In this podcast, Motley Fool analyst Bill Mann discusses:
- Johnson & Johnson‘s ( JNJ -0.99% ) rise despite lowering guidance.
- How J&J’s margins are better than they appear.
- J&J’s 60-year streak of increasing its dividend.
- DiDi Global‘s ( DIDI 0.58% ) upcoming shareholder meeting to vote on delisting from the New York Stock Exchange.
Motley Fool host Alison Southwick and Motley Fool personal finance expert Robert Brokamp talk with Motley Fool bureau chief Kirsten Guerra about how to find good financial advice on TikTok.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on April 19, 2022.
Chris Hill: [MUSIC] We’ve got a blue chip stock, a Chinese company in the spotlight, and a look at financial advice on TikTok. Motley Fool Money starts now. [MUSIC] I’m Chris Hill and I am joined by Motley Fool Senior Analyst Bill Mann. Thanks for being here.
Bill Mann: Hey, Chris, how’re you?
Chris Hill: I am doing well.
Bill Mann: Missed you last week.
Chris Hill: No, you didn’t.
Bill Mann: I did.
Chris Hill: You did just fine without me last week.
Bill Mann: I did.
Chris Hill: I’m doing fine because I’m a Johnson & Johnson shareholder. I know not everybody is, but we’ll get to DiDi Global in a minute. But I did want to get your thoughts on Johnson & Johnson. This one of those times where-
Bill Mann: You just want me to talk about how smart you are for holding Johnson & Johnson.
Chris Hill: No, not at all. I was going to say this is one of those times where, and I say this as a fan of the financial media in general. But the headline on Johnson & Johnson is they lowered their guidance. Technically that is true, although when you look at the underlying results of this healthcare behemoth, pharma sales up 6%, medical devices up 6%. This is a business that is just quietly methodically chugging along as it has done for years now.
Bill Mann: The 60th straight year that they’ve raised their dividend. They’ve raised their dividend by a little more than 6%, which the pennant in me would point out, trails inflation, but nonetheless, it’s a rather great hike. Yeah, their results were fine. They beat on earnings by a bit, they trailed on revenues by a bit, and so instantly, when you hear that sort of thing, you should think in your mind, their lower-margin stuff, the things that they sold where the area that they struggled, and this should tell you why the guidance doesn’t matter all that much. Because the area where Johnson & Johnson struggled was in consumer health. It’s the area where they sell the most volume, but it’s also the area that’s impacted the most by global trade and global supply chain problems.
Chris Hill: It’s also the part that they’re spinning off.
Bill Mann: It’s also the part that they’re spinning off. Here’s not our problem anymore. The stock is now, as of this morning, was at an all-time high up about 12%, and it’s just a cash flow machine. It really is. You’re getting a bigger dividend, I’m going to say everything else like I’m just talking to you, here’s what you are getting, Chris. You are getting a higher dividend. You are getting a higher-margin business, and the higher-margin part, as you know, is the part that’s being retained, which is why you made the decision to retain that part and send the Global Consumer Health part into a separate division.
Chris Hill: They didn’t ask me. They didn’t ask most shareholders on that.
Bill Mann: [laughs] They didn’t have to ask, they knew.
Chris Hill: I don’t want to get ahead of myself. But I’ve been saying for months on the show that we’re in an environment where no company is getting the benefit of the doubt, and Johnson & Johnson, well-known, bluest of the blue chips as far as I’m concerned.
Bill Mann: Heard of that.
Chris Hill: Had quarterly results that were good but not amazing, and they had guidance which was technically lower and the stock is up as a result of that.
Bill Mann: It’s the margins.
Chris Hill: It’s the part where I don’t want to get ahead of myself. Are we moving out of this area, and now we’re seeing some more nuanced thought on Wall Street?
Bill Mann: That would be nice. I just think that in the case of Johnson & Johnson, the fact that they trailed on revenues but beat on earnings showed that they were incredibly high-value earnings and high-value revenues. I think that the numbers themselves, as you say, because no quarter, especially not in an age of COVID, and in the age of all the macroeconomic things going on. No quarter is the same as the previous quarter. You don’t get to throw a stone into the same river, and Johnson & Johnson turned in, to me, a dynamite quarter. It just doesn’t look like it on the surface. It’s like the old line about that Mark Twain said about Wagner’s music, that it’s better than it sounds. This quarter was better than it sounds.
Chris Hill: Let’s move onto DiDi Global, also known as the Uber of China. DiDi Global, like Uber into ride handling and food delivery. Their fourth-quarter results came out on Monday. Revenue was down from a year earlier. We can talk about that. But I want to start with.
Bill Mann: Sure, whatever. [laughs]
Chris Hill: We can get to the actual results. But I want to start with the fact that DiDi Global announced they’re having a shareholder meeting in late May, to vote on delisting from the New York Stock Exchange. You and I have talked over the past couple of months about the SEC coming out with their updated list of companies that might get delisted. Is this how it appears on the surface that a company based in China is voluntarily going to vote on whether or not they leave on their own?
Bill Mann: DiDi’s behavior since the moment they came public has been and it’s only been a little more than a year. It’s been absolutely abominable. The Chinese government essentially, but maybe not clearly enough, forbid them from going public in the U.S., and they did it anyway. The Chinese government has removed the DiDi app from all of the super apps in China. It’s a business that has been defenestrated. Now they are at the point where they’re trying to figure out what’s going to make the Chinese government happy, and one of the things that they believe was, if we undo this American listing, that might help. But they have no plans to go public someplace else. There’s going to be a vote which may or may not pass. After which time, if it passes, DiDi’s shares will go dark and there’s no real plan to have them trade someplace else. It’s wild to me.
Chris Hill: What happens if you’re a shareholder of DiDi Global besides the fact that your stock is worth half of what it was just one month ago?
Bill Mann: You know how everybody really wants to try and get in on pre-IPO companies in a very bizarre way, that’s what’s about to happen. You don’t lose your ownership in a company by virtue of the stock no longer trading, you absolutely retain your ownership, but you’d be retaining your ownership in a private company with no real path to gain any liquidity from it. As an individual investor, that’s not a place that I would want to be. But yet you’re holding a pre-IPO company at that point.
Chris Hill: Is there a scenario where because I can imagine at least a few investors looking at the stock beaten down the way it is and thinking, it’s cheap and [LAUGHTER] if it gets in the good graces of the Chinese government, then maybe it’s a steal at this price.
Bill Mann: Yeah, those people were also the people who love jumping onto the backs of bulls.
Chris Hill: Just for the excitement?
Bill Mann: For the excitement. Like, so I might break a bone or two. Just keep in mind that DiDi had all these warnings from the Chinese government when they held their IPO. They have had a year now where they could have figured out how to buyback the shares, to go have a traditional going private transaction, it happens all the time. Where you actually go in and you buy you the company or the company with investors buys the shares from minority shareholders and you close it out that way. That’s not what they’re doing here. What they’re doing is they’re like, if you vote for it, we’re going to shut the doors and it’s unconscionable behavior to me. It’s OK, if you want to hold a private company, you probably shouldn’t be an individual investor. You should probably be an institutional one where you have the capacity to trade with other large shareholders. But as an individual shareholder, I think you’re risking quite a lot. I think you’re risking to owning a company that has not behaved very well for a very long time.
Chris Hill: A reminder that among other things, setting your expectations accordingly in the same way that you look at Johnson & Johnson and you think, if I’m buying shares of this I’ve got the bluest of the blue-chip stocks. I’m not getting a lot of growth, I’ll get a dividend that’s going to increase year-after-year. [MUSIC] If you want to jump in on DiDi Global, just know you might be buying a private company and not getting that money anytime soon.
Bill Mann: That’s right. The brownest of the brown chips, if you will. [laughs]
Chris Hill: Bill Mann, always great talking to you. Thanks for being here.
Bill Mann: Thank you, Chris. [MUSIC]
Chris Hill: TikTok is available in China, the U.S., as well as 150 other countries. TikTok has over a billion users and some of them are using the platform to get tips on investing. How do you separate the good financial advice from the downright horrible? With more, here is Robert Brokamp and Alison Southwick.
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