During the September 3 episode of Mad Money, a caller asked for Jim Cramer’s current opinion of The Procter & Gamble Company (NYSE:PG), and he replied:
Okay, this is something Jeff Marks and I from the club kick around, and we’re both kind of heartsick about it. We know that Procter has no growth. So being at 21 times earnings with a 3% yield is not enough to attract people. They have to shake things up at Procter. They really do. It just doesn’t have the growth that I would have expected at this point. That’s why we took a small profit and we headed off into the sunset. I’m not recommending the stock right now. It’s got to get down to 19 times earnings before I’ll take a shot at it or invest in it, to use a more foundational term.
Defensive Blue-Chip Strength and Dividend Appeal
The main appeal of The Procter & Gamble Company rests on its unmatched portfolio of household and personal care brands, including market leaders like Tide, Pampers, and Gillette. The massive global scale generates highly predictable cash flows, allowing the company to maintain a reliable 3% dividend yield and consistent capital return programs. For decades, these defensive characteristics have established the stock as a staple holding for conservative institutional portfolios seeking shelter during market volatility.
Valuation Strains and Growth Deficits
Despite The Procter & Gamble Company’s defensive pedigree, the bear case argument rests on a lack of organic top-line momentum that fails to justify a valuation multiple of 21 times forward earnings. Companywide volume was flat in the latest quarter, with declines in several categories offset by growth in Beauty and Fabric & Home Care. Cramer’s target entry threshold of 19 times earnings highlights the requirement for a wider margin of safety to compensate for sluggish structural growth before committing new capital.
Hedge Fund Positioning and Market Sentiment
Hedge fund participation showed an uptick despite broader growth concerns facing the consumer giant. According to Insider Monkey’s tracking data, 83 hedge funds held a stake in The Procter & Gamble Company during the second quarter, compared to 78 in the previous period. Of those hedge funds, Fisher Asset Management was the most prominent shareholder with nearly 11.24 million shares. Short interest remains subdued, with the short percentage of the float sitting at 1.06%, highlighting an absence of aggressive bearish positioning against the company.
The Procter & Gamble Company remains a significant stock for conservative portfolios thanks to its rock-solid cash flow and steady dividend, but slow organic growth makes a 21x multiple a tough pill to swallow. While longtime defensive investors are happy to stick it out through the slow growth, Cramer prefers to put money to work elsewhere until the stock pulls back to a valuation that actually reflects its near-term growth reality.
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