What are your feelings on Johnson & Johnson (JNJ ), Cardinal Health (CAH ), and Washington Mutual (WM )?
Pharma, health care, and financial. A: Let’s start with Johnson & Johnson. I like them overall, I think it’s fairly valued. It’s much more diversified than pure pharmaceuticals. They make medical devices and medical supplies. At 20 times next year’s earnings, I think it’s fully valued. I’d be a holder of the shares here — I view it as a core holding. We own the stock. On Cardinal Health, I like the group, but CAH has really struggled. The stock has come down almost 15 to 20 points since October and November. We’ve seen profitability in hospitals continue to decline, and margins are minuscule. That affords very little pricing power to companies like CAH to expand their profitability. Longer term, I like the company, but I wouldn’t be in a rush to get in at these levels. Washington Mutual is a financial company that has done well and has held up well so far in 2003 when others have not. It’s highly leveraged to the mortgage market. While rates have been coming down, volumes have also be
