No. of Recommendations: 6
It's been at least ten years since Warren & Charlie mused publicly about how Mars Inc would be an ideal BRK acquisition: right-sized, well-run, stable business model etc. (The drawback, of course, is that it was a privately-owned company whose owners had no interest in selling thankyouverymuch)
Today's FT has a very good article.
Two short quotes, the first in the one-that-got-away department: "
Mars revealed last year that revenues had grown from $28bn to $45bn in Grant Reid's eight years as CEO...Mars now has 12 brands with sales above $1bn"And the second, in the Hmmm-I-didn't-know-that file: "
Mars Petcare...the world's largest provider of veterinary services...Mars now spends more than $500mn a year on scientific research, he said, and expects 'tremendous growth' from a new pet diagnostics division"
Excellent article, highly recommended. Gated, unfortunately:
https://www.ft.com/content/85cd2a9d-ed54-4dd9-8cca...Too bad they're such an opaque company - this would be nice to follow. I have a sense of an early J&J, before they lost their way
--sutton
No. of Recommendations: 4
I have a sense of an early J&J, before they lost their way
When I look at a StockChart graph comparing BRK/B and JNJ over the last 10-20 years, I find that JNJ has performed as well as BRK/B plus delivered a dividend along the way. And it has only been the last few years that BRK caught up with JNJ. I own both and find that JNJ provides a welcome cushion during market downturns.
So I'm curious. Does "lost their way" represent a forward looking judgment? Or recent concerns?
No. of Recommendations: 25
"I'm curious. Does "lost their way" represent a forward looking judgment?"
Kind of neither...more of a moral judgement on my part.
I'm not an ESG advocate, even in its (largely hypothetical) ideal form. And, to borrow a phrase, I understand that capitalism ain't beanbag.
But, given the choice, I would prefer companies I invest in to have some evidence of a moral compass. And when patient care is part of the business, it's an imperative.
For literally generations, JNJ was a profitable solid, ethical company. It made sterile dressings, band-aids, home nostrums, sickbed/ personal hygiene/baby supplies.
From its credo: "We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality...We must provide highly capable leaders and their actions must be just and ethical.
It walked the talk in 1982, with the enormous, unprecedented Tylenol recall (briefly: a still-unknown deranged person put cyanide in Tylenol capsules in the Chicago area - this being in the pre-secure packaging days. Several died. JNJ immediately, voluntarily recalled every bottle everywhere at a cost of millions. It preserved the brand, and is still taught as an example of executive management in a business crisis)
But over the last couple of decades (quotes lifted directly from Wikipedia, but I remember hearing about most contemporaneously) :
-- "In 2010 a group of shareholders sued the board for allegedly failing to take action to prevent serious failings and illegalities since the 1990s, including manufacturing problems, bribing officials, covering up adverse effects and misleading marketing for unapproved uses".
-- Also "in 2010, J&J were warned by the FDA to not promote Risperdal as effective and safe for elderly patients, but they did so, and that they paid Omnicare to promote the drug to care home physicians...The settlement was finalized on November 4, 2013, with J&J agreeing to pay a penalty of around $2.2 billion"
-- "In 2011, J&J settled litigation brought by the US Securities and Exchange Commission under the Foreign Corrupt Practices Act and paid around $70M in disgorgement and fines. J&J's employees had given kickbacks and bribes to doctors in Greece, Poland, and Romania to obtain business selling drugs and medical devices and had bribed officials in Iraq to win contracts under the Oil for Food program"
-- "In 2019...class action alleged that Johnson & Johnson, which "aggressively marketed" the [vaginal mesh] implants "failed to properly warn patients and surgeons of the risk, or test the devices adequately". Emails between executives show the company was aware of the risks in 2005 but still went ahead and made the product available." In November 2019 the Federal Court of Australia found Johnson & Johnson negligent"
Then there's talcum powder (science debatable, but it's apparently factual that known asbestos contamination of the talc was deliberately concealed by JNJ); the years'-long failure of a JNJ subsidiary to delay recalling a clearly flawed hip implant; various courts' finding of complicity in the whole opioid mess; nontrivial patent infringements scattered over the last few decades.
That's why I claim JNJ has "lost their way".
Again: no company's perfect, and this whole argument can degenerate into whataboutism in a nanosecond.
But overall, I prefer associating with people who wake up with a sense of duty, and follow it - say, Clinton Coolidge over Andrew Johnson; Col Vinman over Col Kurtz; Starfleet over Ferengi; Jimmy Stewart over John Wayne; Elizabeth II over George IV; Costco over WalMart.
--sutton
No. of Recommendations: 3
Thanks Sutton for taking the effort to respond to my questions.
That's why I claim JNJ has "lost their way".
Again: no company's perfect, and this whole argument can degenerate into whataboutism in a nanosecond.
But overall, I prefer associating with people who wake up with a sense of duty, and follow it - say, Clinton Coolidge over Andrew Johnson; Col Vinman over Col Kurtz; Starfleet over Ferengi; Jimmy Stewart over John Wayne; Elizabeth II over George IV; Costco over WalMart.
We all have our heros - and mourn when they seem to go astray. I've also had mine with both XOM and BRK, my other two major holding. As you say: "Nobody's perfect." We can only choose to live with them or move on.
I originally chose XOM because of my long association with them. I switched a lot of that to BRK - and don't regret doing so. But kept a chunk because I thought BRK was under-represented in O&G. I added JNJ because I also thought my portfolio mix was under-represented in the health care sector.
I thought each of them were the "best of breed" at the time. All were AAA rated and had decades of performance and shareholder orientation through thick and thin. And were strong enough to withstand damn near anything the market could impose.
Not always the best choices, but they've all stood up to my original thesis. Pick the proven strong guys and stick with them. I'm content with the outcomes. It all eventually works out.
I really appreciate your spelling out your thoughts.
