This post continues a series on defensive stock-picking strategies.
With the equity markets in a choppy, consolidation mode (or perhaps worse), the consumer products sector has appeal. One consumer products name worth a look: Procter & Gamble (NYSE: PG).
If General Electric (NYSE: GE) is 'the mutual fund in one company,' then Procter & Gamble is the 'consumer products aisle' in one company. Pick a brand, any brand. PG has about 300, including names you know well like Crest toothpaste, Folgers coffee, Bounty paper towels, Tide detergent, Gillette shavers. PG's core product line contains brands that are entrenched in U.S. culture, and in U.S. consumer buying patterns.
Procter & Gamble says its mission is "to provide superior quality and value to the world's consumers," and both revenue and consumer satisfaction suggest it's "on message," to borrow a political campaign strategy phrase. To be sure, in the kaleidoscopic consumer products market, one can always find a designer/niche product -- a salon-based shampoo, for example -- that argues that it's better, for a price, than PG's product. But PG has moved forward, first domestically and now globally, confident that its products will offer more than adequate value for the typical person. That strategy has been working for, oh, about 170 years.
Further, PG's 5-year average revenue growth rate is 13.7%; its 5-year EPS growth rate is 14.5%. Procter's shares closed Monday up 26 cents to $71.06.
What should investors not expect from PG? Don't expect gargantuan revenue growth or the introduction of niche product that are 'all the rage' / faddish. PG is too big to have any one product, no matter how successful, take it to a new stratosphere of revenue, and most of its products are designed for mass appeal.
Stock Analysis: Procter & Gamble is a low-risk stock. Short-term, PG's stock is nearing overbought levels, and is vulnerable to a pull-back. Also, PG's p/e of 23 is elevated. Hence, PG is not a short-term play. Long-term investors with a +2-year investment horizon should be rewarded from PG's shares.
Deere up on Q4 earnings performance
Reid Hoffman: LinkedIn will go public (at some point)
Retailers can't wait for Black Friday, open Thursday
Reader Comments (Page 1 of 1)
10-23-2007 @ 6:42AM
hal c said...
Even P & G is vulnerable to the effects of generic brands. CVS, Publix, Costco, and others are taking a bigger chunk of their pie every day. Buyers will flock to these off brands more and more as they gain more of our confidence.
A weakening economy also drives consumers to pinch more pennies, another negative for the bloated prices branded products companies think they deseerve.