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No. of Recommendations: 0
According to my calculations from the most recent 10Q, they pass all the numerical CK criteria, other than near misses on the flow ratio.

Gross Margin -- 69.3%
Net Margin -- 17.5%
Leveraged Flow -- 1.56
Unleveraged Flow -- 1.75
Cash/Debt -- 2.69

Of all the medical companies out there, this one has the highest consumer mindshare. The margins on products like band aids and Tylenol may not be the best, but they certainly ensure that the company will make money year in and year out. They also have a healthy annual investment in R&D.

The stock's performance over the years certainly speaks for itself.

Personally, I like the direction as well. EPS has grown by more than 14% over the last 5 years and is expected to grow just over 13% over the next 5.

Biggest shortcomings of this one is that they need to do some work on their flow ratio.

Phil

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No. of Recommendations: 0
<<According to my calculations from the most recent 10Q, they pass all the numerical CK criteria, other than near misses on the flow ratio.

Gross Margin -- 69.3%
Net Margin -- 17.5%
Leveraged Flow -- 1.56
Unleveraged Flow -- 1.75
Cash/Debt -- 2.69>>

I picked J&J because it came close to making the CK criteria (missing only on flow ratio, and then not by that much), and it got extra credit for consumer mindshare and a broad range of products. This gives the portfolio ballast in bad times, although it is likely to cost us in return over the long run.

The other way to go would be to purchase SGP, a pure pharmaceutical that really has their balance sheet in order. Of course, if their new drug pipeline were ever to dry up, then look out below (especially with their valuation). In this case Rob, Phil and I went one way, Tom the other.

By the way, I could probably be convinced that a better way to achieved stability in the portfolio would be to buy SGP and to increase the FF portion of the portfolio over time.

Al
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