Wrigley's Disappoints, Added Johnson & Johnson

Well, the February 7th earnings date for Wrigley (WWY) came and went, and the earnings results turned out not to be so hot. Estimated earnings by analysts were $0.55 per share, and actual earnings turned out to be $0.42 per share for the fourth quarter 2005. I was going to simply dump the options and focus on something else, but I decided that Wrigley's is actually even more undervalued. The current price/earnings ratio stands at 26.6, which is the lowest this company has seen since 1995. And the actual press release is filled with positive news: the major reason for the earnings-per-share drop was due to restructuring costs from the Altoids/Lifesavers acquisition. Bill Wrigley himself seemed very pleased that global sales broke $4 billion, and the company raised the dividend rate yet again.

On another note, I picked up a position in Johnson & Johnson (JNJ), 1,732 shares at $57.70. This stock's price/earnings (trailing & forward averaged) is currently only 15.7. The depreciation in stock price can generally be attributed to the failed bid for Guidant, but Johnson & Johnson will still be compensated by Guidant for their time and effort during the bid process. They are a very strong and ethically minded company, which also happens to be valued relatively cheaply compared to the last 10 years of price/earnings data.

I am beginning to believe that it is not as easy as I had thought to use a value-investing methodology, while limiting oneself to a 10-week trading period. Oh well, I will hold on to most of my current positions because as they fall, they simply become more undervalued and attractive. I may also look into opening some more short positions before the end of this 10-week period.