The lack of consensus over what the market wants to do has resulted in a trading range for the past ...
Procter & Gamble: Mean Reversion?
01/08/2016 8:00 am EST
I’ve written extensively over the years about the tendency of Dow Jones Industrial components to perform well after periods of underperformance, explains Chuck Carlson, editor of DRIP Investor.
Procter & Gamble (PG) is one of the worst performers in the Dow Industrials this year, so history says a better year is likely in 2016.
I know that betting on this stock in recent years hasn’t exactly been a profitable strategy.
Wall Street has been frustrated with the company’s growth. And there has been a bit of a revolving door in top management. Still, I think P&G is an interesting mean-reversion story for 2016.
Another reason I like the stock’s chances in 2016 is that I expect some of the global headwinds that have hurt the company—including the strong dollar and weakness in emerging countries—to dissipate a bit in 2016.
Other factors that should help the stock are continued opportunities for restructuring and asset sales, as well as a dividend yield of 3.4%.
I also wouldn’t be surprised to see activist investors apply more pressure in 2016 if the stock remains in the doldrums. I would feel comfortable buying the stock at current prices and look for double-digit total returns in 2016.
Procter & Gamble offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company.
Minimum initial investment is $250. Subsequent investments are a minimum $50. There is no enrollment fee and no fee to reinvest dividends.
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