We're talking about PG's selloff of a lot of its brands, and the impact that had on stock price. We bought some shares of PG before the divestiture, and since then the stock barely trended upward (about a 1% return). So, does this mean their selloff was good for profits? They only reduced their sales by about 15%, even though they sold off 95 of 160 brands. This made them a leaner company. This was supposed to make them more profitable.
We bought PG as a proxy for the whole the consumer staples sector, which would bolster the overall stability of our portfolio. We were betting that it would mirror or do better than that sector. Although that didn't really happen (a few of their competitors in the sector outperformed PG), it didn't do much worse. It has been pretty stable. Looking back, we missed some opportunities to make more, but it would be nearly impossible to know that at the time.
As a side note, it didn't hurt that PG pays dividends. Their dividend yield is 3.2% of the stock price, which isn't bad. This means that we get 3.2% on our investment each year.
PG wasn't selected because we thought a selloff would happen, and then it happened, and it didn't really do much for profitability. So ultimately, even though the stock didn't increase like we were anticipating, dividends saved us again. The stock price didn't really go up all that much, the dividend yield didn't change, etc. This is just another case of the market being unpredictable and not necessarily rational.
No comments:
Post a Comment