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Don’t give up on Johnson & Johnson

Dear Mr. Berko: We have three accounts with three different brokers, and all but one has done OK in the past couple of years.

We’re both in our mid-70s, depend on these accounts for income and have three brokers because that’s the way it worked out a few years ago. They are all nice guys with good firms.

Our question concerns Johnson & Johnson, which is in two of our accounts. One broker wants us to sell it because the stock price hasn’t done anything, another broker recommends that we hold the stock, and the third broker, where we do not own the stock, told us to buy the stock.

Sometimes the different opinions are a source of amusement to me, and sometimes they are annoying, like now. My dear wife of 51 years, who doesn’t understand stocks, wants me to sell everything and put our money in government or tax-free bonds. But what can you tell me about Johnson & Johnson? Should I sell it, and what stocks should I buy if I sell it? –A.S., Troy, Mich.

Dear A.S.: I think it was Buddha who said: “Married man who have three stock brokerage accounts have four wives.” And at your age and stage, you need three more wives about as much as you need a frontal lobotomy — or perhaps you do.

Anyhow, you should consider employing a knowledgeable, wise and experienced money manager who will consolidate your three accounts into one managed account. The reasons are legion and include cost, efficiency, consistency and simplicity, to name a few.

But the most important reason is your “dear wife of 51 years, who doesn’t understand stocks.” If you get hit by a Budweiser truck tomorrow, if a wayward comet crashes through your roof or if your parachute fails while skydiving, which one of the three brokers would you trust for the remainder of you wife’s life?

Most market professionals have a “second” who manages some of their investments just in case. It’s like trip cancellation insurance, keeping a spare tire in your trunk or putting on a seat belt. Even I employ a second to run a large portion of my IRA and joint account, just in case.

Neither my son nor daughter has the requisite skills to make investment decisions, nor do they care a hoot or wiggle about acquiring them. Because I suspect you deeply care about your spouse, I strongly urge you to interview some money managers and make certain your wife participates.

Meanwhile, Johnson & Johnson (JNJ, 52-week high of $66.20 as of April 20) has continued to disappoint its shareholders. Worldwide sales were off 5.4 percent, and sales in the U.S. were down 8 percent. The most significant impact on JNJ’s revenues was a 15.2 percent fall in consumer product sales.

Pharmaceutical revenues were down 4.3 percent, while recalls of Tylenol, Motrin and Benadryl have unnerved some consumers. And the potential threat of legal action from these recalls has made investors skittish.

Every company has a slip or two, but good companies like JNJ have superb management who know how to manage those slips and turn them into solid footholds. And JNJ’s management team may be the best in the business. JNJ has one of the most fecund pipelines in the industry, led by new drugs for pain, cardiovascular disease and arthritis. Its diverse health care sectors also insulate the company from economic downturns. And as the baby boom generation ages, the entire spectrum of JNJ products will benefit from an increase in health care needs.

Meanwhile, its new psoriasis drug, Stelara, according to several docs I know, could be a billion-dollar product next year.

While earnings will be a tad lower this year compared with 2010, management is expected to raise the solid 3.7 percent dividend from $2.16 to $2.24-$2.28 for the 35th consecutive year.

Hold the stock, but I can’t tell you if you should own more shares because I’m unable to measure your goals, needs, risk tolerances or investment blood pressure from here. That’s one thing a money manager does.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com.

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