P&G resilience in times of turmoil

There are certain things in life that are generally known by all. For instance, the sky is blue, bananas are yellow, grass is green, and P&G is a defensive investment in times of uncertainty. What does that mean? When economic uncertainty rises, investors generally seek safe (or safer) havens.

A safe haven is an investment that changes very little due to economic ups and downs.  A US government bond continues to pay interest regardless of what happens to the economy. An electric utility company continues to supply gas and electric power for machines, appliances, heating, and cooling, regardless of what the economy is doing.

That is not to suggest that the prices of such companies or investments does not change much. They can and do change sometimes dramatically.  However, relative to other investment choices, defensive or safe havens may not move as much as their more cyclically sensitive cousins.

Likewise, even in recession, people still wash dirty dishes, wash their clothes, diaper their babies, and shave their face or legs. So, companies like Procter and Gamble continue to produce and sell products that people still need and use even during more uncertain economic times. Uncertainty may cause people to delay the purchase of a new car or a new home, but delay washing the dishes after dinner? Not happening.

Thus, PG has historically been viewed as a generally resilient investment during times of economic turmoil. Yes, their business has changed. No more Crisco for baking, no more peanut butter, and no more “the best part of waking up is Folgers in your cup” (that brand was sold to Smuckers). Somewhat ironically, some of the products that made PG less sensitive to economic highs and lows were sold or spun off because they also were slow growing products.

Nonetheless, investors still view household products companies like Procter & Gamble, Colgate Palmolive, General Mills (to name a few), and utility companies as more resilient or more defensive investments in times of heightened uncertainty.

 

Disclaimer
This material is provided by Schmitt Wealth Advisers for informational purposes only. Schmitt Wealth Advisers does not provide tax or legal advice, and nothing herein should be construed as such. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product.  Opinions expressed by Schmitt Wealth Advisers are based on economic or market conditions at the time this material was written.  Economies and markets fluctuate.  Actual economic or market events may turn out differently than anticipated.  Facts presented have been obtained from publicly available sources (unless otherwise noted) and are believed to be reliable.  Schmitt Wealth Advisers, however, cannot guarantee the accuracy or completeness of such information.  Past performance may not be indicative of future results.

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