I am of the opinion that Procter & Gamble (PG) is one of those global defensive stocks that every investor should consider as a part of their long term portfolio. The company is always on top of marketing and reinforcing its brand names as being at the top of the pack. I would like to share one example of how the company has used social media to reinforce its brand and then offer a short term income play.
Social Networking at its Best
The creativity in marketing today can be amazing when one uses social networking in combination with brand awareness. And this type of quick thinking and awareness can set a company apart, contributing to sales. Procter and Gamble is a great example of this.
P&G has a newsroom whose purpose is to keep current on events that happen through the day that could have an impact on its brands. It looks for things that could possibly have a direct bearing upon loyal customers. Gauging what was taking place in the world; the company would look for what people were thinking of as well as take action with its brand if it were appropriate. (And authentic-this is the key, the real willingness to help) Here is an example of how one "event" and quick action had a huge affect upon a brand name:
"In one instance, for example, the Tide brand came to the rescue after a fiery explosion during the Dayton 500 covered the Speedway with 200 gallons of burning fuel. TV viewers watched track workers using Tide to clean the track during a two-hour delay in the Great American Race. As a result of its newsroom, P&G was able to create a new advertisement showcasing a new use for its age-old laundry detergent within 48 hours. According to Pritchard, over the course of just a few hours, Tide quadrupled its number of Twitter followers, not to mention became a must-see video on YouTube."
So what does this 'event" do? It creates awareness of a brand and urges conversation about Tide as a superior performing product. It is something that keeps the brand name relevant for a period of time. The adaptability of companies like P&G to use social networking and media to encourage and sustain brand awareness is a vital tool in our society.
This is a good example of a global company that is on top of branding, global marketing, and the latest in social media. Procter and Gamble is one of the companies that should be in every investor's portfolio as a defensive stock with a decent dividend that will be around for a long time to come.
Technically Speaking
After a three month move up, PG stock spent a majority of the month of September in an over bought condition; according to my observations of the RSI indicator. When it enters that range above '70' it is only a matter of time before the stock pulls back. This is the first time the stock used the 50 day MA as support. It could be a sign of an initial slowdown, or it could begin a consolidation period. While the stock moved up, the middle Bollinger Band was used as support and when this happens is always shows strength in the move up. It looks like the stock has found resistance at about 69.45. Three times it has pushed against it. Now I would like to see if it can push through. The MACD indicator also has put perspective on the stock for us. It does not look like it is really bearish yet. Even though the MACD MA's have come down, both are still above the '0' marker, so I would not say the stock is ready to move down just yet.
(click to enlarge)
The Options Play
Even though there is no sign the stock is ready to move down, I am of the opinion that the recent 20% rise over the summer may have reached its height anyway. I believe the stock may eventually pull back here in the next 60 days and for this reason I would make a contrarian short term income play if I was going to make one at all. The stock is presently trading at 68.57.
- Buy the April 2013 put with a strike of '70.00' (priced at $3.75)
- Sell the April 2013 put with a strike of '67.50' (priced at $2.41)
- Net debit to start: $1.31
- Maximum Profit: $1.19
- Maximum Risk: net debit
- Maximum Length of Trade: 6 months
Reasoning behind the Trade
- Stock has moved 20% in last 4 months, ready for a pull back.
- With post election fiscal cliff attention markets may pullback.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
