Warren Buffett’s journey with Berkshire Hathaway, which he acquired in 1965 at a mere $14.86 per share, is nothing short of legendary. The shares of this conglomerate have seen an average annual growth of 19.8%, a feat rarely matched in the investment world. This impressive record makes him a beacon for investors looking to replicate his success.
Buffett’s investment choices, especially his recent exits from Johnson & Johnson (JNJ) and Proctor & Gamble (PG), have sparked curiosity and speculation. These moves, revealed through mandatory SEC disclosures, have significant implications given the strong dividend histories of both companies.
Johnson & Johnson, known for its robust dividend program with 61 years of consecutive increases, recently spun off its consumer goods segment into a new entity, Kenvue. The sale of Berkshire’s entire JNJ holding, including 327,100 shares, might be attributed to this restructuring. With the split, JNJ’s focus shifted more towards its pharmaceutical and medical technology segments, areas that Buffett traditionally treads carefully in due to their complexity.
Despite a challenging quarter marked by a dip in COVID-19 sales, JNJ’s medical technology segment saw a 10.4% jump in sales (excluding currency exchange impacts), and the pharma segment, accounting for 65% of total revenue, grew by 4.4%. The upcoming potential of JNJ’s lung cancer therapy, lazertinib, in combination with Rybrevant, could be a game-changer, potentially challenging AstraZeneca’s top-seller, Tagrisso.
On the other hand, Proctor & Gamble’s divestiture by Berkshire, involving the sale of 315,400 shares, was equally surprising. PG’s dividend consistency is even longer than JNJ’s, dating back to 1890. Despite a recent yield of 2.6% and a strong free cash flow of $14.6 billion, allowing for comfortable dividend commitments, PG might not be the star performer in a portfolio. However, its ability to raise prices in well-established brands like Crest, Tide, and Pampers, and to maintain a solid dividend track record, makes it a reliable holding, especially for risk-averse investors.
In conclusion, Buffett’s recent portfolio adjustments might signal a strategic shift rather than a lack of confidence in these companies. While his moves often set a trend in the investment community, each investor should weigh their risk tolerance and investment goals before following suit. As always, Traders on Trend is here to provide the insights and analysis to help you navigate these decisions.
