ChartWatch: A Defensive Stock On Sale

One month is considered long term in the investing world of today. The days of patience are gone and were replaced with fear caused by an increasingly volatile environment. I won’t argue the merits of short-term trading versus long-term investing, though I prefer the short duration better myself.

However, there are certain companies that deserve a long-term investment period. The Procter & Gamble Company (NYSE: PG)‎ is one of those companies.

Sellers have murdered PG shares over the past three months. In fact, the 13% decline is among the largest three-month declines recorded in the past 10 years for this stock.

On June 20, management lowered guidance for the fourth quarter 2012. That’s never an uplifting announcement, and it often results in a lower stock price. However, investors need to consider where PG shares trade and what the company offers.

The stock trades close to $60, just 5% above $57.50, a level that supported the shares in May 2010 and again during the major pullback during last August. Considering the shares found support at $57.50 (blue line) during the direst of times, I would expect this zone to hold again following a measly guidance adjustment.

Aside from the technical support, consider the company’s product line. PG makes soap, pet food, laundry detergent and batteries, among many other products. In short, the company makes products people use every day, rain or shine.

PG has a market cap of $160 billion and pays about 3.7% in dividends each year. They aren’t going anywhere regardless of deteriorating sales. Long-term investors need to be ready to purchase the shares at any price below $60. This stock won’t rise 40% a year, but it will provide you with reliable returns even in the toughest of economic conditions.

 This chart shows the price of Procter & Gamble shares along with an important support area for you to monitor


Equities mentioned in this article: PG

To top