Talk to any money manager and he or she can tell you about the
client who is terrified of risk.
For such investors,Procter & Gamble (
) is close to ideal. The beta is 0.50, which means every time the
market coughs, this stock merely clears its throat.
Of course, that also means when the market leaps, P&G sits
and taps its toes. This is the way your Aunt Rose likes her
stocks. She wants a stock to act like a bond, and she doesn't
mean James Bond.
Consider P&G's steady virtues:
P&G has raised the dividend 56 years in a row. The yield
Earnings rose in 18 of the past 19 years. The three- and
five-year EPS Stability Factors are 2, on a scale that runs from
0 (calm) to 99 (wild).
Revenue growth seldom reaches double digits (five times in
the past 19 years), but sales rarely retreat (twice in 19
On Friday, however, P&G did something Aunt Rose wouldn't
It gapped up from a first-stage, base-on-base pattern in
torrid volume. The buy point was 71.09.
A gap-up out of a base is exceptionally bullish. It's one of
the few cases in which an investor can buy shares beyond the 5%
If you're managing Aunt Rose's account, it's best if you don't
draw attention to Friday's move. (And if you're reading this,
Aunt Rose, turn the page now. It only gets worse.)
A gap-up for a conservative stock like P&G is unusual. So,
what's happening with P&G?
P&G reported strong quarterly results -- topping views on
EPS by about 10% and by 1% on sales. That alone can't account for
About 11 months ago, P&G announced that it planned to
eliminate 5,700 of its 129,000 jobs. The cuts were part of a
restructuring to squeeze costs and up margins.
The payoff is kicking in. Quarterly after-tax margin grew from
11.9% in Q2 2012 to 15.1% and now to 16%.
The Street expects EPS to grow 3% in fiscal 2013 ending in
June but triple to 9% in fiscal 2014.
At the earnings call Friday, CEO Bob McDonald said organic
sales growth was more than 20% in Brazil and India. More P&G
products are building scale in new markets.
How far P&G can take that
could spell the difference between what Aunt Rose wants and what
the market wants.