A Tech Antidote? Maybe not.

Procter & Gamble is the kind of stock my grandmothers used to love talking about. And why not? It's a straightforward business with big brands and a healthy dividend. The stock sounds even more compelling amid the latest technology doubts. The problem is that investors aren't really buying it -- and they haven't for years.  

Over the last five years, P&G shares have returned 3.3% compounded annually, while the S&P 500 has returned an annual 13.7%. So far, activist investor Nelson Peltz hasn't done much for the stock either. P&G is the second-worst performer in the Dow this year, behind only General Electric.

(Peltz won an awkward seat on P&G's board last month, following a protracted proxy fight that included recounts and recriminations.)

As the stock has gone nowhere, Wall Street analysts have stubbornly stuck to their bullish stance. The Street's average price target on the stock is $92, exactly where it was back in the summer of 2016. Today, one bull threw in the towel, sort of. Macquarie Research's Caroline Levy cut her target to $82 from $96, though she officially stuck with an Outperform rating. P&G shares fell 0.3% Thursday to $78.80.

In her note, Levy runs through a series of options that could still get P&G moving again, including the purchase of over-the-counter medications from big pharma companies. Pfizer is reportedly looking to unload its over-the-counter business, which includes ChapStick and Preparation H. That business could cost $20 billion, Levy notes. Merck, too, is trying to sell its own staple of OTC treatments for around $5 billion. 

Over-the-counter health has become P&G's fastest-growing unit, Levy notes, so it's a sensible place to build. More scale could mean higher profitability. 

But how much is really going to change for P&G? Brands are fighting an uphill battle these days even within supermarkets and drugstores, where the retailers are happy to hawk their own private-label products. And it's arguably worse online, where Amazon has various private label lines, including vitamins by Amazon Elements.  

My grandmothers couldn't have conceived of Amazon's reach. But today, if they were still around, that's the stock they would be talking about. 

What We're Reading Today

• Losing Your Money Could Kill You Barron's
• Fear Not, Investors, the VIX May Be Too Bearish Barron's
• The Housing Rebound Is Right on Track Barron's
• Don't Fix Facebook. Replace It. NYT
• Bill Ackman’s Pershing Square Faces Wave of Investor Redemptions WSJ

The Calendar

Economists expect that employers added 185,000 jobs in March, with the unemployment rate falling a hair to 4.0%. Twelve hours from now we'll have the actual numbers. Average hourly earnings -- expected to grow 2.7% year over year -- has become a closely watched inflation signal. Too much growth gets investors worried that the economy is overheating, raising the likelihood of additional rate hikes.

Have a great night and thanks for reading.

Sign up for more newsletters

You are currently subscribed as [email address suppressed]
Contact us  |  Privacy Policy  |  Cookie Policy

.