Leading economists agree that the United States officially entered recession in February. According to the National Bureau of Economic Research, “The peak marks the end of the expansion that started in June 2009 and the start of a recession. The expansion lasted 128 months, the longest in American economic cycles going back to 1854. ”The last of these periods of economic decline occurred during the Great Recession, which began in December 2007 and ended completed in June 2009.
Investing during a recession is not without inherent risk. That said, buying stocks of a company with a solid balance sheet at a much lower price than usual could produce substantial gains 10, 20 or 30 years from now. If you are thinking of buying Johnson & Johnson stocks now, you may be wondering what your portfolio would look like if you had recovered stocks in the previous recession more than a decade ago.
Let’s take a closer look.
The current value of $ 1,000 invested in J&J stocks during the last recession
Johnson & Johnson stock prices have increased significantly since the Great Recession. In December 2007, the share price was approximately $ 65 per share. Stock prices fluctuated during the economic downturn, and the stock cost around $ 55 when the recession officially ended in June 2009.
Suppose you decided to buy Johnson & Johnson stocks in 2008, at the height of the downturn, when stocks hovered around $ 60. If you had made an initial investment of $ 1,000, you could have purchased approximately 16 shares. This initial investment would be worth nearly $ 2,300 today. On the other hand, if you had made a larger investment of $ 10,000 in 2008, you could have bought approximately 166 shares, which would make your current investment worth more than $ 23,000.
Johnson & Johnson’s growth story – drivers and detractors
Severe headwinds have made Johnson & Johnson stocks somewhat volatile in recent years. Thousands of customers have filed lawsuits against the company, alleging that its talcum powder products contained asbestos and caused cancer. In June, the company lost a call to quash a previous verdict that allegedly saw them pay nearly $ 5 billion in damages to the plaintiffs. However, Johnson & Johnson was able to get a reduced verdict of $ 2.1 billion in damages. Given that the company made more than $ 82 billion in sales in 2019, this verdict is likely to have minimal impact on the company’s results, despite its damaging effects on investors’ nerves.
Products such as the psoriasis drug from Johnson & Johnson Stelara and the multiple myeloma drug Darzalex were the main revenue drivers for the company’s pharmaceutical division, which saw sales growth of 5.8% in 2019. Conversely, sales of the old blockbuster Remicade, an immunosuppressive drug, decreased by more than 10% over one year.
In the first quarter of 2020, Johnson & Johnson reported revenue of $ 20.7 billion, up 3.3% from Q1 2019. Sales of its consumer health and pharmaceutical divisions increased respectively 11% and 10.2%. The company also confirmed a 6.3% increase in its dividend. Johnson & Johnson refused to publish guidance on generally accepted accounting principles (GAAP) due to operational uncertainties. Its release of second quarter results is expected on July 16.
Johnson & Johnson is working on a potential coronavirus vaccine called Ad26.COV2-S through its Belgian subsidiary Janssen Pharmaceutical Companies. On March 20, the company obtained a $ 456 million contract from the White House’s Department of Health and Human Services under the White House’s Operation Warp Speed program to help accelerate the development and manufacturing of its future. vaccine. A phase 1 / 2a clinical trial of the candidate vaccine is expected to start later this month. The study will test the immunological and vaccine response of a group of double-blind, placebo-controlled participants to Ad26.COV2-S. The study will take place in the United States and Belgium and will involve 1,045 participants aged 18 to 55 and 65 and over.
On July 6, it was announced that Johnson & Johnson and Emerging biosolutions (NYSE: EBS) has entered into a five-year manufacturing agreement for Ad26.COV2-S. If the vaccine crosses clinical, manufacturing is expected to start in 2021. Johnson & Johnson hopes to release more than a billion doses of Ad26.COV2-S throughout 2021 and has said emergency doses may be marketed early next year. .
While Johnson & Johnson is certainly not a fast-growing pharmaceutical company, its resilience during the last recession and its slow but steady gains are strengths. Even a relatively small investment of $ 1,000 in Johnson & Johnson stocks could now boost your portfolio in the years to come. If the company’s vaccine candidate hits the market, it could drive up the stock price and dramatically increase its balance sheet.