has proven that it can bounce back from misleading accusations and hit new heights.
Here’s an analysis of Johnson & Johnson’s recent stock performance, and why the company appears to be a safer bet than ever following its response to a recent asbestos scandal.
Consumers were panicked
There’s no denying that consumers around the country grew panicked in the wake of news reports that insinuated Johnson & Johnson products may contain asbestos, a harmful substance linked to a wide variety of harmful medical conditions. Shares for the company suffered their biggest losses in a 10-month period following the news, with a recall of some baby powder products being particularly scary for the company’s future. After all, new parents and those preparing to become parents aren’t likely to forgive a company that sold them baby products containing harmful chemicals.
Those fears appear to be in the rearview mirror now, however, as Johnson & Johnson reacted quickly to the recall and conducted a wide range of tests to verify that their products were asbestos-free. According to an extensive report from CBS, for instance, 15 separate tests showed that there was no asbestos in the baby products in question. This was backed up by 48 new laboratory tests of samples from previously-recalled Johnson’s Baby Powder, all of which confirmed that the product contained no asbestos and was safe for household use.
Almost immediately, the company saw its stock prices soar upwards after the news quickly spread across the marketplace and into the homes of concerned parents. 33,000 bottles were recalled due to one single online purchase that potentially contained asbestos, but these days the company appears to be bouncing back and is poised for growth that will help it reclaim the valuation it’s lost these past few months. An incredibly well-diversified company, Johnson & Johnson shouldn’t view this temporary setback as a permanent blotch on its record, but rather as an opportunity ripe for market exploitation.
For a whopping 57 years in a row, for instance, Johnson & Johnson has increased its dividend, and the market seems to consistently undervalue the company by not taking into account its revenue. While talcum powder lawsuits will mitigate the company’s popularity for a few more days at most, its long-term position will prove to be incredibly envious sooner rather than later, as today’s hectic news cycle will ensure these falsely-founded asbestos fears are soon behind us for good.
Medical products have a booming future
Johnson & Johnson isn’t just a good buy because of its popular household name; it’s also a company well-situated in a medical industry that’s poised for truly mind-boggling growth for the foreseeable future. All around the world, the populations of developed nations are getting older and older, leading to a surge in medical spending. Medical products and services which were unpopular just a few years ago are now in hot demand, and medical professionals expect this burgeoning growth to continue to for years to come as maintaining one’s health becomes increasingly important to consumers.
As medical providers and medical services like Johnson & Johnson, CVS, and Drescher & Cohen DDS tap into the potential being generated by ever-older consumers, investors who backed them early on will stand to gain the most. It’s also worth noting that the company’s strong fundamentals will make it attractive to standard investors all the while.
Johnson & Johnson’s steady growth will also enable it to scoop up any potential competitors before they become too big of a threat; with a good acquisitions strategy, the company can remain well-situated in a thriving industry throughout the entirety of its years-long boom. It’s above-average dividend yield of 2.9% will also ensure that dividend investors in particular scoop up J&J stock whenever the opportunity arises, so it’s worth investing ahead of time. With Johnson & Johnson having generated a truly impressive cash flow that neared $9.5 billion in the first half of 2019, critics will be hard-pressed when arguing that it doesn’t have enough gas left in the tank to survive the tail-end of this asbestos scandal. Johnson & Johnson may not be the most alluring or talked-about stock available to investors, but it’s incredibly consistent growth and current market potential renders it nearly as ideal a buy as one can get in our current era of volatility. The current asbestos scandal plaguing the company is already being solidly refuted, and the stock will bounce back sooner rather than later. All in all, Johnson & Johnson has an incredibly bright future to look forward to as medical demand heats up as time goes on.