Dear Mr. Berko: Thanks to you, we sold 800 shares of Yahoo at $46 last year. Now our stockbroker recommends 200 shares of Procter & Gamble. What do you think of this stock?
— T.S., Waterloo, Iowa
T.S.: I’ve liked Procter & Gamble (PG-$82.22) since October 1988, when I did something I seldom do because I was too smart by half. PG was trading at $81.25, and I placed a limit order to buy 100 shares at $81. My order didn’t execute. The next day, it traded at $82, and my ego got in the way. Since 1988, PG has split 2-for-1 three times, so the 100 shares I didn’t buy for $8,125 are now 800 shares worth $65,776. PG’s dividend has increased every year since 1957, and in the past decade, that dividend has tripled, from 93 cents to perhaps $2.75 this year. The lesson is simple: Long-term investors should never place limit orders. Because I’m a long-term investor, it wouldn’t have made a bit of difference if I’d paid $82 or even $83 a share.
PG is headquartered in Cincinnati. In 1837, Bill Procter and Jim Gamble put this company on the map by selling soaps and candles from their Cincinnati storefront. Cincinnati had plenty of fat and oil for soap- and candle-making. Bill and Jim easily shipped their product by boat along the Ohio River to clamoring consumers in such cities as Louisville, New Orleans, Pittsburgh and Memphis. And by 1859, Procter & Gamble had 82 employees and annual revenues of $1.1 million. The candle business peaked after the Civil War, and the company introduced Ivory soap (99.44 percent pure), which became PG’s first branded product, followed by VapoRub, Crisco, Gillette and Max Factor.
Today PG is the largest consumer products company on the planet, with a market cap of $217 billion, $65 billion in revenues (after over 100 product spinoffs), net profits of $10.75 billion plus an expialidocious 15.9 percent net profit margin.
