Saturday, February 28, 2009

added more P&G;

Just in case anyone hasn't noticed, consumer staples stocks, those that are usually deemed to be safe havens in a market storm, having been falling like rocks lately. Procter & Gamble is down 22% year to date, Coca Cola (KO) (10%), Diageo (DEO) (19%), Pepsico (PEP) (11%), Johnson & Johnson (JNJ) (14%), and Wal-Mart (WMT) down 13%.

I think this is just a natural stage in a major market decline where investors are realizing that these names have been piled into when the market got ugly and they are now being liquidated due to their relatively higher value. Another reason for the declines are likely due to evidence in some sectors that consumers are trading down and using less brand name goods that people might normally consider recession resistant. For example, alcohol and some health care goods have shown signs lately of reduced demand. For these large global names, the fact that the US dollar has strengthened over the past year has not helped.

In my opinion the recent decline in global consumer goods firm Procter & Gamble has been overdone. This stock is trading at 2003 levels, when it's earnings and dividends per share were $1.85 and $0.91 respectively. The company now earns $3.68 and pays a dividend of $1.60, which will be raised by April, 2009.

With a P/E ratio of 13x, this is certainly good value for a company with 25 Billion dollar brands and a growing presence in the developing world. I confidently added to my investment in PG this past week.


Sox Fan said...

Warren Buffett said he's bearish on the US dollar. Do you think it's too early to buy US stocks and pay the current exchange rate?

POL said...

MG, I did the same 2 weeks ago!

What do you think of the current exchange rate? Even if the canadian dollar is low, I think PG stock has been so much oversold that it could generate huge gains in the next coming years...

Dividend Growth Investor said...


I recently added some PG around $53. I think consumer staples are the stocks to own in 2009 as well. Of course diversification is the thing to do to build long term weatlh

MG (moneygardener) said...

It feels like CAD vs. USD has settled into a range and I don't see that changing too drastically without the economy really recovering a and oil going over $90 again.

Nurseb911 said...

Same here on the CAD. I think too many investors have the mentality that the CDN$ will appreciate again to where it was and that they won't want to buy US stocks now that they are "more expensive." When you consider the hit many of them have experienced and their relative valuations at present currency shouldn't be the sole focus for an investor to not buy. We could see the CAD go up, but the valuations of these depressed stocks might move even further.

Nice grab on P&G though MG

Anonymous said...

As a Canadian, I find it difficult to invest in anything American right now due to the risk of US dollar weakness.

Also, most brokerage houses, including the one I use (eTrade) do not allow me to keep funds in US currency in my RRSP. I noticed that qTrade does allow this, which got my att'n. Maybe in 2-3 years, if the US can actually turn things around, I'll consider moving everything over to them.