Student Name

Finance 135 – Spring 2021

Analysis of:

Johnson & Johnson (JNJ)

Vanguard Equity-Income Fund Investor Shares (VEIPX)

Stock Report

1.Provide the name and ticker symbol of a publicly listed company

(“Company”)with at least 5yearsof historical data

o Company name: Johnson & Johnson

o Company Ticker (JNJ)

2.Provide a brief description of the Company1

o Johnson & Johnson is an American multinational corporation that is the largest

healthcare company in the world and has developed and manufacturing

pharmaceutical and consumer good as well as conducting research and

development on medical devices. Johnson & Johnson was founded in 1886 by

three brother named James, Edward Mead and Robert Johnson who created the

first commercial first aid kits that revolutionized wound care and is today known

as the world most valuable companies and has over 250 subsidiary companies

with operation in over 60 countries and sell their product to over 175 countries

around the world. The company operate in three different segments in the market

which are Consumer Health, Medical Devices and pharmaceuticals. Johnson &

Johnson is also a major company that is distributing the COVID-19 vaccine to

American and people around the world.

3.Describe the Company’s key products and/or services

1 Information found on: https://www.google.com/finance/quote/JNJ:NYSE

Consumer Health products:2

o Johnson& Johnson has developed and created unique personal health by

delivering a majority of their product being rooted to science and is the leading

healthcare company that has created close partnerships with dermatologist and

skin care expert to work on the next generation science to create high performing

product for healthy skin. According to their website their “Innovations include:

personalized skin health assessments, treatments for acne and eczema, gentle

skin-loving cleansers, moisturizers that repair the skin barrier and rebalance the

skin’s microbiome, and sunscreens that protect and defend against inflammation,

premature aging, 3and skin cancer.” Their commitment is to use quality

ingredients that is safe and efficient Some of their top selling company in this

segment are NEUTROGENA ®, AVEENO® which are skin care brands. As well

as self-care products that offers their patients the power to take their health into

their own hands with natural healthy and wellness product that range between

medical and non-medical solution. The most well-known company that

incorporates with Johnson and Johnson is BENADRYL® and TYLENOL® which

provide solution to health symptoms brought by sicknesses. Johnson & Johnson

also has sells essential health products for every stage of their consumer’s daily

routine such as wound care and oral care. The most well-known essential health

product is LISTERINE® and BAND-AID®.

2 Information was found at :https://www.jnj.com/healthcare-products 3 Data was found on https://www.jnj.com/our-heritage/meet-the-innovative-brothers-who-founded-johnson- johnson-in-1886 &on https://finance.yahoo.com/quote/JNJ/profile?p=JNJ

Medical Devices:

o Johnson & Johnson have used their scale and experience to reimagine the way

that they can help people live longer and healthier lives in this troubling time.

According to their website”4 As pioneers in medical devices, we continually focus

on elevating the standard of care—working to expand patient access, improve

outcomes, reduce health system costs and drive value.” Johnson & Johnson are

making medical devices by connecting science and technology to have expertise

in surgery and other departments like vision, orthopedics and interventional

solutions. Their medical devices help Orthopedics by helping patient that have

suffered from trauma and spine damage and helping their 56consumers to return

to living active and healthy lives. Johnson& Johnson devices are used in the

surgical field by providing biosurgery technology to minimize complications as

well creating wound closure material call Ethicon that is the leading advancement

in closing comprehensive wounds.

Pharmaceutical Products:

o Johnson& Johnson has been actively developing treatments for six different

therapeutic area: Cardiovascular & Metabolism, Immunology, Infectious

Diseases & Vaccines, Neuroscience, Oncology and Pulmonary Hypertension and

have decided to redefine treatment for patients with autoimmune disorders

According to their website “Through our ongoing efforts in discovery, biomarkers,

4 Information was found on https://www.jnj.com/healthcare-products/medical-devices#orthopaedics

clinical research and external innovation, we are poised for continued leadership

and growth, bringing transformational medicines to patients and healthcare

professionals around the world.” The company mission plan is be as transparent

to their client as possible with the help of medicine and science. Johnson &

Johnson is working on creating vaccine to cure infectious disease worldwide and

make the world free of life threating diseases. So far Johnson& Johnson has

developed therapies and vaccine for diseases like HIV and Ebola and currently

Covid-19. The pharmaceutical company also has a mission to reduce

neuropsychiatric diseases and studies in oncology so that their scientist can

create a cure to reduce the number of people who are diagnosed to have cancer.

4.Provide current market cap, current price per share, 1-year target price, average

volume, and beta

As of Date of 5/13/20217

o Current market cap: $447.57 Billion

o Current price per share: $169.96

o 1-year Target price: 187.00

o Average Volume: 7,662,827

o Beta: 0.71

7 Data was found on: https://finance.yahoo.com/quote/JNJ?p=JNJ

5.Discuss current and forward-looking macroeconomic environment and assess

Political influence8

o The concept of political influence a concept that can go both way the outcome

can be positive or can have a negative impact on the macroeconomic

environment. Political influence is important because it help make decision for

company on the way they trade with other countries in the trade market and

global market. The way that Johnson & Johnson is a global company that works

with different governments and providers and stakeholder worldwide to ensure

that their consumers are able to get affordable and safe health care. They are

informed and actively supporting participation in policy making and political

processes. The global government affair teams on Johnson & Johnson team is

responsible for helping with advocacy activities within the government. According

to their website “In the interest of advancing sound public policy, we support

those persons who serve the public by seeking elected office. Where permitted

8Information was found on : https://www.investor.jnj.com/gov/contributions.cfm

by law in the U.S., Canada, Australia, and Japan, our Company makes corporate

political contributions, primarily to the electoral campaigns of individual

candidates.” Johnson & Johnson have said that when it comes to interaction with

government candidate and officials that they conduct legal and ethical manner

when it comes to company policy’s and applicable laws to follow government

ethic laws, the Foreign corrupt practices act and the U.S anti-kickback statues.

GDP:

o GDP is a good indication of the economy total production of good and services is

the statistics used to describe the macroeconomic environment. The concept of

GDP is important because investor use it to make decision on whether it’s a good

time to invest their money into the market. When there is an increase in the GDP

there is a rise in interest rate and helps expansionary fiscal policy which

stimulates the market. Johnson& Johnson has had a solid financial record from

the year 2014 and continue to make investment to make higher growth in long-

term investment which will help the GDP to go higher. The company Johnson &

Johnson reinvest their money to have a strong and consistent business plan that

allows them to creates more opportunity for growth in every segment they

operate and have enough money to put into programs like research and

developing new product and vaccines.

Fiscal Policy:

o This is the use of government spending ad tax policies that have a direct impact

on the macroeconomic environment and the economic conditions. Fiscal policy

includes the economic growth of the business to earn more money and

aggregate demand for goods and service, inflation and new employments. Many

would argue that the government is in charge because they can help business

stabilize and can keep the economic growth to be regulated. The way that this

would impact the company Johnson& Johnson is that they can open up more

broader advantages if they decide to partner up the government and help keep

the economy strong by providing hundred of new job to people as Johnson &

Johnson expand their reach and start to get connection to partner with more

public health organization as well as creating expediential opportunities to help

the government earn more money by keeping more jobs here in America then

sending job to foreign country. The way that Covid crisis has affect the U.S is that

the government had to figure out way that they were going to fight the pandemic

and allowed the company Johnson & Johnson to sell more of their product that

are used to fight of disease and the government had to ask for help on getting

PPE for hospital so they had to turn to company like Johnson & Johnson to help

supply hospital with available equipment and help with the increase of

unemployment in the U.S the last year.

Creating a better Future

o The goals of Johnson & Johnson is to create a world were everyone has equal

acess to medicine and healthcare. They want their patients to live longer and

healthier lives and they want to create vaccine and cure for diseases that have

plagued the world like HIV and Covid-19 and slow killing diseases like cancer.

Johnson & Johnson want to help people live longer and healthier lives and

remain transparent with their science and the use of their expertise’s. They want

to rid the world of disease that have killed thousand in the past they want to use

their research and development to make vaccine that can be use worldwide and

help create a more healthier future.

6. Name at least two key competitors

o Eli Lilly and Co (LLY)

o Merck & C. Inc. (MRK)

o Pfizer (PFE)

7.Provide a chart of 5-year trend analysis on key valuation metrics such as P/E,

P/Book, P/Sales, P/Cash flow ratios and compare with at least two key

competitors. Provide commentary about the chart regarding relative valuation of

your Company versus key competitors. As of 5/12/2021

9Data taken from https://www.morningstar.com/stocks/xnys/jnj/financials(5/12/2021) 10Data taken from https://www.morningstar.com/stocks/xnys/lly/financials(5/12/2021) 11Data taken from https://www.morningstar.com/stocks/xnys/mrk/financials(5/12/2021) 12Data taken from https://www.morningstar.com/stocks/xnys/pfe/financials(5/12/2021)

Johnson& Johnson

9(JNJ)

Eli Lilly and Co

(LLY)10

Merck & Co Inc.

(MRK)11

Pfizer (PFE)12

P/E Ratio: 30.0 P/E Ratio: 29.15 P/E Ratio: 28.41 P/E Ratio: 26.88

P/Book

Ratio:

6.80 P/Book

Ratio:

27.10 P/Book

Ratio:

7.40 P/Book

Ratio:

3.54

P/Sales

Ratio:

5.39 P/Sales

Ratio:

6.98 P/Sales

Ratio:

4.16 P/Sales

Ratio:

5.09

P/Cash

Ratio:

18.73 P/Cash

Ratio:

22.78 P/Cash

Ratio:

17.64 P/Cash

Ratio:

15.72

Johnson & Johnson (JNJ) Stock Report 5 Year Trend Analysis Charts. ( As of

5/12/2021)13

13 https://www.morningstar.com/stocks/xnys/jnj/quote

Eli Lilly and Co (LLY) Stock Report 5 Year Trend Analysis Charts. ( As of

5/12/202114)

14 https://www.morningstar.com/stocks/xnys/lly/quote

Merck & Co Inc (MRK) Stock Report 5 Year Trend Analysis Charts. (As of

5/12/2021)15

15 https://www.morningstar.com/stocks/xnys/mrk/quote

Pfizer (PFE)Stock Report 5 Year Trend Analysis Charts. (As of 5/12/2021)16

16Data was found on : https://www.morningstar.com/stocks/xnys/pfe/quote

Commentary:

Price- to -earnings Ratio:

o Company might have a negative P/E ration are company that are losing a heavy

amount of money and have negative earnings per share. Since Johnson &

Johnson has the highest price per earnings ratio when you are comparing them

to their competitor such as Elli lily company and Pfizer and Merck Company. The

price to earnings ratio for Johnson and Johnson is 30.0 overall compared the

lowest company that was Pfizer that ratio was in low 26.88. The ratio is the value

that a company measure it current share price and divides it from the per share

earnings. If the P/E ratio is high than that means that company stock is being

considered be overvalued and the investor in the company are expecting a

higher growth rate. When the company has a low P/E ratio then the stock is

being undervalued and is losing money. The Johnson & Jonson has a higher

ratio when comparing the stock to Elli Lilly company by a small portion that is.85

point away from each other and is 1.59 point away from it next competitor Merck

Company. The ratio that Johnson & Johnson has is a good one because it

means that it doing very well when it to price per earning.

Price-to-Book Ratio

o Price/Book ratio very useful if a company has negative or unstable earning

like Elli Lilly company. The P/Book ratio can be uses to compare a firm

market capital to its book value. The way that it is calculated is that it

divided the company price per stock by the book value per share. The book

value is found on the balance sheet and companies use it to net their asset

against accumulated depreciation found with in the company. The book

value is the gross of expense and trading cost that it cost the company to

sell it at in the stock market. A lower price/Book ratio mean that the stock is

being undervalued this is found in the company of Pfizer that has a 3.54%

when it comes to price /Book ratio compared to the highest Price/book

ratio which is The Elli Lilly Company that has a 27.10 % when comparing all

four-company found on the chart. The Price/Book ratio reflects the value

that the market is when it come the company equity to the book value. For

Company like Johnson & Johnson they must expense the part of company

that has to do with research and development cost and that causes them to

reduce the company book value. The Johnson and Johnson company has

a higher Price/Book value when you compare it to the lowest which is

Pfizer currently, But Johnson& Johnson has less book value than Merck by

.6 which is small difference. When You see the ratio of Johnson & Johnson

and Elli Lilly company there is a difference of 20.3 Because the Elli Lilly

company has more investor that bid up the price of a the Elli Lilly company

and they get better return on their equity. During the last 12 months of

Johnson& Johnson has had the book value of 7.40 per year and rank lower

because of the covid 19 problem that have come into the new recently

about how their vaccine was put on pause because of complication and

that had dropped their rating when compared to other company that have

more book value than Johnson& Johnson.

Price-to-sales Ratio

o Price/Sales ratio is the value ratio that compares a company selling price to

it revenues. It is the price that the financial market has placed on each

dollar the company makes in sales and revenues. The ratio show how

much a investor is willing to pay for that particular stock. The Calculation

on how to get the price-to sale-ration is calculated by dividing the stock

selling price by the company sales per share.The price-to sale ration also

help see whether a company will make money or no earn any earning in the

year. A low ratio would imply that a stock is being undervalued and a high

ratio would mean that a stock is being overvalued in the financial market.

When looking at the 5 year chart it show the different variation between

each company .When comparing the company Johnson & Johnson has a

ratio of 5.39 over the past 5year which is higher than their competitor Pfizer

and Merck Company that had 4.16 and Pfizer that had a ratio of 5.09. But

that ratio is taken when their calculations of the stock selling price to its

revenue over the last 5 years. The company that has a value that is being

over valued is the company Elli Lilly company that has a ration of 6.98.

Johnson & Johnson has been the recent year been put their money back

into their company and investing in more research and developments

project their competitor Pfizer and Merck company. But Elli lilly has been

selling more pharmaceutical drug to the market which allow them to have a

higher selling price than compared to the stock of Johnson & Johnson. I

believe that in the next few year their will be a bigger price-to sales ratio for

Johnson& Johnson because they have release some new vaccination that

are hitting the health market and are continual coming out with products.

Price-To cash flow ratio-

The price to cash flow ratio is the comparision of the company market value and their

operating flow per share.The companies have large non cash expesnes that are called

depreciations and a low Price to cash flow mean that a stockis being undervalued and if

the stock has a higher price to cash flow than it is being over valued . When comparing

Johnson& Johnson stocks It has a moderate ratio when it comes to its key competitors.

When you look at the key competitor and Johnson & johnson it is clear that Elli lilly

company has a higher cash flow then johnson& johnson that a diferenc of 4.05 . But

Johnson& Johnson has a higher cash flow than Merck that has a ratio of 17.84 which is

a difference of 4.94 when looking at the ash value that these company provide. I would

say that Johnson & Johnson is doing very well and is being valued fairly .

Mutual Fund Report:

1.Providethe name and ticker symbol of a mutual fund (“fund”)with at least10

years of historical data

o Mutual Fund Name: Vanguard Equity-Income Fund Investor Shares

o Ticker symbol :(VEIPX)

2.Providefund category, fund family name, net assets, YTD return, Morningstar

rating, inception date, and NAV per share1718

o Fund Category: Large Value

o Fund Family Name: Vanguard Group

o Net asset: 47.23 Billion

o Year to date ( YTD) returns: 16.38%

o Morningstar Rating ★★★★★

o Inception date: Mar 21,19988

o NAV per share(of 5/13/2021):$43.73

o NAV change( 5/13/2021) : +$0.63(1.46%)19

3.Provide fund strategy (i.e., fund summary )and its associated benchmark20

17 https://www.gurufocus.com/term/pb/JNJ/PB-Ratio/Johnson–Johnson 18 Date was found on this website : https://investor.vanguard.com/mutual-funds/profile/overview/veipx 19 Information was also gathered form :https://advisors.vanguard.com/investments/products/veipx/vanguard- equity-income-fund-investor-shares 20 Fund summary information found on :https://finance.yahoo.com/quote/VEIPX/performance?p=VEIPX

o Fund Summary: The fund normally invests at least 80% of its assets in equity

securities. That fund is used to multiply for the investment advisors and is

invested mainly in common stock in large companies as well as mid-size

companies. These stocks usually pay above average level of dividend and get a

reasonable long-term capital appreciation.

o Benchmark21- The benchmark for VEIPX is based on is Spliced Equity Income

Index*and Lipper lease is part of The NASDAQ which is the growth of a

hypothetical $10,000 investment in this fund with the growth.

21 The benchmark is found: https://investor.vanguard.com/mutual-funds/profile/performance/veipx

5.Provide fund’s expense ratio, 12b-1 fee, front-end load, and back-end load

Expense ratio:

o Gross expense ratio:.28%

o Net expense ratio:.28%

o 12b-1 fee:None

o Front-end load-None

o Back-end load:None

6.22Provide overall portfolio composition sand sector weightings

22 Chart can be found on https://finance.yahoo.com/quote/VEIPX/holdings?p=VEIPX

7.Provide names of top 10 holdings and the aggregate percentage of Total Assets

8.Provide performance data of 1-year, 3-year, 5-year, and 10-year returns and

compare with its benchmark / category and discuss how did this mutual fund

performed relative to its category23

Performance Data : As of 5/13/2021

1 year return:49.12%

Category: 46.33%

3-year return:12.43%

Category: 11.71%

5-year return: 11.21%

Category:12.01%

10-year return: 12.27%

Category:10.42%

o The performance for the mutual fund VEIPX is found on the chart above and it

shows the 2,3,5,and 10 years of the company performance data. The company

1-year performance It was above the benchmark of its competitor and has a

higher return performance out of all the 10 year that are shown on the graph. The

3 year performance was very good as well because it stayed in the positive

position and the Vanguard Equity-income Fund investor share did very well in the

financial and healthcare services that they provide and and had a small change

when looking at the 5 year return chart that showed a return of 11.21 which is

23 The chart information was found on https://finance.yahoo.com/quote/VEIPX/performance?p=VEIPX

decrease of 1.22 % when comparing the two years of difference between them.

The chart also show that the 10 year return it did very well also staying in the

positive mark when it came to return and good sign for a mutual fund

performance. The best yield when looking at these chart is the 1 year return

which is more than triple the amount of return from the last ten years . The lost

return when looking at the chart is found on year 5 were it is performing very well

but not as well at 1 year of returns. But looking at 1 year return it has out

performed when compared to other mutual fund.

9.Provide 5-year risk statistics data: alpha, beta, R-squared, standard deviation,

Sharpe ratio, and Treynor ratio24

VEIPX 5-year risk statistic data; As of

5/13/2021

Alpha -2.93

Beta 0.90

R square 91.22

Standard deviation 14.17

Sharpe ratio 0.82

24 Information for Chart was found on: http://performance.morningstar.com/fund/ratings- risk.action?t=RPBAX&region=usa&culture=en-US www

Treynor Ratio 12.49

10.Discuss merits and concerns regarding this mutual fund

o Wh