Podcast Summary
Johnson & Johnson's Focus Shifts Amid Challenges: Johnson & Johnson is forecasting sales growth despite a profit decrease, and is focusing more on pharmaceutical and med tech segments to reduce reliance on consumer health.
Effective communication skills are crucial in business and life, and the Think Fast, Talk Smart podcast, with its expert guests and practical tips, can help hone those skills. Johnson and Johnson's fiscal year ended with a 25% decrease in 4th quarter profits due to reduced COVID-19 vaccine demand and inflation. However, the company is forecasting 5% sales growth in the next year, with the pharmaceutical and med tech segments expected to contribute significantly. The split of Johnson and Johnson, resulting in the creation of Kenview, will allow the company to focus more on these growth areas and reduce reliance on the more volatile consumer health segment.
Diversified business models of Johnson & Johnson and 3M provide stability and resilience: Johnson & Johnson's and 3M's diverse revenue streams, deep pockets for innovation, and shareholder-friendly structures make them highly cash flow generative investments despite potential company splits and macroeconomic pressures.
Despite the challenges of a potential Johnson & Johnson company split and macroeconomic pressures, the diversified business model of Johnson & Johnson, including its stable medtech segment and consumer electronics division, offers reassurance to investors. The company's balance of innovative and dependable revenue streams, deep pockets for innovation, and shareholder-friendly structure make it a highly cash flow generative investment. Additionally, 3M's CEO, Mike Roman, expects macroeconomic challenges to persist in 2023, leading to a 5% decline in 3M shares and a workforce reduction of 2.5%. However, the company's broad reach across various industries means that economic downturns will impact its various business segments differently. Overall, while there are challenges, the diversified nature of Johnson & Johnson and 3M's businesses provides a degree of stability and resilience.
3M's Challenges: Slower Growth, Divestment, and PFAS Transition: 3M faces challenges from slower growth, divestment, and costly PFAS transition. Uncertain future growth and potential share price appreciation require careful monitoring.
3M, a company in the safety and industrial business with a concentration in PFAS chemicals, is facing challenges due to slower growth, divestment from certain businesses, and the costly transition away from these chemicals by 2025. These factors, along with negative growth projections and a declining stock price over the past five years, make it a questionable choice for investors seeking reliable growth and ballast for their portfolios. However, 3M did generate $1.7 billion in adjusted free cash flow in Q4 and is taking steps to decrease inventory levels and manufacturing. A potential positive scenario for investors could be if 3M shifts towards a more consumer-oriented and electronics-facing business, where cash flows are steady and liabilities are less. But overall, the company's future growth and potential for share price appreciation are uncertain and may require careful monitoring.
The importance of having some exposure to international stocks: Investors should allocate at least 10% of their equity portfolio to international stocks for historical trends and current market valuations, with up to a third being reasonable.
While the US stock market has outperformed international stocks in the past few years, it's important for investors to have some exposure to international stocks due to historical trends and current market valuations. The US market has been expensive compared to other markets for some time, and there have been long periods when international stocks have outperformed. Additionally, many US companies generate significant revenue from international sales. A good starting point for international stock allocation is 10%, but up to a third of your equity allocation isn't unreasonable. The Vanguard Total International Stock Market ETF is a good choice for gaining international exposure.
International Stocks Outperforming US Stocks: Maintain a diversified portfolio, consider valuations, and be cautious with retirement funds and high-risk investments.
International stocks have been outperforming U.S. stocks lately, as seen in Fidelity's target date funds and the Vanguard International Stock Index ETF. While it's important to consider valuations, it's also crucial to maintain a diversified portfolio and not put all eggs in one basket. Regarding Bitcoin and options trading with retirement funds, it's essential to be cautious and do thorough research. Taking money out of a 401k to pursue high-risk investments like Bitcoin and options may not be the best decision, especially if it involves potentially illegal or fraudulent activity. Lastly, when deciding between bonds and stock investments, it's essential to consider risk tolerance, time horizon, and overall financial goals. While I-bonds may offer a higher yield, a diversified portfolio that includes both stocks and bonds can help mitigate risk and provide a more stable long-term investment strategy.
Diversifying retirement savings with bonds and I Bonds: Invest in a mix of bonds, I Bonds, and other bond funds like Vanguard Total Bond Market ETF or target date bond funds for a well-diversified retirement portfolio. Regularly review investments and avoid anchor bias.
Having a diversified investment portfolio is crucial for retirement savings. For typical target date funds with a retirement date of 2045, around 10-15% of assets are allocated to cash or bonds. I Bonds are a good addition to a bond portfolio due to their inflation adjustment feature, but their attractiveness depends on inflation rates. The Vanguard Total Bond Market ETF and target date bond funds are other options for bond investments. For those starting a new job, the recommended savings rate depends on age and accumulated savings, with most guidelines suggesting a savings rate of 15% or more. Lastly, investors may face anchor bias when considering investments with a low cost basis, leading them to overlook potential winners. It's essential to periodically review investments, especially for individual stocks, but not too frequently to avoid making hasty decisions.
Investing in Growing Assets: Continue investing in stocks or assets with potential, diversify, and consider options for investing for a child, such as custodial or brokerage accounts.
It's generally a good idea to continue investing in stocks or assets that you believe have potential, even if they've already experienced significant growth. Diversification is key, and adding more investments to your portfolio can help mitigate risk. When it comes to setting up an investment account for a child, you have a few options. You could open a custodial account, which allows the child to eventually take control of the funds, but comes with tax implications and potential impact on financial aid eligibility. Alternatively, you could open a brokerage account in your own name and gift the investments to the child when you see fit. This approach allows you to maintain control of the investments and taxes are paid by you until the transfer. Ultimately, the best approach depends on your specific circumstances and financial goals.
Saving for education and gifting strategies: Consider opening tax-advantaged accounts for education expenses, be mindful of gifting limits, start small and gradually invest for children, diversify investments, and seek expert advice from trusted sources.
For those planning to use savings for educational expenses, opening a Coverdell or 529 account can help the money grow tax-free. Regarding gifting, individuals can give up to $17,000 annually without filing a form 709, but exceeding this limit may impact your lifetime gift and estate tax exclusion. For new parents investing for their child's future, starting with a small amount and gradually increasing contributions is a viable strategy. Consider opening a Roth IRA for your child when they begin earning an income. Diversifying investments, including both index funds and individual stocks, is essential, even if it's challenging to reach the recommended 25 stocks initially. With the availability of fractional shares, it's easier than ever to invest in multiple companies with a smaller initial investment. Lastly, when considering investment advice from other sources, remember that The Motley Fool's unique perspective and expertise can provide valuable insights.
Invest 5% in volatile investments: Keep 5% of investments in risky assets for potential rewards, but monitor performance and adjust if losing money
It's important to have a small portion (5%) of your investment portfolio in volatile investments, such as startups or cryptocurrencies. These investments carry a low probability of success but have the potential for significant returns. However, it's crucial to keep track of your record with these investments and consider reducing their percentage if you're consistently losing money. This approach allows you to enjoy the potential rewards of riskier investments while minimizing the impact on your overall portfolio. Remember, it's essential to maintain a well-diversified portfolio and not rely solely on volatile investments for success in the long run. As always, consult with a financial advisor before making any investment decisions.
