I share Buffett's opinion that only one model is needed. I love multiple models though. That's how mispricing occurs. Conservatively (VERY conservatively) JNJ is worth low $70s. Realistically, more like $95-$100.
What exactly do you mean by "new money"? The term is not intuitive or it means that $90 billion of actual dollars needs to be invested by investors into JNJ for it to go up $30/share.
That is what it means.
The secondary market is still supply and demand driven. To get to a $90 share price JNJ would have a market cap ~$85B higher or get rid of float significantly, which is the equivalency of paying a dividend. To accomplish this one of three things needs to happen. JNJ purchases more shares and gets rid of float, new money flows into the shares or you have a reduced liquidity pool in which fewer shares trade. i.e. 90% of the float doesn't trade and 10% trades freely so the price melts up on lighter volume having said that there is always going to be providers of liquidity as the shares rise significantly, causing sellers to come into the market and need for more marginal liquidity from the sidelines or other investments to move into JNJ.
Every model, every analyst, every Warren Buffet attempt to provide a reason to purchase liquidity at a higher price. Don't confuse what the market is, it is a way to transfer liquidity. Either in penny gains like high frequency traders or dollar gains like mutual funds, hedge funds and individual holders. In the end assuming there aren't significant amounts of JNJ outstanding off the market, you are talking about at least $50B of new capital being deployed into the stock, either by a penny run up (although HFT guys stay away from large companies like JNJ, they are looking for the rebate from the exchange for providing liquidity) or by normal investors saying JNJ is worth marginally more than its current share price up to a $90 price target.
JNJ is a good core holding but as we discussed last year when you were buying leaps then, there isn't $50-90B of marginal liquidity that is going to be pumped into JNJ. Marginal liquidity likes to push things that can move. It is easier to push a LULU or a NFLX which are relatively small then it is to push a giant like JNJ. AAPL obviously the exception but it seems every second guy that files a 13f now has AAPL as a holding, so there is your liquidity argument.
We can also get into the whole option Greeks on why purchasing top of the vega smile leaps very rarely works. What you are doing is combining two completely different investing strategies. Value investing in JNJ and rampant speculation via extreme out of the money options.
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