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All I Need to Know About Johnson & Johnson (NYSE: JNJ) I Learned 30 Years Ago

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All I need to know about Johnson & Johnson (NYSE: JNJ), I learned at my first job at a broker dealer.

To this day, the firm I worked at is one of the largest assets under management (AUM) shops in the world. And while there I had a mentor, who I will call "Joe" to protect his anonymity

Joe was something of a stereotype. He was freaky with math, loved chess, never married, and wore a really bad toupee.

He was also the happiest person in the building.

You see, Joe was worth more than pretty much everyone else who worked on our floor – all upper-management included. He never feared the stock market and would whistle while others cried over their 401k performances.

Joe's secret to success was that he owned a position in Johnson & Johnson. He had worked for the company in the past, and he'd built up a nice-sized block of stock while he was there. Better still, he added to this single position with every dividend.

In a business that preaches diversification, Joe did the exact opposite in his personal life – and it worked for him. I would never suggest an investor fixate on a single investment the way Joe did, but in his context it was amazingly rewarding.

Joe called Johnson & Johnson a once-in-a-lifetime investment – and in a way it still is.

Johnson & Johnson has split at least three times in the last twenty years, and has grown its dividend during that time. It is currently yielding about 3.5%, which is head-and-shoulders above what U.S. Treasuries and bank accounts are paying.

And while the stock has not gone up much in the last decade, the dividends have been pouring in, buying new shares, and in the process compounding the real rate of return on invested capital.

So it's time to buy Johnson & Johnson (NYSE: JNJ) (**).

We may never be like my friend Joe, with a zero average cost basis on a growing pile of shares, but we can still enjoy some of the slow and steadily growing dividend from this AAA-rated company.

Here's how.

125 Years of Excellence

Johnson & Johnson's positive attributes include [To continue reading, please click here…]

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Prepare for Iran's Energy Market Chaos with the United States Oil Fund LP (NYSE: USO)

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Iran kicked off the New Year with aggressive messages for the Western world, setting the stage for heightened political tensions and a huge oil price push in 2012.

Oil futures finished at their highest level in eight months yesterday (Tuesday), with West Texas Intermediate crude jumping 4.2% to settle at $102.96 a barrel on the on the New York Mercantile Exchange (NYMEX).

The surge came after Iran warned a U.S. aircraft carrier to stay out of the Persian Gulf. The message fueled speculation that Iran will make good on its threat to close the Strait of Hormuz to oil tankers.

An average of 14 supertankers carrying one-sixth of the world's oil shipments every day pass through the Strait, a narrow channel which the U.S. Department of Energy calls "the world's most important oil chokepoint."

With global oil demand expected to rise to a record 89.5 million barrels per day in 2012, a major disruption to oil exports from Iran would drastically affect pricing.

Even though Iran has made such threats repeatedly over the past 20 years, tighter sanctions imposed by the United States and Europe may have pushed the country to its breaking point. Iran just concluded a 10-day military exercise intended to prove to the West that it can choke off the flow of Persian Gulf oil whenever it wants.

Now Iran is expected to trigger oil market performance similar to spring 2011, when Libya's civil war caused oil prices to spike close to $115 a barrel.

In fact, if the Iranian government made good on shutting down the Strait, oil prices would probably shoot up $20 to $30 a barrel within hours and the price of gasoline in the United States would rise by $1 a gallon.

While we can't control Iran's actions, we can control how we prepare for whatever political and economic turmoil it inflicts. That's why it's time to buy the United States Oil Fund LP (NYSE: USO).

Global Political Tensions Will Bolster US Oil Fund

Iran is trying to scare the world out of imposing more sanctions against it, which drastically limit the country's ability to conduct business.

The latest sanctions, signed into law by U.S. President Barack Obama last Saturday, will make it far more difficult for refiners to buy crude oil from Iran, the world's fourth-largest oil exporter.

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How the European Debt Crisis Could Smother Fiat S.p.A. (PINK: FIATY)

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Around this time last year I warned you that the Eurozone debt crisis would trample the Italian economy and take carmaker Fiat S.p.A. (PINK: FIATY) down with it.

To profit from this debacle, I told you to short Fiat. Since then, the stock has tumbled 76%, from $19 a share to yesterday's (Wednesday's) closing price of $4.66.

Fiat is a perfect example of how an unstable home market – like Italy – will kill a struggling company's stock. Fiat is Italy's largest private sector employer, and the past year's market performance mirrors the weakness unleashed by the European debt crisis.

Sadly, Fiat won't be the only company whose shares will plunge.

TheEuropean debt crisis has grown from a problem on the edge of Europe to a problem inside the region's core. You only have to look at the series of bank stress tests that Europe has rolled out to see that things are getting worse, not better.

In fact, the European Central Bank (ECB) announced yesterday that it would provide $638 billion (489 billion euros) in three-year loans to more than 500 banks in the Eurozone. More than a dozen Italian banks borrowed $143.52 billion (116 billion euros).

But the solution is only short term, and the region's grim long-term outlook hasn't changed. We're heading toward a point of maximum pessimism – one I think we'll reach sooner rather than later.

So, it's time to thank the Eurozone, Italy, and Fiat S.p.A. for a great short trade and close it out. While the stock could go all the way to $0, the meat of the move is over, and we want to take profits before a major short-covering event gives the share price a temporary boost.

Fiat S.p.A.: Stung by the European Debt Crisis

The European Central Bank forecasts Eurozone growth will slow to a near standstill next year, with gross domestic product (GDP) only expanding 0.3%. The ECB said area-wide inflation will reach 2.7% in 2011.

This slow-growth, higher-priced environment won't bode well for the region's automakers, which are already feeling the effects.

Automobile registrations in Europe in November dropped 3% to 1.07 million vehicles from 1.10 million a year earlier. That's the biggest decline since June, according to the Brussels-based European Automobile Manufacturers Association. The Italian auto sales market led the region's declines, slipping 9.2%. France was close behind at 7.7%.

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AeroVironment Inc. (Nasdaq: AVAV) Is the Future of the Defense Industry

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If you don't know about AeroVironment Inc. (NASDAQ: AVAV), it's a name you need to follow.

My fascination with the founder of AeroVironment, which designs, develops, produces, and supports aircraft and energy systems, started when I was 12 years old. History was made that year when a man-powered aircraft flew across the English Channel for the first time.

I remember the flight clearly. The 70-lb aircraft made the 26-mile journey in 2 hours and 49 minutes.

The idea that a man could pedal a bicycle fast enough to fly across the channel seemed crazy to me at the time. But it was made possible because of groundbreaking designs by Dr. Paul MacCready.

MacCready made the first human-powered aircraft in 1977, the Gossamer Condor. Two years later came the Gossamer Albatross, the first fully human-powered aircraft to cross the English Channel. MacCready won the prestigious Kremer prize, which honors pioneers in human-powered flight, for each design.

His innovative creations led TIME magazine to call him one of the "greatest minds of the 20th century."

MacCready started AeroVironment in 1971. His imagination and persistence helped the company become a leader in creating UAVs (Unmanned Aerial Vehicles). Now AeroVironment has grown into the largest provider of UAVs to the U.S. military.

UAVs will play an incredibly important role in our country's future. The art of war is evolving, and these devices have become the next key tool in the U.S. arsenal.

With its great niche in the defense industry, AeroVironment Inc. is a "Buy." (**)

Providing for the Future of Defense

When I think of UAVs, I think of the hunter-killer models the United States uses in its "War on Terror."

However, those are typically large, expensive, unmanned planes with missiles attached to them, which can fly three to five days without refueling. But in fact the U.S. military has purchased thousands upon thousands of small handheld UAVs, with the smallest designs weighing less than five pounds each.

These drones are revolutionizing the real-time gathering of battlefield information. The smaller breed of UAVs use a localized Wi-Fi type communications package instead of broadcasting their information to military satellites. This gives field troops direct access to intelligence, without it having to be relayed back from the United States.

The new UAVs also allow American soldiers to scout enemy territory without having to risk their lives.

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No Debt and High Yield Make Automatic Data Processing Inc. (Nasdaq: ADP) a "Buy"

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Most people aren't incredibly familiar with Automatic Data Processing Inc. (Nasdaq: ADP), but it's a company every investor should know.

You see, ADP, which provides payroll and human resources services to businesses, has two important traits that investors need in their portfolios right now.

First, it has virtually no debt. Its unleveraged balance sheet has made it one of the few U.S. companies with a AAA credit rating from Standard & Poor's. It also has a perfect credit rating from Moody's Corp. (NYSE: MCO).

Companies with such a high rating from S&P are rare, and the number of countries with that rating is dwindling. Even the United States is no longer in the AAA group. But this isn't the only special category in which ADP belongs.

It's also a "Dividend Aristocrat." This is the title Standard & Poor's gives companies that boast a AAA rating and have a history of raising their dividends for at least 25 years. There are currently only three U.S. stocks that are both "Dividend Aristocrats" and have a AAA rating from S&P – two things investors should look for in this volatile environment.

That's why it's time to buy Automatic Data Processing, a debt-free, steady dividend payer with a solid future. (**)

Automatic Data Processing Inc.: Safe and Profitable

The once-deep list of U.S.-listed AAA companies has dwindled to a small group of four. I've recommended a couple of them before –Microsoft Corp. (Nasdaq: MSFT) and Exxon Mobil Corp. (NYSE: XOM). Johnson & Johnson (NYSE: JNJ) is the fourth.

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Anadarko Petroleum Corp.(NYSE: APC) is a "King" in the U.S. Oil and Gas Industry

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Anadarko Petroleum Corp. (NYSE: APC) has been a big player in U.S. onshore oil and gas production, and it's about to get significantly bigger, unlocking incredible profits for investors.

Anadarko has stakes in some of the most prolific U.S. oil fields in Texas, Colorado, Wyoming, Utah, and Pennsylvania. It's also an international leader in unconventional production, employing methods like horizontal drilling to increase productivity rates from deep wells.

But a recent major development will propel Anadarko to the top of the U.S. oil and gas industry.

You see, the company reevaluated one of its Colorado oil fields and now believes it holds between 500 million and 1.5 billion barrels of oil and natural gas. This is huge. A billion-barrel field is a rare find; only a handful have been discovered in the United States.

This new discovery could increase Anadarko's annual production rate in the region by 20% in 2012. It also prompted Tudor, Pickering, Holt & Co. analysts to name the company "King of the Rockies" and raise its net-asset-value estimate for Anadarko by 5% per share.

Anadarko was already solid, but the new discovery has made it a must-have investment in the oil and gas industry. It's time to buy Anadarko Petroleum Corp. (**)

Anadarko Petroleum Corp.: An Oil Industry "King"

Anadarko's big oil find came from the Wattenberg shale in northeast Colorado. The formation was first discovered in 1970 and is listed in the top 20 U.S. oil and gas fields.

Anadarko has been using horizontal drilling, the technology it uses in the Eagle Ford shale oil field in Texas, to unlock the liquid-rich Wattenberg. Based on 11 test wells, Anadarko is confident it can drill between 1,200 and 2,700 wells over time, and will ramp up Wattenberg's development by drilling 160 wells in 2012.

The Wattenberg wells also have a quick payback rate.

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Struggling Barnes & Noble Inc. (NYSE: BKS) Will See Its Stock Plunge - For Good

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Don't believe the recent rally in Barnes & Noble Inc. (NYSE: BKS) stock – it's not going to stick.

In fact, this stock is ready to plunge.

The share price has been on a roller coaster ride all year. It climbed in February to over $18, fell to almost $8 in April, rose to around $21 in June, and then slipped to $10 in October.

Now it's on a tear again. It's moved up by 5% to 10% per day lately, soaring 65% in the past month.

But this move isn't based on strong fundamentals and good earnings. In fact, Barnes & Noble's business faces serious obstacles.

The book-retailing sector has been struggling with the growing popularity of eBooks. While Barnes & Noble has benefited from deep-pocket investors who have built a major stake in the company, the fundamentals aren't there to support this investment. It is extremely overleveraged, and the company has reached the stage where it's borrowing money to pay high dividends.

That is never a long-lasting business model.

The market agrees with this sentiment, building one of the largest short positions in a public stock.

You see, I believe the majority of Barnes & Noble's share price climb is due to shorts covering their positions. As of Oct. 14, 46.7% of the float was short.

Once this short cover period is over, I expect the stock to fall again, dipping even lower than before.

So it's time to sell Barnes & Noble Inc., before the stock rally collapses and all you're left with is a weak company in a struggling sector. (**)

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PepsiCo Inc. (NYSE: PEP) Is the Perfect Buy-and-Hold Investment

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If they aren't already, long-term investors should be digging up some solid defensive plays, like PepsiCo Inc. (NYSE: PEP).

Everyone is familiar with PepsiCo, one of the leading manufacturers and marketers of food and beverage products. And with a strong business model, steady bottom-line growth, and a healthy dividend, PepsiCo is one of those rare buy-and-hold investments.

Although its name is typically associated with soda, PepsiCo has developed a diversified product line that supports a steady revenue stream from more than just fizzy drinks. PepsiCo, through its Frito-Lay and Quaker Oats subsidiaries, is the name behind consumer-favorite brands like Doritos, Tropicana, Gatorade, SoBe Lifewater, Cracker Jack, Rice-A-Roni, and Grandma's Cookies.

Many investors already know that, though.

What you might not know is that PepsiCo's future earnings are based on much more than delicious snacks for U.S. consumers.

This global powerhouse is investing in two areas that will drive food company profits going forward: emerging markets growth and "good for you" products.

It has struck deals to develop both initiatives this year, and the efforts are paying off.

Increased emerging markets sales boosted PepsiCo's revenue from those countries 33% last quarter. Sales of healthy products are on pace this year to hit almost $15 billion, and the company hopes to double that by 2020.

When you combine its new business focuses with its existing profitable product lines, PepsiCo is strong enough to weather a global economic storm – exactly what our portfolios need to include right now.

So it's time to buy PepsiCo Inc. (**).

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EOG Resources Inc.(NYSE: EOG) Is Looking to Lead U.S. Oil Production

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EOG Resources Inc. (NYSE: EOG) has undergone a massive change in its business model – and it's paying off astoundingly.

EOG Resources used to be known as a leader in natural gas exploration and production.
But low natural gas prices led to declining profits. In fact, the company lost $70.9 million in 2010's third quarter.

So it embraced a major production and technology change. EOG perfected horizontal drilling techniques to access shale rock formations trapping large reserves of oil – instead of reserves of gas, as many competitors were doing.

Now EOG has transformed from a leading gas drilling company to a major oil producer, increasing its liquid production last year by 49%.

With this new production model, EOG's profits are driven by high oil prices instead of depressed natural gas prices. The company just reported its third-quarter earnings and the results are astonishing – it turned a loss from the same quarter last year into a blowout earnings surprise this year. Net income hit $541 million.

The bottom-line growth helped the company's share price rally 20% since earnings were released Nov. 2.

By changing its focus to profitable oil production, EOG Resources is now a low-risk, high-reward energy stock, making it a "Buy" for investors looking to cash in on rising oil prices. (**)

EOG Resources Inc.: Unlocking Profits from Shale Oil

EOG Resources is one of the largest independent (non-integrated) U.S. oil and natural gas companies, with proven reserves in the United States, Canada, Trinidad, the United Kingdom, and China.

It's the largest oil producer in North Dakota's Bakken Shale, and the largest producer in the Eagle Ford Shale in South Texas. These two shale oil fields have played a key role in ramping up U.S. oil production over the past few years, with each having an estimated 4 billion barrels of recoverable reserves.

EOG's extensive operations in these fields have pushed its total liquid production to 130,000 barrels per day, and Chief Executive Officer Mark G. Papa said he expects to reach 200,000 barrels per day in 2012. That could make the company the second or third largest oil producer in the United States.

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Marathon Petroleum Corp (NYSE: MPC) May Soon Be the World’s Richest Refiner

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There's an oil price trend that's giving some oil refining companies a huge competitive edge.

Specifically I'm referring to Marathon Petroleum Corp. (NYSE: MPC).

You see, production from North Dakota's Bakken oil shale formation – the largest known reserve of light sweet crude in North America – is soaring. It went from a mere 3,000 barrels a day in 2005 to 225,000 in 2010, and could hit 350,000 barrels a day by 2035, according to the Energy Information Administration.

Currently, there aren't many ways to ship oil out of the basin, and supply in the region is outpacing refining capacity. That's helped keep the price of West Texas Intermediate (WTI) crude lower than the price of Brent crude in London, with the spread now around $17.

Since U.S. East Coast refineries usually source Brent-priced crude oil, their input costs have skyrocketed. This is one of the reasons major integrated oil companies have shed their refining capacities.

But Midwest refineries have been able to save money by running WTI-priced oil, getting crude at significantly cheaper prices than globally sourced locations.

With the Bakken formation ramping up production in coming years to meet growing demand, the region's refineries will continue to enjoy low input costs. It also means refineries that have access to Bakken oil will have a steady supply that's cheaper than their competitors.

This is why Marathon Petroleum Corp., the largest Midwest refiner, is a "Buy." (**)

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