Johnson & Johnson Shares Take a Hit Amid Talc Powder Report

Damien Conover: Johnson & Johnson stock is down close to 10% today, largely on news of a media report that came out that suggested Johnson & Johnson's talc powder might be related to major health issues, most notably cancer. Within the media report, a lot of ideas were floated that there was this link between asbestos and potentially the talc powder.

Now, there's still going to be a lot of cases that will need to come out litigating this, but our general belief is that J&J will litigate these one by one, and really, over a long period of time wear down the defendants, and the outcome will largely be not a significant impact to the valuation.

With this 10% pullback in the stock, we think the shares are trading pretty close to our fair value, so we were thinking the stock was a little bit overvalued going into the news, and following this news the stock actually looks relatively fairly valued.

We continue to think Johnson and Johnson is well positioned with a wide economic moat, really with a huge diversity of assets that are bringing in a lot of cash flows that will really help fund the firm through any potential legal concerns that it might have with this talc powder issue.