Johnson & Johnson's shares lost 16% on Friday in reaction to a NY Times article which disclosed that the government is conducting a criminal investigation into JNJ's Puerto Rican manufacturing facility which makes Eprex. While this is clearly tough to call, analysts are inclined to believe that the evidence (albeit circumstantial) supports that the better guess is that the situation is not going to materialize into anything significant and that the reaction in the stock price is overdone. Here are a quick summary of 4 items considered in conclusion:
1. The investigation is being conducted by the OCI, the arm of the FDA that patrols investigations related to civil claims. At this point, contrary to many press reports, the US Attorney/DOJ are not involved, and actually passed on the case back in February of 2001. Separately, no charges have been filed against JNJ. OCI's renewed interest in the case could just represent a more cautious FDA in light of the high degree of publicity surrounding PRCA.
2. The FDA and French medical authorities recently reviewed and became comfortable with the Puerto Rican plant (citing only minor observations)
3. The disgruntled employee's ethics seem questionable, as it has been reported that, among other things, he stole money from employees.
4. According to JNJ, the company has questioned all but one of this employee's witnesses, none of whom have corroborated his story.
The loss in the JNJ's stock price of about 16% is far greater than the 4% in potential lost earnings related to this issue.
Not sure if you ever priced anything out but the calls I mentioned (SEP 45's) went out at 5 today. I closed my (very small) position, up 66%.
Based on your opinion (hit 50 in a month), you might have wanted to set up a bull spread - buy the 45's, sell the 50's, hold til expiry. Too late now, IMO.
You say brokers are sleazy while at the same time you would be willing to take their advice on what options to buy. Crazy.
I don't have a personal broker. I guess that makes me less "connected". If you know options theory, then price some options out using Black-Scholes and find yourself a bargain. If you don't want to construct a model, there is one on the cboe website.
I don't post messages often, but I can tell you that Charles Schwab does a nice job with trading options, explaining the mechanics of trading them and is a secure, safe place to have some money invested. You will have to fill out some brief paperwork, but after that it's quite easy.
Hope this helps you.
If I wanted to buy 10 or 20 Thousand shares of J&J for a quick couple three point gain and get out, how could I do this with no collateral, or what is the minimum amount of collateral I would need? A margin account with half, or is there a way to day trade only covering the spread?
Reason is, I would like to buy ten thousand or more shares. If it goes bad, I could cash in some stuff I have which is not easy to liquidate, but large enough to cover.
I'm super confident this stock is going back up to at least 45 in the next week or so, maybe 50. And I'd like to make a quick 20-50 thousand or more. But can this be done without a great hassel, except the risk of course.
You day traders, can you tell me the deal?
The wise Stah