The Motley Fool Industry Focus podcast rounds out a discussion on Procter & Gamble's (NYSE:PG) recent addition to its board of directors: activist shareholder Nelson Peltz. In the following segment, we discuss the very short list of high-impact changes Peltz can champion to effect near-term change at the multinational conglomerate.
A full transcript follows the video.
This video was recorded on Sept. 25, 2018.
Vincent Shen: Things have been relatively quiet, in terms of headlines and updates from the company. There has been some stock price movement since Peltz mentioned that management is seriously considering some of the suggestions that he and his firm have made.
I'm curious about your personal view on some of these changes, in terms of maybe the top one or two priorities that could have the greatest near to mid-term impact for the company, its results, shareholders. What do you think?
Asit Sharma: Well, if we went with that very first idea, which is to break the company up into three major divisions, I think that would have a really strong impact, near-term and medium-term, on the stock. It would be that radical change which P&G has avoided. That's the single most important thing the company could do if it wants to inject some life into the stock.
If the company wants to compromise, it could signal to Wall Street that it is interested in maybe spinning off a smaller division or a group of companies and pursuing this mergers and acquisitions strategy. I think that would have a medium to long-term impact on the stock and would probably be the best way to go. As I've said, the company has put so much of its free cash flow back into shareholders' pockets. But when the stock doesn't move after years and years of following this formula, maybe it's time to allocate capital in a different place and acquire some other younger companies.
These couple of things, I think, would have, out of all the options, the most impact. I, too, find it interesting that since Peltz joined, it's been sort of quiet. One of the things that you get when you bring on the activist shareholder and add him or her to the board is that that outside criticism, that loud voice, suddenly quiets down. Now they're on the inside and they have to produce. [laughs] So, it'll be very interesting to see, over the next few quarters, what they choose to enact.
He has the Street's attention after that conference in June. There is some expectation now, with the stock clawing its way back to par, that something is going to shake out in the next one to two quarters. I'm sure we'll be returning to this if we see that happen.
Asit Sharma has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.