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Dykstra: JNJ Options Are Back in the Game

Lenny Dykstra

I like to focus on certain sectors and themes in making my investment decisions, and right now I find the health-care sector particularly attractive. Americans continue to increase their health care spending year after year, and with babyboomers aging, the sector should continue to experience spectacular growth.

Furthermore, the focus on providing increased access to health care will yield even higher amounts of spending on health care.

One company I continually turn to in the sector is Johnson & Johnson(JNJ). I first bought calls in Johnson & Johnson following a tumultuous period for the stock in early March.

Johnson & Johnson is arguably one of the top five companies in the world. Why? Diversity. It sells products that are complicated -- like its biotechnology-derived product that stimulates red blood cell production -- and products that are simple, like over-the-counter products like Tylenol, Sudafed, Soap, Motrin, Neutrogena, Pepcid AC.

The company boasts a steady revenue base both at home and abroad. With the dollar showing historic weakness, foreign revenue holds the potential to drastically increase profits. In July, Johnson & Johnson reported 9% growth in second-quarter profits, leading to a nice boost in the share price.

Steady growth should continue thanks to its diverse array of products, and regardless of which way the economy moves, people will continue to spend money on health care.

On a technical note, the stock broke above a key resistance level recently, closing Tuesday at $64.55. Such a move makes for an opportune deep-in-the-money (DITM) call play. With that in mind, I will place a limit order to buy 10 April 55 calls (JNJDK) for $10.60 or better.

Now, as we do every week, it's time to get to the bottom line, the item that matters most; the numbers! I don't need to remind you -- it will always be about the numbers.