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Johnson & Johnson Shares Take a Hit Amid Talc Powder Report

Johnson & Johnson Shares Take a Hit Amid Talc Powder Report

Damien Conover: Johnson & Johnson stock is down close to 10% today, largely on news of a media report that came out that suggested Johnson & Johnson's talc powder might be related to major health issues, most notably cancer. Within the media report, a lot of ideas were floated that there was this link between asbestos and potentially the talc powder.

Now, there's still going to be a lot of cases that will need to come out litigating this, but our general belief is that J&J will litigate these one by one, and really, over a long period of time wear down the defendants, and the outcome will largely be not a significant impact to the valuation.

With this 10% pullback in the stock, we think the shares are trading pretty close to our fair value, so we were thinking the stock was a little bit overvalued going into the news, and following this news the stock actually looks relatively fairly valued.

We continue to think Johnson and Johnson is well positioned with a wide economic moat, really with a huge diversity of assets that are bringing in a lot of cash flows that will really help fund the firm through any potential legal concerns that it might have with this talc powder issue.

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Damien Conover

Director of Equity Strategy
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Damien Conover, CFA, is the director of healthcare equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is also director of equity strategy, responsible for helping to shape, package, and surface research based on Morningstar’s investment philosophy by working closely with the firm’s sector strategists and directors.

Before joining Morningstar in 2007, Conover was an equity research analyst covering the healthcare sector for Raymond James, Bank of Montreal, and Tucker Anthony.

Conover holds bachelor’s and master’s degrees in finance from the University of Wisconsin and was a member of its Applied Security Analysis Program. He also holds the Chartered Financial Analyst® designation.

Damien Conover, CFA, is the director of healthcare equity research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is also director of equity strategy, responsible for helping to shape, package, and surface research based on Morningstar’s investment philosophy by working closely with the firm’s sector strategists and directors.

Before joining Morningstar in 2007, Conover was an equity research analyst covering the healthcare sector for Raymond James, Bank of Montreal, and Tucker Anthony.

Conover holds bachelor’s and master’s degrees in finance from the University of Wisconsin and was a member of its Applied Security Analysis Program. He also holds the Chartered Financial Analyst® designation.

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