Should I Sell Some Johnson & Johnson & Add Novartis ?

[ownyourfuture]

**Shares Are Held In A Regular Taxable Account**

I bought my first shares of JNJ in early 2002.
Since then I've reinvested the dividends & bought more when I thought it was oversold.

I now have 602 shares valued around 61-k

At any given time, I hold between 17 & 20 dividend paying stocks in my portfolio.

About a year ago, for diversification purposes, I came up with a new rule for my portfolio.

Anytime one of my holdings hits $20,000.00 or more, I discontinue adding any 'new' money to them. *This includes dividend reinvestment*

Obviously, JNJ was well past this point when I decided to address portfolio diversification.



JNJ vs NVS: A brief comparison.

Both are mega cap healthcare related stocks.

Both pay a nice dividend. JNJ 2.70% NVS 3.10%

JNJ has an AMAZING record of 51 straight years with dividend increases.
JNJ is the clear winner of this category

Dividend payout ratio: JNJ 47% NVS 52%

Finally, I like to use a basic 5 year chart (including the s&p 500) when comparing 2 companies.

NVS Basic Chart | Novartis AG Common Stock Stock - Yahoo! Finance



As you can see, NVS dominates JNJ by a good 50% here, while also topping the s&p 500 nicely.

IMHO Novartis is the JNJ of Europe & I think my plan is a good one.

Your thoughts.........

 

[LOL!]

I am curious about your $20K "rule". That would mean with a a $2 million portfolio that you would have around 100 separate stock positions. Of course, if things doubled, you have 50 positions with $40K each.

In the end, you would kind of end up with an index fund anyways.

To answer your question: Yes, you should sell some JNJ and buy some Novartis. While you are at it, you might as well buy a few other stocks, too. If you like big pharma, there are many of them. Get them all.

 

[target2019]

I might be tempted to hold the JNJ and invest dividends in Novartis. Maybe sell enough JNJ to establish a starting position in NVS.

 

[Bikerdude]

I've never heard of a 20K rule but I am aware of a 'no more than 4% per individual stock' rule. Under that rule unless if you have more than 1.5 mil invested you have too much in JNJ.

 

[FIREd]

I own both JNJ and NVS. JNJ has grown to be one of my largest positions. The downside with NVS: slow dividend growth, dividend paid in Swiss Francs so subject to the whims of the currency market, 35% withholding tax on the dividends (which can be recouped at tax time with a foreign tax credit).

Would I sell JNJ to buy NVS? It depends. My cost basis on JNJ is pretty low, so I would not sell JNJ, because even on LTCGs I pay close to 35% in income taxes (20% federal, 3.8% medicare surtax, 11.3% state). But if I was in a low tax bracket where LTCGs could be taxed very little and/or I had some JNJ lots with a high cost basis, then sure, I'd sell some and buy NVS.

 

[ownyourfuture]

Thanks for the replies.

ATTN LOL!
"I am curious about your $20K "rule". That would mean with a a $2 million portfolio that you would have around 100 separate stock positions. Of course, if things doubled, you have 50 positions with $40K each"

The total portfolio is about $408,000.00 I should have mentioned this in the original post

The rest of your post was mostly sarcasm, so I'll disregard it.

ATTN target2019
"Maybe sell enough JNJ to establish a starting position in NVS"

That's what I plan on doing

ATTN Bikerdude
"I've never heard of a 20K rule but I am aware of a 'no more than 4% per individual stock' rule. Under that rule unless if you have more than 1.5 mil invested you have too much in JNJ"

The total portfolio is about $408,000.00
So you & I both agree that I have too much in JNJ

ATTN FIREd
"JNJ has grown to be one of my largest positions. The downside with NVS: slow dividend growth, dividend paid in Swiss Francs so subject to the whims of the currency market, 35% withholding tax on the dividends (which can be recouped at tax time with a foreign tax credit)"

JNJ is my largest position by far. I can understand the downside issues you mentioned, but capital appreciation is also important to me & the bottom line is that NVS has outperformed JNJ by a substantial amount (at least in the last 5 years)

"My cost basis on JNJ is pretty low, so I would not sell JNJ, because even on LTCGs I pay close to 35% in income taxes (20% federal, 3.8% medicare surtax, 11.3% state)"

I'm in a lower tax bracket, (no medicare surtax) so this isn't as much of an issue for me.

"If I had some JNJ lots with a high cost basis, then sure, I'd sell some and buy NVS.

Wouldn't any shares you sold go by the 'First In, First Out' method. Isn't that an IRS rule ?
I'd love to 'pick & choose' which 'lots' to sell. Am I missing something ?

 

[jarts98]

You can specify the lot you're selling at the time of sale.

 

[FIREd]

Wouldn't any shares you sold go by the 'First In, First Out' method. Isn't that an IRS rule ?
I'd love to 'pick & choose' which 'lots' to sell. Am I missing something ?

You can pick and choose which lot to sell. I use the "Specific Identification" method instead of FIFO. If you keep good records, you should be able to figure out the cost basis of your various purchases and designate the proper lots when you sell.

 

[ownyourfuture]

Thanks jarts98 & FIREd
I had no idea you could choose.

Just goes to show, one never stops learning.