Q. Can I expect my shares of Johnson & Johnson to increase in price soon? F.C., via the Internet
A. Even the world's largest health-care firm has its ups and downs.
On the upside, its Band-Aid, Listerine, Motrin IB, Neutrogena, Stayfree, Carefree, Sudafed and Tylenol are familiar over-the-counter products for consumers.
It is regularly listed among Fortune's "Most Admired Companies," and its board of directors is highly regarded.
Profit rose 40 percent in the first quarter, thanks in part to new over-the-counter sales of the allergy drug Zyrtec, solid sales of inflammatory disease treatment Remicade and a boost in foreign revenue because of a weak dollar.
This company with an impressive AAA credit rating should weather economic uncertainty better than many competitors because of the diversity of its offerings. Its business is spread across three divisions: pharmaceutical, medical devices and diagnostics, and consumer.
More than two-thirds of its products are No. 1 or No. 2 in their markets. Aging baby boomers requiring more health-care services are a positive sign for its future.
On the downside, however, the firm introduced no new products in the quarter, and it is cautious in its outlook for the rest of this year.
Sales of its Procrit and Eprex anemia drugs declined on concerns about blood clots, which led to a label change and more study, while sales of its Cypher drug-eluting stent used to prop open coronary arteries also are down on health concerns.
Shares of Johnson & Johnson (JNJ) are up slightly this year after a gain of 1 percent last year. It increased its quarterly dividend by 11 percent and has a $10 billion share repurchase program in full swing.
Consensus recommendation on Johnson & Johnson shares is "buy," according to Thomson Financial. That consists of seven "strong buys," seven "buys," five "holds" and one sell.
It is not surprising that patent expirations and side-effect issues are the chief worries for a health-care giant such as Johnson & Johnson. It loses patent protection for anti-psychotic drug Risperdal in June and has voluntarily recalled a version of popular pain patch Duragesic because of manufacturing problems that could result in accidental overdose.
The Food and Drug administration warned doctors of a possible link between the firm's Prezista HIV drug and liver damage. The agency is also looking at a study that suggests diabetics using the drug Regranex have higher rates of cancer.
Johnson & Johnson earnings are expected to rise 7 percent this year and 5 percent next year, with the five-year annualized return projected to be 8 percent, according to Thomson.
Q. Is the MFS Value Fund a good investment? It has been recommended. L.M., via the Internet
A. It is a consistent blue-chip value fund that doesn't get into restructuring or bankruptcy plays. Holding around 100 primarily domestic stocks in its portfolio, it spreads around risk and keeps volatility to a minimum.
It is also the largest fund in the MFS family, with $16 billion in assets.
MFS Value Fund "A" (MEIAX) is down 2 percent over the past 12 months and has a three-year annualized return of 11 percent. Both results rank in the top one-fifth of large value funds.
"While I like this fund the best of the MFS domestic equity funds, it is not an analyst pick because there are better large-cap value funds out there," said Andrew Gunter, analyst with Morningstar Inc. in Chicago. "However, it is a good fund if, say, your 401(k) plan offers mostly MFS funds or you are limited for other reasons, for it is a good one to buy if you're a long-term investor."
Lead manager Steven Gorham, who also helps manage MFS Global Total Return Fund, was joined by former telecommunication services analyst Nevin Chitkara in 2006. Using fundamental research, they emphasize strong brand franchises, healthy balance sheets and strong operations. Although they emphasize domestic large-cap stocks, they can go anywhere they find value.
Gorham invests more than $1 million of his own money in the fund, while Chitkara invests between $500,000 and $1 million. They also invest significant amounts in other funds they co-manage.
Last year, astute trimming of their Goldman Sachs Group Inc. holdings after a price run-up, their move into an improving Intel Corp. and their success with energy firm Hess Corp. were indicative of solid fund management.
Nearly one-fourth of MFS Value holdings are in financial services, with other significant concentrations in energy and industrial materials. Its top holdings are Lockheed Martin Corp., Altria Group Inc., Allstate Corp., Exxon Mobil Corp., Total SA, Metropolitan Life Insurance Co., Johnson & Johnson, Bank of America Corp., AT&T Inc. and Bank of New York Mellon Corp.
This fund requires a 5.75 percent "load" (sales charge) and $1,000 minimum initial investment. Annual expense ratio is 1.11 percent.
Q. How can you check out a broker's record? A.D., via the Internet
A. Federal and state securities laws require brokers, investment advisers and their firms to be licensed or registered and to make important information public.
Unfortunately, information goes unnoticed unless you use it.
Investigate a broker at the BrokerCheck hotline (www.finrabrokercheck.org, 800-289-9999), which has information on all registered brokers from a computerized database.
Run by the Financial Industry Regulatory Authority (FINRA), BrokerCheck tracks employment history, customer complaints, disciplinary actions, settlements, bankruptcies and other information.
"Investors can also check up on brokers through state securities regulators, though the information may be presented differently, and it is a good idea to check all sources," said Nancy Condon, a representative with FINRA in Washington, D.C. "If you see your broker do something you don't like, you should not be embarrassed to ask the broker about it."If you plan to do business with a brokerage firm, the Securities and Exchange Commission advises finding out whether the firm and its clearing firm are members of the Securities Investor Protection Corp., which provides limited customer protection if a brokerage firm becomes insolvent.
Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, Ariz. 85287-4702, or by e-mail at [email protected]