Procter & Gamble (PG)

It is a bet on China. They have been underperforming there. Diapers are now being bought from Japan. They were told by the Chinese that their products were old and outdated.

Mega company with 23 brands that generate over a billion $ in revenues and it is about as global as you can get.

This is a way to play the consumer staples sector where you are trying to get the best of the group. Has an upside target of around $97. The risk/reward is pretty good from here.

You really can’t go wrong with a big consumer discretionary like this. He would have no problems with owning this for long periods of time. The issue is that they have a lot of global sales and the US$ is stronger. There are issues showing up in some of the emerging markets. A classic story of headwinds overseas. Valuation has come down and it is trading at a 21X PE ratio.

The consumer companies have gotten a great underlying bid from the market because they are predictable and pay out a lot of cash. People see them as fixed income. The problem is that they are slow growers. It is too expensive for him.

60% of revenues come from outside of North America. That means the currency is going to be a headwind against them. Trading at about 18X forward earnings, with probably a mid-single digit 6%-7% long-term EPS growth rate. That puts it at a pretty high clip in terms of valuation. Pays a nice dividend of 3.75%.

The whole pullback on the stock is related to emerging markets. 40% of revenues is emerging markets. He is very interested in taking a look at this in the near term. However, in the consumer brand space, he would be a little more interested in the short term on a Constellation Brands (STZ-N) or moving more into a healthcare orientation company.

Definitely challenged by a high US$. He likes it for its low volatility. One of the most stable stocks in the S&P 500. A stock that you can own and sleep well at night. Trading at about 17X earnings. 3.9% dividend yield.

Thinks the stock is fine. If you have ridden it down it is probably better value now than it was 6-8 months ago. A lot of these consumer staple stocks got to trading at multiples way above their normal historical pattern. Now trading at about 16X next year’s earnings, and trading in line with the market. Dividend yield of 3.7%.

This is on his radar because it is in the consumer staples area. Not all that sensitive to consumer spending. Does a lot of its business outside of the US, so the strong US$ has been a big negative on its sales and earnings. At some point that will create a Buying opportunity. If you are a long term investor, you are probably okay buying it here.

Don’t get out right now. Shareholder activism is starting to rise up and they are talking about a split up of the company. Don’t get out entirely. There is not much downside.

He would have to categorize this with a lot of other consumer package companies. They are good companies, but tend to struggle for a catalyst. They tend to be low single digit growers. In many, many cases they are trade at an exaggerated P/E ratio, in large part because of the dividends. They have offered higher dividends because they have predictability of cash flow. In the low interest rate environment it is very attractive, but interest rates are about to start to rise. High dividend payers will have less cache and the multiples are going to suffer.

20x earnings a decent yield, They have a massive amount of products and are getting out of products that are not doing well. Re-assessing how to deal with emerging markets.

Doesn’t score particularly well on a price momentum basis and has been trending down with a lot of other consumer staples. The challenge with consumer staples right now is that they are a defensive part of the market and tend to trade down as bonds go down. He holds a “small” position simply because it is a stable stock and is not going anywhere. If you are holding this for 10 years, the entry point is not as important. Dividend yield of 3.3%.

A very high quality global consumer products company. It plays into the whole evolving expanding middle-class in emerging markets. She has chosen Unilever (UN-N) instead because it is much better positioned in emerging markets. Over 57% of their revenues come from that area. Growth is not coming from developed markets; it is coming from emerging markets. This company is restructuring and refocusing, and talking about selling some of their non-core divisions, which could be a catalyst for them. Probably an attractive entry point at this time.