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Here's What You Don't Know About The Procter & Gamble Company, Today's Best Dow Stock

By Alex Planes - Mar 24, 2014 at 12:16PM

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P&G is behind many of the breakthroughs that have made housework less time-consuming over the past century.

The Dow Jones Industrial Average ( ^DJI -0.17% ) isn't particularly pleased with the latest Markit Economics manufacturing data today. The index opened in positive territory but slipped to a loss within the first hour after Markit reported a March factory activity level of 55, down from 57.1 in February but still showing expansion. However, at least one Dow component is helping to hold the line against worse losses: Procter & Gamble ( PG 1.78% ), the index's household consumer goods representative, was the only one of the 30 Dow stocks with a gain consistently in excess of 1% this morning.

You probably know a fair bit about P&G, and you might even know a few interesting things about some of its many popular brands. But with so many moving parts working together to drive the world's largest packaged consumer-goods company -- or the second-largest, depending on how you categorize Nestle  -- there can be a lot of details to overlook in your search for useful information and worthwhile value. Let's take a look at some of the interesting information behind P&G, whether it's part of the company's lengthy history or part of its present as a global powerhouse.

Procter & Gamble was founded in Cincinnati by William Procter and James Gamble in 1837. It's the third-oldest Dow component, behind only JPMorgan Chase and DuPont, which trace their origins to 1823 and 1802, respectively.

Each founder put up $3,596.47 to form the company. If the Procter and Gamble families had each retained a 50% stake since 1837, they would each be worth $108 billion. The company's valuation has grown at an annualized rate of 10.3% for more than 175 years!

P&G originally sold soap (Gamble's specialty) and candles (Procter's specialty). The company still sells both products, although it's far better known today for goods such as detergents.

P&G surpassed $1 million in annual sales two years before the Civil War broke out. It became a major Union supplier of (what else?) soap and candles in 1862.

The company's first "megabrand" was Ivory soap, which was created in 1879. The company rolled out its first national ad campaign for the product three years later. The soap became renowned for its ability to float in water, which was a key element of the company's early marketing campaigns.

P&G joined the Dow in 1932 and has remained part of the index ever since. Only General Electric and ExxonMobil have longer uninterrupted tenures. P&G's profits outpaced the Dow's growth in the eight decades that followed, with an annualized net income growth rate of 9.3% stacking up quite favorably to the Dow's annualized gain of 7.2% from 1932 (the lowest ebb of the Great Depression, no less) onward.

P&G acquired Clorox ( CLX 1.01% ) in 1957, but federal judges sided with government antitrust regulators several years later to force P&G to divest its new subsidiary. The case set a precedent that has become important to antitrust law, which is that a large and diversified company with a lesser market share in a certain niche (in this case, bleach) can't buy smaller companies with dominant market share in those niches.

Procter & Gamble has developed (or acquired) several consumer-goods products that have transformed housework:

Gillette became a household name by the end of World War I, when the U.S. military supplied all soldiers with a "field razor" set of disposable blades made by the company. Without military-supply contracts, P&G as we know it might very well not exist!

P&G paid $57 billion for Gillette, which was 11.4 million percent greater than the company's founding capitalization of $500,000 -- even when adjusting for inflation, Gillette's real valuation grew 410,000% from founding to buyout.

Tide was called "the first big change in soapmaking in 2,000 years" because it was the first successful synthetic detergent. Even today, Tide commands roughly a quarter of the global fabric-care market, and its popularity has resulted in an unusual phenomenon -- because it's so popular with consumers, thieves have begun targeting Tide bottles in retail stores, with the intent of using them as a sort of "street currency" to trade for small amounts of drugs.

Today, P&G is not only one of the world's largest companies, it's also one of the pickiest. Almost 500,000 people apply to work for P&G every year, and the company winds up hiring less than 1% of all applicants. For comparison, Harvard University accepts roughly 6% of its applicants.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,580.08 (-0.17%) $-59.71
The Procter & Gamble Company Stock Quote
The Procter & Gamble Company
$149.88 (1.78%) $2.62
The Clorox Company Stock Quote
The Clorox Company
$168.16 (1.01%) $1.69

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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