P&G GOOD STOCK TO HOLD ONTO

What do candles (P) and soap (G) have in common? Lard! That's right, we cooked, lit our homes and washed our bodies Saturday night with it. The world's largest maker of household products and the world's largest advertiser, Procter & Gamble, started there. Today, the company has cut a lot of fat, and its stock trades on the NYSE (symbol PG) close to my estimate of market value, making it a good stock to hold for a while longer.

Some of us are "chronologically gifted" enough to remember when Mom or Grandma stood over the big black pot cooking lard to make soap or candles. William Procter made candles and James Gamble made soap in Cincinnati for those who could afford to buy instead of making their own. In 1837, they combined their small businesses, becoming Procter & Gamble. With sales of $1 million, P&G was one of the largest companies in Cincinnati in 1859.

Family led until 1930, P&G became a leader in branding, labeling and advertising direct to the public.

Some of their early products, Ivory and Crisco, introduced in 1879 and 1911 respectively, became household names because of their early sponsorship of daytime dramas (soap operas) on radio. P&G started on radio with "The Puddle Family" in 1932. You may be a little more familiar with the current P&G productions "As The World Turns," "Another World" and "Guiding Light."

P&G acquired many strong brands over the years. Some became more successful, and others fell by the wayside. Among the brands we all recognize are Spic and Span, Charmin, Folgers, Crest, NyQuil, Metamucil, Noxzema and Eagle Snacks. In addition, P&G has become America's largest cosmetics company and largest provider of feminine sanitary protection products with acquisitions of Cover Girl, Max Factor and Tambrands. None of this includes P&G's growing presence in pharmaceuticals.

In 1992 and 1993, P&G initiated an everyday low-pricing policy, reduced its reliance on coupons and trade promotions, reduced costs, closed 30 manufacturing plants and cut 13,000 jobs. Since then, P&G has grown from 96,500 employees to 106,000, and that number is growing at 2.9 percent a year. Southeast Missouri is home to about 1,200 P&G employees, who produce disposable diapers in the local facility, which is part of the paper products division.

April 16, P&G announced it would invest about $350 million in an expansion of the Cape Girardeau facility, adding 130,000 tons of paper products production capacity and 350 jobs.

P&G's management team, led by chairman and chief executive officer John E. Pepper, has established a goal of doubling sales every 10 years. That is an annual compound rate of growth of 7.18 percent. During the past nine years, P&G has achieved a 7.07 percent rate of growth in sales while growing net income at 14.37 percent per year. During that same period, the stock price has increased around 21 percent per year.

With a P/E of 31, P&G's stock is priced above the market average. On the other hand, the changes initiated in 1992 and 1993 have helped make P&G more efficient than most other publicly traded companies. That helps partially justify a higher P/E. In addition, the company pays out almost 40 percent of earnings in dividends yielding about 1.3 percent.

Procter & Gamble appears to be continuing to earn its position as one of the "blue chip" Dow 30, and my research indicates this stock should be trading at about $74. Because it is currently trading near its high for the year ($80 15/16), I do not think it is a good value investment. In fact, more than 20 of the Dow stocks offer better value with a little more certainty at this time. Because I do own P&G stock, I will continue to hold it for a while longer to take advantage of its current momentum and think you should do the same. There are many other stocks offering a better value for new investments, so I can't recommend buying it.

Dividend Reinvestment Plan: Yes

Web Site: http://www.pg.com

Bill Walker is president and chief executive officer of Walkrich Investment Advisors and completes a market appraisal of more than 5,000 common stocks each week. (walkrich@mvp.net) (573) 651-9196

The Southeast Missourian does not recommend that readrs buy or sell stocks fetured in this column, which is provided for informational purposes only.