The Procter & Gamble Company (PG): Was This The Dumbest Stock Pick at The Ira Sohn?

Procter & Gamble currently trades at 18 times earnings, whether we consider its trailing results or analyst expectations for the fiscal year ending in June 2014. Net income was up 6% in its most recent quarter compared to the same period in the previous year, but this was primarily due to higher net margins as revenue grew by only 2%. We don’t expect the company to be able to continually increase its margins, so over time earnings growth should match revenue growth and going by last quarter’s numbers it’s not clear that earnings will rise enough to make the stock a value at these levels. It’s possible that P&G is a better value than peer Johnson & Johnson (NYSE:JNJ), which carries a trailing earnings multiple of 23, but it’s difficult to see it as a good value in absolute terms let alone one of the best opportunities in the market.

Ackman has made some excellent picks at investing conferences in the past (including his long recommendation for General Growth Properties Inc (NYSE:GGP) four years ago) but his move into Procter & Gamble has not done well in the last year compared to the market or to the stock it replaced in Pershing Square’s portfolio. The company also doesn’t look too attractive right now, and so we would advise against following the fund into P&G.

Disclosure: I own no shares of any stocks mentioned in this article.