Consumer staples ad spending rises
A lot of the stock action this year has been in small caps, but let's not forget the big dogs.
But news that these consumer staple companies are ramping up advertising spending tells me they expect some solid growth.
These giants understand advertising very well and what will happen when ad spending increases.
It is likely that they've forecast almost to the penny how much sales can be had for a particular advertising campaign. Spending on advertising when GDP growth is negative is never a wise decision. That is why spending drops during a recession.
The reverse is true when GDP is growing, and it is now. Although the recession has not been declared officially dead, most, including business executives, believe that growth is returning.
According to the Wall Street Journal, ad spending on household products showed year-over-year improvement by 15% in January and 11% in February. Those are big numbers that are likely to generate big results for these companies in the future.
These moves to spend more on advertising portend good things, and the stocks are attractively priced today.
Procter & Gamble trades for 15 times fiscal year 2010 estimates. Colgate-Palmolive trades for 17 times 2010 estimates. Kimberly-Clark trades for 13 times 2010 estimates.
In addition these companies pay healthy dividends of 2.8%, 2.5% and 4.3% respectively.
A double digit increase in advertising expenses compared to last year can be expected to power earnings growth above current estimates. Eventually investors will discover these stocks and raise the stock price as well.
Investors who buy now can get in early. I like cheap stocks so of the three mentioned here I would have a bias toward Kimberly-Clark.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
In the never-ending contest for sales, American carmakers are pulling ahead.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.