Should J&J Investors Consider Swapping for Kenvue Shares?

With Johnson & Johnson’s recent announcement about spinning off a significant portion of its stake in Kenvue, you might be at the cusp of a strategic decision. Let’s delve into why this may be the time to dump J&J and add Kenvue to your portfolio:

1. Agility and Value Creation:

The decoupling of Kenvue from J&J is not just a typical corporate restructuring. It’s a strategic move aimed at making both companies more agile. As separate entities, they can focus more intensively on their respective niches, driving better results and value for shareholders. For investors, Kenvue is the more defensive play. As a consumer health company, its revenues will be steadier and less exposed to certain legal risks that J&J currently faces.

2. Kenvue’s Strong Performance:

Kenvue’s first quarterly earnings report post-IPO reflected strong consumer loyalty for brands like Band-Aid and Tylenol, highlighting Kenvue’s potential in the consumer health sector. It’s clear that with Kenvue, investors get a company with leading consumer health brands. As a standalone company, Kenvue will be free to pursue its own strategic direction. Investors might also compare what Kenvue might do in a similar way to how Mondelez expanded after separating from Kraft.

3. Kenvue Attractive 7% Discount:

J&J’s offer to swap shares with a 7% discount on Kenvue’s stock is a tangible incentive for new investors. Though J&J has been a reliable stalwart for many portfolios, dumping J&J and adding Kenvue is an opportunity for both immediate value and potential for long-term growth. In the short-run the terms of the share swap that will ultimately separate J&J from Kenvue is holding down the share price of Kenvue. Meanwhile, the shares of J&J have rallied. This may provide a good buying opportunity for those more interested in holding the spin-off for the long-term.

4. Dividend Comparison:

One key metric dividend investors often seek is the yield. Prior to the final separation & share swap, Kenvue boasts a dividend yield of 3.45%, notably higher than J&J’s 2.72%. If dividends play a crucial role in your investment strategy, Kenvue seems to have an edge.

5. Legal Liabilities Facing J&J:

It’s essential to acknowledge the risks J&J faces due to its legal liabilities, especially related to talc. Such legal issues can pose substantial financial risks and might impact J&J’s overall reputation and stock performance.

6. Consumer Health – A Defensive Sector:

For investors wanting a more defensive posture in their portfolios, the consumer health sector, led by brands like Tylenol, offers stability. Especially when more focused names in the pharma and medical devices businesses are available, holding a share in a company that concentrates on leading consumer health brands can be a strategic advantage. Kenvue’s dedication to this sector positions it as an attractive choice.

7. Kenvue Upcoming S&P 500 Inclusion:

Kenvue’s potential inclusion in the S&P 500 Index could stimulate additional buying interest from index funds, which might drive an upward price momentum.

Our Family Office

At Markdale Financial Management, our cornerstone approach has always been to champion long-term buy-and-hold investment strategies. We firmly believe in the enduring value and stability that blue-chip stocks bring to an investment portfolio. Given its resilience, brand strength, and potential growth trajectory, Kenvue emerges as a prime candidate that aligns seamlessly with our philosophy. We consider this company to be an asset for buy-and-hold investors who prioritize sustainable, long-term returns.

Each week, we send out a free newsletter to our subscribers with valuable rates and insights into financial markets from the perspective of our family office. Add yourself to our list here: