One to Buy, One to Watch, One to Sellhttp://www.fool.com/investing/general/2011/03/08/one-to-buy-one-to-watch-one-to-sell.aspx Roger Friedman
March 8, 2011
Just because a stock is cheap doesn't mean it's attractive to value investors ... but it can certainly help. Today, Motley Fool Inside Value advisor Joe Magyer shares a company that is a solid buy, one that's worth watching, and one to get rid of as soon as humanly possible.
One to buy
"They make half the things in your medicine cabinet," he says. "You're going to shave every day, people use diapers every day, they use toilet paper every day. There's no getting around that. P&G focuses on premium-priced brands for everyday needs."
Shares have fallen of late on fears of rising input costs -- let others worry about such short-term concerns, scoffs Joe -- and because the company has become more aggressive on cutting prices. Joe doesn't love the pricing move, but understands the need to maintain market share and brand loyalty in a down economy. "P&G can always return to price increases later, but for right now, they need to focus on keeping those customers locked into their brands."
One to watch
First, the company provides huge cost savings on its payroll processing to businesses. Since the costs to switch are enormous, it can also muscle through price increases above the rate of inflation. Second, ADP earns interest on the funds it holds, from the time its clients deposit the money until ADP ships it out in the form of paychecks.
"I really like the business model of both of these companies, but they're a bit rich for me at the moment," says Joe. "I own both, but I'm not adding right now."
One to sell