The Coca-Cola Company (KO), The Procter & Gamble Company (PG): What’s the Gates Foundation Betting On?

The Procter & Gamble Company (NYSE:PG)The Bill and Melinda Gates Foundation Trust is known for investing in companies that are leaders in their respective industries. The trust’s focus has always been on long-term investments, and its holding also provide a useful and dependable source for investors to find new avenues of growth.

According to the latest 13F filings for the fourth quarter 2012, the trust’s top picks are The Coca-Cola Company (NYSE:KO), The Procter & Gamble Company (NYSE:PG) and Wal-Mart Stores, Inc. (NYSE:WMT).

Continuing my quest to identify investment opportunities based upon investing entries/additions which various funds make, I ran a deeper analysis on these three stocks. My ideology behind choosing any pick from an investment firm’s portfolio is plain – who’s got the skin in the game? I test these stocks on fundamental grounds and analyze whether they possess any investment opportunity for the long run.

Wal-Mart Stores, Inc. (NYSE:WMT)

Wal-Mart reported better-than-expected fourth quarter 2012 results, with EPS of $1.67 against the consensus estimate of $1.57. The company was able to post same-store sales growth of 1% in the US against a difficult macro environment. This makes six-consecutive quarters in which it reported positive comps. Its continuous investment in “everyday low-pricing investment” (EDLP) and active marketing strategies like local basket search are helping the company to attract customers.

On the other hand, its international market saw 7% sales growth on a year-over-year basis. Although this growth was lower than last year’s 13.1%, the company is focusing on implementing the EDLP model in China and Brazil in 2013. This will help Wal-Mart Stores, Inc. (NYSE:WMT) to obtain a bigger market share in these countries.

Another positive for Wal-Mart should be its investment in the global e-commerce platform. The company has given a guidance of around $0.09 per share investment in e-commerce. Its Polaris search engine has already showed success in the US by achieving around 10% growth increments in sales.

Another initiative, called “click and collect is also becoming popular among consumers, as almost half of ASDA online customers are shopping through this route. The company plans to launch both these initiatives internationally in 2013.

Looking at all these aspects, I feel this stock is the best bet at this point.

The Procter & Gamble Company (NYSE:PG)

For Procter and Gamble, delivering innovative products has always been the key to success. The company launched various innovative products which started to gain momentum in 2012.

Its Tide Pods are gaining market share since the February 2012 launch. Currently, Tide Pods have 75% market share in the U.S. unit dose category, and the company has been charging a 20% premium over its standard liquid-Tide products for the Pods.

This particular product is expected to generate around $500 million in fiscal year 2013. P&G is also planning to launch this product in Europe sometime this year. Along with this, it plans to launch various other innovative products that are already successful in the U.S., such as ZzzQuil, Pantene Expert Collection, Illumina Color, 3D and white toothpaste into newer markets.

Turning to its $10 billion restructuring plan, which was announced in 2012, things seem to be running as forecast. The company is focusing on local manufacturing, which will reduce overall costs.

Its new production facilities in China, Brazil, Nigeria and Indonesia will start production by 2014. Side by side, it also has deployed various cost-savings measures such as the Integrated Work Systems approach, which focuses on improving productivity. This program has resulted in 50% less planned downtime. The total impact of these cost-saving measures is expected to generate savings of around $1.2 billion in 2013.

Looking at all these aspects and P&G’s trailing-12-month P/E of 17.3, which is less than the industry average of 20.8, I feel the company is on the right track to gain in the long run. I would recommend buying this stock.