One of legendary investor Peter Lynch’s favorite bits of advice for individual investors trying to figure out the stock market on their own was to buy what you know. If you’ve tried a company’s product and enjoyed it, that could be a sign to investigate the stock.
The following three companies are all giants in the consumer goods industry, and you’ve probably encountered at least one product from each of them in the past week. Even if 10-K reports aren’t your thing, just by being an American consumer you could know an awful lot about these three companies.
English candles meet Irish soap
What do you get when a brother-in-law duo of an English candle-maker and an Irish soap-maker combine forces in Cincinnati? A $218 billion dollar consumer goods giant named The Procter & Gamble Company (NYSE:PG). That’s what. The company is organized into five reportable segments.
Fabric care and home care is the largest in terms of net sales and earnings (32% and 26%, respectively). Blockbuster brands from this segment include Febreeze, Tide, Downy and Duracell.
The Procter & Gamble Company (NYSE:PG)’s second largest segment is beauty. Billion dollar brands from this segment include Head and Shoulders, Pantene, and Olay.
Up next is baby care and family care. Toilet paper and diapers is what this segment is all about.
Fourth is the company’s health care segment.
Last, and also least in terms of revenues and profits, is grooming. This segment almost exclusively deals with hair removal. Some names we all know from this segment include Gillette and Braun.
One thing investors are sure to love about this company is its incredible dividend record, one of the best in the entire universe of stocks. The Procter & Gamble Company (NYSE:PG) has been paying a dividend for 122 consecutive years. It has increased its dividend for 56 consecutive years at a annual growth rate of approximately 9.5%.
Over the past six months, insider sales outnumber insider transactions by a ratio of 10 to 1. While some may see this as a troubling sign, I attribute it more to the fact that the stock market as a whole is overvalued right now. (An excellent discussion expounding on that can be found here.) As the stock market becomes more overvalued, big names like The Procter & Gamble Company (NYSE:PG) are sure to follow suit.
Don’t underestimate the Dutch
If you do, you are depriving yourself of countless opportunities, included among them being an investment in Unilever N.V. (ADR) (NYSE:UN).
Unilever N.V. (ADR) (NYSE:UN) manages its brands in four categories. They are:
Personal Care – This segment contains Unilever N.V. (ADR) (NYSE:UN)’s hygiene products. Some names you might know from this segment include Dove, Suave, and Axe.
Refreshments - If you love ice cream, then you’ll probably love Unilever N.V. (ADR) (NYSE:UN). It owns Ben and Jerry’s, Breyers, Klondike, and the Popsicle brand.
Foods – Unilever N.V. (ADR) (NYSE:UN) owns the most popular condiment in the United States of America, Hellman’s mayonnaise. This segment also sells Ragu and Bertolli brand pasta sauces.
Home Care – This segment contains Unilever N.V. (ADR) (NYSE:UN)’s household cleaning products.
The crisis in Europe has led the the Euro becoming noticeably weaker against the dollar. The 2008 euro-to-dollar exchange rate was roughly 1.4, and in 2012 that number was approximately 1.24.
For Unilever, a company that proportionately generates most of its revenues in euros, this translates into a relative decline of revenues and profits if denominated in dollar terms.
Can’t forget this Swiss powerhouse
I saved the biggest company for last. With a market cap of $236.9 billion dollars, Nestle SA (VTX:NESN) is just slightly bigger than The Procter & Gamble Company (NYSE:PG).