Q–Procter & Gamble is the largest stock holding in my retirement portfolio. What’s the outlook for its earnings and its stock this year?
A–This tried-and-true stock still has the potential to quietly clean up for investors.
Though Procter & Gamble stock is trading near its 52-week high, the consensus recommendation among the 24 Wall Street analysts covering it is a “buy.” The most recent recommendation changes have been upgrades by some analysts to either buys or a strong buys, according to the I/B/E/S International research firm.
That despite the fact that earnings estimates for P&G have been trending down lately, with a current mean of $4.30 a share for the fiscal year that ends in June. The expectation for next fiscal year has slipped as well, to around $4.82.
“There is optimism about Procter & Gamble that exceeds the hopes for the overall household products industry,” observed Anthony Centeno, data researcher with I/B/E/S, who describes P&G as a huge market capitalization stock that “plods happily along” and has a decent dividend. “Consumers have to buy these staple items, regardless of whether or not inflation is low.”
Q–I invested in Putnam Global Growth Fund. I’d like some peace of mind as to whether this was a good idea.
A–Rest assured that this relatively conservative fund has less volatility than other world bond funds and tends to perform just a bit above average.
Putnam Global Growth Fund is up 22 percent over the past 12 months to rank near the upper one-third of all world stock funds. Its three-year annualized return is 14 percent, about the midpoint of its peers.
It recently had 37 percent of its portfolio in Europe, 27 percent in the United States, 19 percent in Japan, 12 percent in the Pacific Rim and the remainder scattered around the globe. Largest individual stock holdings included Veba, Greencore Group, Omron, Ciba-Geigy and Astra Free.
Anthony Regan has capably managed the fund’s overseas investments since 1988, though making a few errors along the way. In early 1995, he made a large bet on Japan and also hedged against the Japanese yen, two decisions that backfired. Meanwhile, Carol McMullen has guided the fund’s U.S. holdings since 1995.
“This fund represents international exposure for fairly conservative investors who understand that such diversification makes their portfolio safer in the long run,” explained Michael Mulvihill, analyst with the Morningstar Mutual Funds investment advisory. “It’s for people who like investment primarily in developed markets, rather than the emerging ones.”
This Boston-based fund’s Class A shares have a 5.75 percent “load” (initial sales charge) and a $500 minimum initial purchase.
Q–I see the term 12b-1 used frequently when discussing mutual funds, but don’t exactly know what it means. Can you help?
A–The 12b-1 fee is a distribution and marketing charge deducted from a mutual fund’s shares that reimburses the broker or financial planner who sells the shares.
That commission based on a percentage of the money the investor puts into the fund continues as long as the money remains in the fund.
“A fund’s total expense ratio typically involves a management or advisory fee, plus the 12b-1 fee,” explained John Teall, research coordinator for the Lipper Analytical fund-tracking firm, who noted that the median 12b-1 fee these days is three-tenths of a percent.
Q–A fellow employee of mine has talked about buying ADRs. I didn’t want to sound like a dope, but I really don’t know what they are, other than that they are some kind of foreign investment. Can you explain?
A–Here’s the investment scoop:
American depository receipts, or ADRs, are documents indicating that you own shares in a foreign stock held by a U.S. bank. Such ADRs may trade on exchanges here or over the counter.
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Andrew Leckey, who co-anchors the “Today’s Business” program on the CNBC cable television network each weekday from 5 to 7 a.m., answers questions only through the column. Address inquiries to Andrew Leckey, “Successful Investing,” Suite 367, 76 N. Maple Ave., Ridgewood, N.J.
