JNJ-Super company, Super stock! Message Board

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Biotech / Medical : JNJ-Super company, Super stock!

JNJ 188.88

-0.1%

Oct 31 3:59 PM EST

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To: muddphudd who wrote (468)	1/7/2004 8:26:03 AM
From: Lance Bredvold	Read Replies (2) of 552

I have been buying JNJ incrementally from about $54.50 and each 5% drop. That decision was based upon my confidence that a PE of 30 for JNJ is unsustainable and so I had been selling calls whenever the PE got that high. I lost at least two batches at $55 strikes and bought back below those losses each time. With the PE now down around 23, I still feel that is plenty high and would be most comfortable if the price to trailing earnings were about 15 which I regard as ordinary and proper. Of course that would suggest a price in the low thirties as of today and many people will feel that improbable. My strategy is to be ready and to buy all the way down to $25 or so should the markets give me that chance. But I already have 20% of my optimum JNJ holding purchased at about $50 if the price goes up again. Should it reach over $60 and probably more like $68, I would be selling calls again and probably with a strike of $60 or $65 or both. The Cypher stent is of special interest to me as I have a large holding in the company which licenses the polymer coating to Cordis. While the overall volume is not that huge (probably $2B sales) for JNJ, it is a very nice and profitable piece of business. JNJ has said it was in the third quarter collecting 78% of the stent dollars and 70% of the stent units in the US and those figures were increasing. The overall market has been estimated at $2.5B now and growing as drug eluting stents are 2 1/5 times as expensive as steel stents ($2500 vs $1000 roughly). And most doctors are going to DES already while JNJ has the only model approved for sale in the US. Overseas BSX is also approved and has picked up over half the unit sales but less than half the $ sales apparently. Some investors seem to be confident BSX will take a large part of the DES market in the US when their DES is approved in 3 months or so (the FDA advisory committee has already recommended approval as of Nov. 20). I have more faith in JNJ's marketing though there is the argument that many doctors will prefer the BSX stent for ease of application. But JNJ will have its next two series out during 04 and 06 I believe and will probably manage to make the devices easier to use. Also the surprise finding that paclitaxol on the BSX stent will not be eluting completely--the polymer they are using does not erode and so, like swiss cheese with a paclitaxol molecule in each hole, there is a fairly rapid elution at first and drug eludes from holes connected to the surface holes over the next few days. But then it all stops and most of the paclitaxol remains permanently trapped in remaining coating. My hopes are that the price will drop some more. I was fortunate enough to have had an order in place for shares at $48 or so the day there was a break down to $41+ and I picked up my shares way down there. That has happened to me a few times and usually I am happy about it though with a few companies I buy, it is frightening that something very bad has indeed happened and the price will continue to decline. I'm not too concerned about JNJ in that regard as I trust management and the diverse product line, broad customer base, excellent market visibility and reputation, all produce a stolid company which should be able to weather many fair sized shocks. Best regards, L.

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