Kevin Njeru, 18, Gainesville, FL
Tip for beginners: Join an investment club. Collaborating with others allows you to pool resources and financial sources. It also allows for feedback and additional research on companies.
My favorite holding: Procter & Gamble Co. (PG)
Why I like the stock: It’s an easy to understand company for young investors because it manufactures products such as Tide laundry detergent, Pampers diapers, and Crest toothpaste. Procter & Gamble’s products are daily essentials and as a company, it’s trustworthy. They’ve recently increased prices on products, which has helped generate a profit in the sagging economy. The stocks value has taken a hit, falling more then one-third since last September. Long term, I see them performing well because of brand equity and the fact that consumer goods will always be a profitable industry.
The Professional Opinion
Strong Buy: 1
Wendy Nicholson of Citigroup Inc.:
“We rate the shares of Procter & Gamble hold/low risk. Our hold rating primarily reflects the stock’s valuation, which we find to be full. Indeed, while we view the acquisition of Gillette to be a positive for Procter & Gamble and its shareholders over the long term, we believe that it will become increasingly difficult to generate accelerating sales growth given Procter & Gamble’s size. While we believe Procter & Gamble has impressive long term growth momentum, we also worry that various pressures on Procter’s business may eat into any potential upside to earnings per share estimates; especially given that we think some of the company’s higher-margin businesses (e.g., pharmaceuticals) are currently decelerating.
Overall, though, with Procter & Gamble’s excellent track record in integrating acquisitions, continued success at launching higher-priced, higher-margin new products, and management’s proven ability to manage exceptionally well its increasingly large and diverse business, we are hopeful the company will continue to meet, if not exceed, our earnings expectations.”
Michelle RhodesBrown, of Profit Investment Management:
“Procter & Gamble is a well-run, large, global consumer staples company. In any dogfight you want this company on your side, for the most part. They have huge mega brand large advertising budgets they use to gain market share.
It’s not a “buy” because they’re so large that growing is difficult. If you look at their sales growth, it’s more driven by price increases than by volume increases. That makes people nervous. Procter & Gamble attributes its volume declines to customer (retailer) destocking. Because energy and commodity prices have come back, they worry about whether they can keep their prices.”