PG: Bedrock Stock

In these very fickle times, where top wall street firms are going belly up, stock markets making 400 point moves the norm, its very important to have a strong defensive name to stabilize your portfolio through thick and thin. Procter and Gamble is just the stock to fill that slot within your portfolio. The wide array of consumer products that PG sells will weather the worst of recessions and so will its stock. PG operates in three Global Business Units and seven reportable segments. The Beauty and Health Unit consisted of the Beauty segment (30% FY07 revenues) and the Health Care segment (12% of revs); the Household Care Unit had the Fabric Care and Home Care segment (24% of revs), Baby Care and Family Care (16% of revs) and Pet Health, Snacks and Coffee (6% of revs); and the Gillette Unit had blades and razors (7% of revs) and Duracell and Braun (5% of revs). These are low cost consumer staples products that have been and will continue to sell strong throughout this recession. PG is an excellent marketer that has and will continue to outperform its peers. It has been able to pass through high commodity costs onto the consumer and operating margins are expected to increase this year. PG is also a strong beneficiary of a weaker dollar and overseas growth. PG markets in more than 180 countries and 64% of total sales were outside of the country. There are hundreds of millions of consumers entering the middle class in BRIC and other emerging markets that are in need of consumer products that PG offers. This will continue to drive growth for PG in the coming quarters and years. PG is one of the best financially capitalized companies out there. As of 12/31/07 PG has $6 billion in cash and a strong annual cash flow of about $10.3 billion. This is how PG can implement one of the best stock buyback programs in the market which they pledged to buyback $8-10 billion of stock a year for three years. In this recessionary environment, PG will continue to attract more and more investors due to its recession proof business. From its fall off its high at $75 to $67 this gives us a great buying opportunity. PG is expected to increase EPS by 14.8% in FY08 to $3.49. At a 22 P/E which is about its 5 year P/E historical average this would give us a $77 stock. With its nice 2% dividend this would yield us a solid 17% gain. You can also foward any questions and concerns to Mr. Warren Buffet who holds a very large position in Procter and Gamble.