Difficult
times require essential goods – plus, defensive assets with strong fundamentals
and good historical yield. It appears that difficult times may be approaching
sooner than expected. So, let’s look at the potential of Procter & Gamble
stock to act as a safeguard in volatile markets.
The word
“recession” is being mentioned by experts more and more frequently
with regard to the US economy. These economic conditions are now being
discussed not only in the long term but also in the near future. Among the
proposed dates is the later half of 2023 or the end of the year, when the
Federal Reserve will finally conclude its series of interest rate hikes – and
the consequences of this hawkish policy will chase the United States economy.
The
general situation in the US stock market probably won’t be too cheerful,
either. However, there are always assets that perform well during market
downturns. Procter & Gamble, or just PG, might be one of them. By the way,
if you’re looking for suitable stocks to add to your portfolio, you can utilize
specialized tools like stock screener. You set filters
based on your requirements, and the screener shows a list of securities by
these criteria.
Procter
& Gamble stock has shown an impressive growth of nearly 100% in the last
five years.
These
are significant figures, it seems. But it’s essential to make a comparison.
Therefore, let’s consider the performance of the S&P 500 index as well, as
it enables us to determine whether PG has outperformed the market or not (yep,
PG stock has done it).
It’s
worth noting that Procter & Gamble stock hasn’t grown in 2023; the asset
has actually lost 1% of its price. However, what lies ahead? Toilet paper,
razors, shampoos, diapers, and similar goods are definitely defensive assets.
And Procter & Gamble manufactures all of them under various well-known
brands such as Tide, Pampers, Head & Shoulders, Gillette, you name it.
Regardless
of whether this period can be classified as a crisis, it won’t deter
individuals from purchasing essential items like toilet paper – this is the
answer. Moreover, in the case of well-established brands of essential goods
brands, there are loyal customers. Usually, people don’t want to choose a new
razor or shampoo every time they go shopping if they’ve already found products
that suit their needs.
The
critical factor to consider here is inflation. Prices in shops will continue to
rise, but customers always have the option to choose more affordable
alternatives. In fact, this shift has already begun.
The
latest Procter & Gamble’s report revealed that in Q3 2022, YoY prices rose
by 10%, resulting in decreased sales volumes. The most affected units
were fabric and home care products, and the least – were health and beauty
segments. But it’s important to understand that rising prices and decreasing
sales create a delicate balance.
One more
factor in favor of PG is its consistent dividend history. The company has been
paying dividends for so long that Adam and Eve might have received them.
Most
analysts believe that Procter & Gamble stock could deliver positive results
in a medium-term or long-term perspective. The consensus forecast suggests a
growth of +11% over the next 12 months. Nevertheless, it’s essential to
remember that any forecast should supplement your own research.