Johnson & Johnson

Johnson & Johnson was the Fund’s top-performing stock in Q1 2026, rising 18.7% as markets gained confidence that the company has been effectively replacing revenues of Stelara, a drug that accounted for more than 10% of sales at its peak. This confidence was fuelled by a very solid earnings print with which the firm reported full-year sales growth of 6%, despite a 7.5 percentage point headwind from Stelara’s loss of exclusivity. Performance was broad-based, with strong momentum across a number of key drugs within the firm’s pharma division. Importantly, management reiterated solid 2026 guidance at 5.9% and confidence in achieving the upper end of its 5-7% long-term sales growth target, with a credible path to double-digit growth later in the decade.

Johnson & Johnson (JNJ) appreciated 18.74% during the first quarter driven by strong Innovative Medicine growth, improved outlook for the medical device segment, and management’s comment that there is a 'line of sight' to double-digit revenue growth by the end of the decade. JNJ’s Innovative Medicine segment continues to provide results that exceed expectations. Rapidly growing products in oncology and immunology, combined with a solid pipeline of new candidates, has changed investors’ narrative on JNJ’s pharma business from one of patent risk to pipeline durability. In MedTech, the company is reallocating capital from low-growth businesses, like Orthopaedics, and toward higher-growth segments, particularly cardiovascular and electrophysiology.

Johnson & Johnson (JNJ) appreciated 18.74% during the first quarter driven by strong Innovative Medicine growth, improved outlook for the medical device segment, and management’s comment that there is a 'line of sight' to double-digit revenue growth by the end of the decade. JNJ’s Innovative Medicine segment continues to provide results that exceed expectations. Rapidly growing products in oncology and immunology, combined with a solid pipeline of new candidates, has changed investors’ narrative on JNJ’s pharma business from one of patent risk to pipeline durability. In MedTech, the company is reallocating capital from low-growth businesses, like Orthopaedics, and toward higher-growth segments, particularly cardiovascular and electrophysiology.

Johnson & Johnson (JNJ) appreciated 18.74% during the first quarter driven by strong Innovative Medicine growth, improved outlook for the medical device segment, and management’s comment that there is a 'line of sight' to double-digit revenue growth by the end of the decade. JNJ’s Innovative Medicine segment continues to provide results that exceed expectations. Rapidly growing products in oncology and immunology, combined with a solid pipeline of new candidates, has changed investors’ narrative on JNJ’s pharma business from one of patent risk to pipeline durability. Enthusiasm is also rising for JNJ’s imminent entry into the robotic surgery market.

We increased the position in Johnson & Johnson (J&J), a large-cap health care company with two segments, Innovative Medicine and MedTech. J&J has been actively optimizing its portfolio, separating and spinning off lower-growth and less attractive businesses and investing in higher growth, innovative businesses. This has led to a portfolio of businesses with accelerating growth, which we think justifies a higher multiple. Management guidance for 2026 operational sales growth is roughly 6%, and could accelerate to double-digit revenue growth by the end of this decade.

Johnson & Johnson also delivered a strong quarter, with shares rising 22.3% in USD. The global healthcare and pharmaceutical leader reported robust second-quarter results in July, beating top-line expectations and raising its full-year 2025 guidance on foreign exchange tailwinds and stronger-than-expected core business performance. The robust quarter came despite sector-wide uncertainty related to US pharmaceutical regulations, tariffs, and the ongoing loss of exclusivity for flagship drug Stelara. Notably, MedTech revenue exceeded consensus by 3%, underscoring the resilience of Johnson & Johnson’s highly diversified business model.

Johnson & Johnson also delivered a strong quarter, with shares rising 22.3% in USD. The global healthcare and pharmaceutical leader reported robust second-quarter results in July, beating top-line expectations and raising its full-year 2025 guidance on foreign exchange tailwinds and stronger-than-expected core business performance. The robust quarter came despite sector-wide uncertainty related to US pharmaceutical regulations, tariffs, and the ongoing loss of exclusivity for flagship drug Stelara. Notably, MedTech revenue exceeded consensus by 3%, underscoring the resilience of Johnson & Johnson’s highly diversified business model.

Johnson & Johnson (JNJ) has outperformed as medical devices performed better across the board. The Fund's exposure to JNJ is part of a broader strategy to invest in companies with durable competitive advantages and attractive growth prospects. The manager remains confident in JNJ's ability to deliver sustainable long-term investment returns, particularly in the health care sector, which has shown resilience despite market fluctuations.

Despite regulatory pressures on health care stocks, we see a better outlook for Johnson & Johnson, particularly with Tremfya, which could emerge as a next-generation leader in immunology. This potential, combined with the company's strong fundamentals, positions it favorably in the current market environment, where overlooked, high-quality businesses are gaining traction.

Johnson & Johnson was a top contributor to Distillate’s U.S. FSV strategy, impacting relative returns positively by 0.58%. The company is part of the health care sector, which constitutes 23.4% of the U.S. FSV portfolio. This indicates a stable presence in a diversified portfolio, but no explicit bullish or bearish argument is made regarding its future performance.