Thursday, August 19, 2010

Is Warren Buffett Looking To A Post-Arbitration J&J? What's To Come: October-November 2010

Andy Obermueller, writing over at SeekingAlpha this morning, notes not only that Mr. Buffett has plunked down a new multi-billion bet in the health care sector, but that J&J's more recent troubles aren't likely to drag down overall profits, longer term.

It certainly would help J&J's $58 NYSE stock price if it won say $5 or $6 billion from Merck -- at the end of September, in the Remicade®/Simponi® Centocor distribution agreement "change of control" clause arbitration. Here's a snip from Mr. Obermueller -- do go read it all:

. . . .Warren Buffett has made a big bet on Johnson & Johnson, adding more than 17.4 million shares to the portfolio of his holding company, Berkshire Hathaway. His stake in J&J is worth about $2.4 billion, at current prices. . . .

Investors should mirror Buffett's J&J buy -- few companies are able to match its diverse and innovative product lines, and even fewer can generate the earnings of the health-care giant. Plus its shares are cheap. Buffett's wisdom has always been in spotting undervalued gems, and he couldn't give investors a clearer buy signal. . . .

This is a classic Buffett move -- buy on weakness, wait patiently for the catalyst -- then start to lighten up the position -- little by little.

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