Johnson & Johnson (JNJ) lawsuit – a Time Bomb

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There are a lot of dividend growth investor (including me) own JNJ. I have it on my S&P 500 fund. So, no, I hate to see JNJ is on the hit list. But in case you miss it. JNJ was order to give $55 million for causing ovarian cancer.

In February, JNJ was order to pay $72M to the victim family.

That’s not all. JNJ is facing another 1200 lawsuits. Dang!!

So, what’s up?!!

It’s the talc baby powder made by JNJ. And you’ve seen it. I’ve used it. In fact, most all of us use it. There were numbers of study starting from 1970 to now linking JNJ baby powder to cancer, and the company were notified and know about the study and chose not to warning users.

So, hence, the results of 1200 lawsuits and counting. This year, there has been two cases against JNJ and won. Assuming ,they can get $55M a piece x 1200. That’s $66 Billion. Yikes! The company is worth $311.5B at the trading price of $112.94. That’s 22% of what the 01-johnsons-baby-powder.w245.h368company is worth.

Not to mention if this is widespread, the company will be charge with regulations. If its anything like the financial sector, JNJ might be in deep [trouble].

What JNJ stock is doing right now?

Just another trading day, stock is barely down, before going back up to 2016 high. Business as usual. Maybe long-term investors just don’t care about these kind of issues and keep making their usual buys. I still have 70% of my money in the S&P and hopefully the company will ride it out.

What do other investors do?

The rich are the first ones to pull out in 2007-2008 – they are much better at timing the market. Dividend investors or retail, small-timers are the last to pull out. 

What are the similar situations?

In 2009 BP had an oil rig explosion, resulting $20B in compensation, BP stocks were going for $60/share. It was quickly down to $32, but recovered to $50s in the following weeks. 

Oil stocks were hot in 2009 as the pharmaceuticals in the last few years – explosive, in fact. 

Are you riding it out? What stocks have you own in similar situation?

 

 

 

GA

6 Comments

  1. Vivanne,
    You may be right. JNJ went through this before with Tylenol, and their stock price plummeted like a rock. If this happens, I think I will buy more… okay – remind me to buy more 🙂 because everyone will be panicking.
    D4s

    • 🙂 buying more is great! But nobody is panicking right now. The stock is at 2016 high, and very close to 52-week high. It’s odd to me considering the risks. But we’ll see if they will continue to behave this way.

    • These happened in adults. We were all exposed to baby powder, I wonder why so many of us has ovarian cysts and such, wonder they were all related. If the lawsuits advance to such. JNJ might be in more trouble.

      As the div4son pointed out, JNJ recovered and went up even more after the Tylenol lawsuit. Will see how things pans out.

  2. It’s a blow, but it’s also something that pharma companies are aware will happen. Hopefully this doesn’t blow up to a massive scale. But if it does, we’ll get to buy cheap JNJ stock 🙂

    • Hihi we say that, but back in Jan-feb COP was $28/share, nobody buy it. Now it’s back in the $40s. It doesn’t look cheap now, it won’t look cheap when the FDA is on JNJ’s butt. 🙂

      Shortterm pull back, JNJ would be back in the $90s, then $80s but it probably won’t go lower. JNJ gets very strong support in the $90s.

      I know Edward Jones (biggest private investment firm) endorse JNJ, they’ve been recommending JNJ for decades on out. So, it’d be a rare occasion if it happens.

      Look at target and the 2million signature boycott, or the hacking flop, target was in the $60, and popped right back into the high $80s, and treading with the general market. Brand names do survive. That’s why I won’t be selling my s&p index fund. Just let it riding the market.

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