Posts Tagged ‘pg’

  • Happy 125th Birthday, Dow Jones Industrial Average!
    , May 26th, 2021 at 9:01 am

    The Dow Jones Industrial Average (DJIA) was born 125 years ago on May 26, 1896. To give you an idea of how long the Dow has been around, its birth is closer to the Declaration of Independence than it is to today.

    The index was the brainchild of Charles Dow, who was the editor of the Wall Street Journal. When the index started, it only had 12 stocks. The list grew to 20 stocks in 1916, and it reached its present total of 30 stocks in 1928.

    The index has only changed 55 times over the last 124 years. In fact, the Dow has had two separate streaks of going 17 years without a single change — once from 1939 to 1956, and again from 1959 to 1976.

    Until recently, General Electric (GE) was the only one of the original 12 from 1896 left in the index, but GE was removed two years ago. A few stocks have been long-time members. ExxonMobil or Standard Oil of NJ (XOM) has been a member since 1928. Procter & Gamble (PG) joined in 1932. A few other stocks like Coca-Cola (KO) and International Business Machines (IBM) were taken out only to be put back in.

    The Dow’s history with IBM is a good investing lesson. The keepers of the index decided to kick out IBM in 1939 only to change their minds 40 years later and bring it back. Over those 40 years, shares of IBM soared 22,000%.

    Oops.

    If IBM had been in the index, the Dow would have broken 1,000 in 1961 instead of 1972. By my rough estimate, the index would be over 4,000 points higher today. If that wasn’t bad enough, the Dow was subsequently punished by IBM’s addition in 1979 as that marked a period of slow growth for the company.

    I can’t hide my feelings. I think the Dow is a lousy index. I rarely refer to it here on the blog. The reason is that it’s just 30 stocks and the index is weighted by price instead of by market value. Perhaps that made sense 80 years ago, but it’s not needed today. The only reason the Dow is still in the news is because the index is owned by the Wall Street Journal.

    Still, I have to give credit for Charles Dow for starting the index. Anything that’s still quoted 125 years later deserves a tip of my cap.

    Here’s to 125 more!

  • Procter & Gamble Lowers Guidance. Again.
    , June 20th, 2012 at 11:35 am

    One of Wall Street’s most respected blue chips announced more bad news today. Procter & Gamble ($PG) had previously told us to expect fiscal fourth-quarter earnings to range between 79 cents and 85 cents per share. Now P&G says that range is 75 cents to 79 cents per share.

    The market is not pleased as the shares are currently down about 3.3% today. Procter & Gamble is already in Wall Street’s doghouse. In April, they delivered lousy earnings and seemed to have a litany of excuses. Analysts were quick to point out that P&G’s competitors seemed to be doing a good job of avoiding these issues:

    “It strikes me that from an execution perspective, P&G isn’t delivering,” said Citigroup analyst Wendy Nicholson.

    “There’s so many excuses: Not our fault, competition didn’t follow the pricing; not our fault, Venezuela changed; not our fault, the developed consumer isn’t robust,” she continued. “And I just say to myself, God, where is the mea culpa?”

    In April, P&G lowered their full-year forecast (which ends at the end of June) from $3.93 – $4.03 per share to $3.82 – $3.88 per share. Today’s news brings the range down to $3.78 – $3.82 per share.

    For 2012, P&G expects core earnings to rise by mid-single digits. Let’s say that means 5%. If the company makes $3.80 per share this year, then we should expect earnings of $3.99 per share for 2013. Wall Street had been expecting $4.11 per share. My simple stock valuation method gives P&G a fair value of $46 per share which means that the current price is more than 30% too much. Stay away from P&G.