4 Stocks to Help You Clean Out Your Portfolio
Cody is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Every so often I like to take a look at my portfolio and reflect on my purchases. There are so many different metrics and measurements to consider before making a financial move. I’m sure I am not alone in my pursuit to find the perfect “formula” to find out what the best company is on a list of twenty. While evaluating financial statements is a very important aspect of investing, I’d like to also consider the simple side of investing.
Take a look around in your home. What are items that you always have on hand? Things that as soon as you run out of you put on your grocery list to purchase. I think we should take a look at the companies that make these products, so here is a run down on four different companies that make products everybody needs in their home.
Procter & Gamble (NYSE: PG): I guarantee you have used products made by PG. Some of its more recognizable brands are Duracell, Dawn, Cascade, Pampers, and Vicks. These items are always going to be around; so the real question isn't when to buy these products, but when to buy the stock. As investors we want to buy in when companies are valued below what we think they are worth.
As of now, PG’s price is floating just under $70. Last time that was the case was in September of 2008. Over the last three and a half years Procter and Gamble has grown from $45 to $68, but its road to slow growth has been a bumpy one. In my opinion, I would wait another three months or so (at least after the election) to see if the price bounces back down. Remember, this isn’t a quick gain play. I am recommending this as a long-term hold, but that doesn’t mean you go ahead and buy it right now. Wait for a lower value, then buy in and you will be set.
Clorox (NYSE: CLX): The king of clean is used everywhere in this germ-infected world in which we live. Schools, offices, homes, and fitness centers all use these germ-killing products constantly and are required by law (in the home it would most likely be the law of the mother) to keep a clean living area. While I this company is a long-term buy, as a general rule I’m not comfortable with buying any company before it reports its earnings. If they have disappointing results, the price can drop drastically, but if they report on target numbers, the payoff is most likely minimal. I like Clorox and their presence across the globe, but I’m not thrilled about their current price. If you want to see a good financial analysis of CLX and PG, please read this article written by my fellow blogger David Gould. Let’s put this one on the back burner and wait for the price to drop.
Colgate-Palmolive (NYSE: CL): CL has been on a tear since 2010. For a slow growth company to grow 40% plus over a two and a half year span is tremendous. CEO Ian Cook has been with the company since 1976, and I always have confidence in a company that hires from within and can guide the company through tough times.
Aside from solid leadership, CL also makes a strong array of products in four main categories: Oral Care (Colgate toothpaste) Personal Care (Speed Stick Deodorant) Home Care (Palmolive Dish Soap) and Pet Nutrition (Ideal Balance). Although I would recommend buying CL now, one thing makes me slightly skeptical. Colgate-Palmolive is only 4 points below its all time high stock price; however that was true in June of 2011 and the price has only climbed since then. So as always, do your own research on this one. This is a long-term buy in my book.
Estee Lauder (NYSE: EL): There may be more women that know this makeup, skin care, and fragrance company than men, but that doesn’t mean anything in the world of investing. EL has tripled in price from its pre-crisis mark. This makeup giant expanded their international presence and now has just over half of its income coming from the international business. The current Executive Chairman is William Lauder, the grandson of Joseph and Estee Lauder. He became the Regional Marketing Director in 1986 and has worked his way up. I like the leadership team and the growth over the last few years, but if I had to choose a stock to buy right now, I wouldn’t choose EL. I think there are better value plays out there, but this is a very viable option down the road.
If you have made it this far in my persuasion, there is one other gem of information I'd like to give you: all of these companies have dividends! I am a huge fan of reinvesting dividends in slow growth companies. It will help your investment grow leaps and bounds in a matter of years.
Occasionally a friend of mine will ask me how they should start building their portfolio. To new investors, the S&P 500 can look more like an overwhelming amount of gibberish rather than a potential gold mine. To get them started, I tell my friends to take a look around their house and write down the products they find and to look at what companies make those products. This really sends the message home that you want to own companies that are always present. Who says a begginer's strategy isn't applicable to well seasoned investors? There is no specific right way to invest, but this should help you either get started or come back to some basic ideas of investing.
CWTerrill has no positions in the stocks mentioned above. The Motley Fool owns shares of The Clorox Company. Motley Fool newsletter services recommend The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.