Johnson & Johnson–Blue Chip, Value or Sell

Kiplinger’s says, in it’s August 2011 issue, that J&J is one of 6 cash-rich stocks to buy now. They note that J&J shares “have mostly lagged the stock market since the March 2009 bottom.” And also point out that “One of J&J’s problems has been quality-control issues at its McNeil Consumer Healthcare unit that resulted in massive recalls and a reprimand from the Food and Drug Administration. But fund manager Osterweis sees that as a temporary problem.”  But are the problems at McNeil a “temporary problem”? 

Mylanta liquid and tablets were voluntarily recalled in December for what J&J referred to as a mislabeling problem (failing to note the presence of a small amount of  alc0hol in the products). So how long does it take to print  new labels? This is market share that may never return. In the meantime, what do they say about the return, if ever, of these products on their corporate website? Nada, zip, not a word.

On the other hand, take a look at the take of Richard Brecker at J&J’s failure at mitigation of problems with Motrin, noteworthy in contrast to how they responded to the great Tylenol scare way back in 1982. It seems that the execs at J&J could be providing the script for an episode of Law & Order or perhaps Leverage.

I am not an investment advisor and this is not a financial blog, but when corporate executives, their PR teams and their legal staff seem most concerned with immediate CYA, (which admittedly the stockholders might prefer in many cases) rather than the long-term reputation in the public interest (which may ultimately aid the corporate bottom line) this does not look a winner to me. Without mentioning my favorite religion, who can doubt the principles of  cause and effect or in non-secular parlance, “what goes around comes around.”