(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — We have 17 health care sector names on the Best Stocks in the Market list, a cohort that has been growing throughout the course of the year. Today we’re going to tell you about one of the most well-known and respected health care stocks in the world. Johnson & Johnson (JNJ) has spent the post-pandemic period becoming leaner and meaner and Wall Street is finally giving the company credit for it in the form of increasing earnings expectations and a rising stock price. JNJ shares have been consolidating in a well-defined range for years now — this action is what technicians refer to as “building a base.” The general idea is that, if and when a stock breaks out from its typical range, the move could be extraordinary if that range had been constraining the stock for a long time. An old adage from The Street is “the bigger the base, the higher in space.” Well, this is a big one… JNJ is in the midst of a massive transition in which it has identified and executed on a few main goals: Becoming a pure-play health care company focused on two high-growth pillars: Innovative Medicines (oncology, immunology, neuroscience) and MedTech (surgical robotics, cardiovascular devices, orthopedics). They spun off the consumer products division – renamed Kenvue – in 2023 in order to streamline focus and free up capital. Pipeline expansion – JNJ is working on expanding its own in-house next-gen drug platforms like IMAAVY (immunology) and CARVYKTI (oncology), while acquiring new assets such as CAPLYTA (CNS) via Intra-Cellular Therapies. JNJ is also going hard in the devices and robotics business as it makes some cutting edge bets on the future of medicine. Becoming a MedTech giant is an exciting new development for shareholders wondering where the future growth for this business may come from. They’ve been expanding into the high-growth cardiovascular space (Shockwave, Abiomed) and building a robotics business – the OTTAVA surgical platform. Cleaning up the way M & A has historically been done at JNJ (and elsewhere in Big Pharma) has been one of Duato’s stated goals and he ought to know, having been at the company since 1989. The new program is to be more strategic with acquisitions — disciplined deals to fill portfolio gaps rather than mega-mergers. Lastly, there’s still a legal risk overhang related to the talcum powder lawsuits. JNJ has now made three unsuccessful attempts to put an end to the class actions and the torts via bankruptcy court. They’re now going to try a different tack — litigating cases individually to clear the overhang. The Street is not terribly concerned with what the final financial outcome will be on this issue. These initiatives are starting to bear fruit. JNJ joined the Best Stocks list on July 16 and, as you can see, this is coinciding with an uptick in the outlook for earnings. Below, I am showing the last thirty years or so of JNJ’s share price versus its trailing twelve months’ earnings per share. With this trailing 12-month EPS number rocketing to record highs, it shouldn’t be a surprise to see the stock price now following suit. In July, JNJ raised guidance for the rest of the year and had a lot of great news to share about the future. The stock’s been rallying ever since and is now about to challenge the high end of the range. After five years of consolidation, the next earnings report (Oct. 14 premarket) could be the catalyst to finally take the stock into a new space. Sector leaderboard As of Sept. 15, there are 204 names on The Best Stocks in the Market list. Top sector ranking: Sean — Health care has had a difficult year. It’s the worst performing sector in 2025 up 1.3% year to date. There have been a ton of negative headlines, sending household names like UNH and REGN both down 60% from highs. But something interesting is going on under the surface. Some of these stocks are making comebacks. These are some of the best health care performances of the past month: UNH up 29%, CNC up 20%, LLY up 10%, MOH up 11%. As these names put their rally caps on, they begin to get added to our list systematically. In June, there were just 11 health care names on the list; today there are 17: Top industries: Top 5 Best Stocks by relative strength: Sector spotlight: JNJ has traded sideways since about the end of 2022. This is the first meaningful breakout the stock has had since its Covid era. The fundamentals are breaking out too, as Josh noted above. As of the latest earnings, full year 2025 sales guidance was raised to $93.4 billion, representing 5.4% year-over-year growth. JNJ has now gone 5 straight quarters with consecutive revenue growth post-Covid, and this latest guidance would make it 6 consecutive positive quarters. JNJ also raised EPS guidance by $0.25 to $10.85 which would be 8.7% year-over-year growth. JNJ is a product development behemoth. They now have 13 brands growing double digits under the innovative medicine category. Within this innovative medicine category, they have 21 products in the market and 46 “approved indications” which are the specific diseases or conditions that regulators have authorized JNJ to treat. On the MedTech side, their portfolio of products has solid growth. The MedTech division grew revenue by 6.1% year over year, led by cardiovascular products, which grew by 22.3%. JNJ has this visual in their earnings presentation: Year to date, JNJ has allocated $6.7 billion toward research and development, distributed $6.1 billion in dividends to shareholders, and committed $15 billion to M & A activity — much of which, as Josh noted, is currently being streamlined. Risk management Josh — Investors should be collecting the roughly 3% dividend yield and accumulating opportunistically so long as the stock remains above that obvious support at $150. Below there and something may be wrong, I would exit and let the stock set-up again. Shorter-term oriented traders can obey the rising 50-day trendline as they anticipate the big breakout (above $180). I would take a half-position here and then double up as it breaks out. Averaging up on a breakout is a professional move. Most amateurs can’t bring themselves to do it. 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