If you have been following the news lately than you know it hasn’t exactly been a stellar quarter for my favorite company Johnson & Johnson (NYSE: JNJ)
First there were recalls of tens of millions of bottles of Tylenol and other well known brands. Then there was the long-term closure of one of the plants that produced the drugs.
But even after factoring in the $200 million in lost revenue due to the recall-related plant closure, Johnson & Johnson still managed to increase both revenue and earnings year over year.
According to its second quarter release, through the first half of the year, adjusted earnings are up 3.7%.
That's one of the reason's why the Oracle of Omaha himself loaded up on shares of the health care giant earlier this year, boosting his holdings to over 41 million shares.
From Bloomberg by Andrew Frye entitled: Buffett Restores J&J Holdings as Berkshire’s Cash Haord Climbs
“Berkshire Hathaway Inc. increased its Johnson & Johnson stake, repurchasing shares that Chairman Warren Buffett sold in the financial crisis to fund investments in firms including Goldman Sachs Group Inc.
Berkshire raised its stake in the New Brunswick, New Jersey-based drugmaker by 73 percent to 41.3 million shares from 23.9 million on March 31, according to a regulatory filing yesterday listing the company’s U.S. equity holdings at the end of the second quarter.
Buffett, 79, uses earnings and premiums from Omaha, Nebraska-based Berkshire’s insurance units to invest in stocks and bonds and acquire companies. In 2008, he slashed his Johnson & Johnson stake and spent $14.5 billion on fixed-income securities issued by Goldman Sachs, General Electric Co. and Wm. Wrigley Jr. Co. Buffett said last year that he sold Johnson & Johnson shares to ensure Berkshire had “more than ample cash.”
“This kind of tells me that he’s comfortable with the cash position now in Berkshire,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington. “He’s starting to building back up in the investments he wants to be in — Johnson & Johnson and, of course, the new Fiserv” stake, Martin said.
Berkshire’s earnings have helped replenish a cash position that dipped to $25.5 billion at the end of 2008 from $44.3 billion 12 months earlier. The company reported its first profit decline in five quarters for the period ended June 30 as derivatives bets suffered and equities fell. In 2008, Buffett stepped in to buy debt from to New York-based Goldman Sachs and GE when most money managers and banks retreated.”
The Oracle of Omaha strikes again.
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