In Focus

Procter & Gamble

NOTE: June was a month for buying. So for the whole month, we will be going into detail on the companies that we recently considered for our quarterly Chick "buy." We ended up purchasing stock in Medtronic (MDT) on June 3, 2001, but there were many, many great companies that didn't get our majority vote. We wanted to highlight them as it was a close call and they are still up for consideration for our next buy in September. For more on the companies that were considered, and what we'll be featuring all month, check out our summary.

This will be the third time I've touched on Procter & Gamble (PG:NYSE) and this should surprise no one. Once I get my underwear in a bundle over a company, I tend to really sink my teeth in and sell 'em like gangbusters. Chick Cheryl may be the biggest cheerleader for the Chicks, but when it comes to posturing for a company, my pompons are much bigger. (So is my butt, but who's measuring?) Anyhoo, the first time I touched on P & G  was back in January where I carefully examined the company responsible for allowing me to indulge in potato chips for the first time in years. The second time I actually got to run them through the Dozen, and they stood up quite well. Of course, since then some things have changed and depending on your point of view, it's either a major bummer or a major opportunity. You can only guess which direction I'm gonna go here...

Last you'd heard from me, Procter & Gamble was getting ready to shift their focus from manufacturing and selling just about everything, to selling off the debris and concentrating on their biggest sellers and their biggest markets. That continues to be their plan. We've seen them unload the majority of their food products with the exception of their Folgers, Crisco, and Jif products and of course, the joint venture with Chick-held Coca-Cola and the snack food arena. Otherwise it's back to basics and jumping headfirst into marketing their hair and skin care lines, healthcare products, baby/feminine products and fabric and home care. With these changes comes a typical loss of synergy, and while the company is moving ahead they will have to suffer the all-too-common growing pains. So as their stock will fluctuate and tend to be representative of investor hesitation, one can consider any dips they take as a chance to "get while the getting's good," or run away leaving skid marks and a trail of smoke behind.

Ready, Okay!!  Gimme a "P!"

"P" is for Paradigm. Yes, paradigm; P&G  is a terrific model that has survived generations and generations of changes and still came out on top. This company has been around since the 1800's and has stood the test of time. They have managed to create and manufacture numerous products with an incredible percentage ranking number one. Their biggest downfall might be, perhaps, that they got too big. But the beauty of P&G is their ability to see a problem and fix it. Hence, the selling off of many of their food products, and the laying off of some 17,000 employees. These kinds of moves make people nervous, but when it comes to business strategy they can be a necessity. P&G knew that they needed to find a way to cut costs as well as increase sales. With higher revenues they will be able to shift their weight toward marketing their already successful lines. Achieving homeostasis* is something P&G does well and the reason Paradigm is such an appropriate description for them.

Gimme a "G!"

"G" is for Growth. And this is huge. Often, when we talk about "sexy" stocks, we're referring to those big mothers who have incredible amounts of growth in short periods of time.the ones that most day-traders swear are out there but rarely seem to find. Procter & Gamble would NOT be considered sexy. They would be classified as "safe." The kind you put your money into that gives you a reasonable amount of growth year after year, and decade after decade.  Every now and then a company like this has big a shake-up, everyone freaks out and sells, and then when the restructuring is over and they're back on track, public confidence is restored and the stock begins to climb. President and CEO A.G. Lafley has continued to express his confidence in P&G's Organization 2005 Restructuring, and as recently as June 15, 2001, reiterated his belief that they will meet their financial commitments for the year. In May, the company had its best performance in more than a year.

What's that spell??

I think it spells opportunity. Of course, this is just my opinion and you must make your own decisions. (My kids truly believe that my word is Gospel -- that must count for something!) However, I would be really lax here if I didn't comment on one issue about P&G that really irks me. I've decided to express it in an Open Letter to P&G directly. Here goes:

Dear Procter & Gamble,

Say it isn't so. Tell me you're not considering cutting back on your wonderful Olean products. (Lie to me if you must.) According to Brad Dorfman of Reuters on June 15, 2001, your company has been disappointed in the performance of Olestra-based products and has blamed a portion of that on its poor reception by some complaints of gastrointestinal discomfort. Listen, I read those studies, but only because I took the time to research them. You have GOT to get the word out: It is completely safe. If consumers only have easy access to sensationalized programs touting the "dangers" of your products, how are they to know the difference? I cannot single-handedly change things for you, but do an old customer a favor -- don't give up. My entire future in snacking depends on it!

Think they'll listen to me? I hope so!

So that's it. My quick rundown on why I think P&G is STILL worth the gamble. They have a terrific history of keeping up with the times and continuing to be successful. They are entering a period of restructuring and to the masses, that can be intimidating. But to the Chicks, it is just another company going through some much-needed changes. Hopefully these changes will bring them back to first place. Go PG, Go PG, Go... Go... Go PG!