Household Stocks: Not Exciting, but Necessary
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Procter & Gamble had a good quarter. Heck, the firm has had two good quarters. And the market just seemed to realize it following the company's most recent earnings statement. That's good, and the way the company's stock jumped after the earnings shows that people can see a good thing. But that's the problem with only looking backward, you're only getting some of the profit.
That can be the case with a lot of household consumer stocks. Investors - and consumers - are so used to seeing them, and buying them, that they become a part of the air and water. They don't exist as investments because they're everywhere.
Household stocks are a part of what I used to tell my brokerage clients are the 'boring investment group.' Everyone wants to hear about the things they see on the news. The technology, energy and transportation sectors all command a lot more media attention than household goods. When's the last time you saw CNN do 3 minutes on toothpaste? Not recently, I'd wager. That's exactly why they're good investments. They do their thing, make money and just grow in value as everyone in the world buys the products they sell. As one of my investment mentors way back when said, “Even in the worst recession … people still brush their teeth.”
So think about these consumer stocks. They should treat you well going forward.
Procter & Gamble (NYSE: PG)
If you're not already in PG, you're going to be a little behind the curve. The firm has reported two good quarters and expanded into overseas markets. But there's still value there if you move quickly. The company still has some expected value growth with a P/E above 18, but my guess is that won't last. Even an EPS of 3.80 won't deter investors now that the herd instinct is kicking in. Get some soon and wait for six months to see if the firm's plan continues to pay off. Remember, even before the latest earnings rampage, this is still a firm that appreciated 15%+ in six months.
Colgate-Palmolive (NYSE: CL)
Just because CL has a market cap one-quarter of PG doesn't make it small. It's still sitting on a valuation of $52 billion. Another excellent household goods stock, Credit Suisse has set a target on it of $126. Given that it's at $110, that's not a bad call on their part. Stock-wise, CL has had a great year. Twelve months ago it was almost $20 dollars lower. Another great growth year for a solid, well-managed firm. It also pays a 2.25% dividend to help you make up your mind. Another one to add to your portfolio, then think about every time you're brushing your teeth. Smile as you cash those checks.
Clorox (NYSE: CLX)
Pine-Sol, Fresh Step, Glad bags and, of course, Clorox bleach. You see why I caution you not to ignore boring stocks? They're boring for a reason. Clorox hit two 52-week highs in the last two weeks and could go much higher. The firm's stock is headed upwards, just as it has for most of the last year. All told, it's gained about 16% since February and been paying a dividend of 3.30% as well. There's a lot to like here, and a lot that's investable. Add this to your stable, if you have the money.
Kimberly Clark (NYSE: KMB)
At last we come to one that I'm not that wild about. Kimberly Clark makes some very famous products, Scott, Huggies, Pull-ups...heck, even Kleenex, for heaven's sake. If that's not a product that's become a part of the environment, I don't know what is! Still, a 1% growth rate, lowered profits (even if they beat expectations, and a stock that's been flat since July makes me standoffish. Not so much that it might not be a good play, but others on this list will be better, safer long-term stocks for your portfolio. Take a wait-and-see with KMB. Maybe next time.
Household stocks. Each of these firms, even KMB, beat the S&P in the last year AND paid a good dividend. Remember this, the more boring a firm is, the less it seems to need to push its name out there, the more solid it likely is. No one can argue that these firms couldn't hire a great PR firm and get themselves out there on all the talk shows. It's just that they don't have to. The customer base for each of these firms is established and growing as the population grows. Far better you see their commercials and displays in grocery stores, than see some yammering cable television guy talking them up.
Follow Nate on Twitter: @natewooley
More columns by Nate Wooley:
- Media Hype Over Apple and Technology Stocks
- Coffee Stocks and Your Investments
- Mary Jo White, the SEC and Bank Investments
Nate Wooley has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Procter & Gamble. The Motley Fool owns shares of The Clorox 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!