Stock Picks: Ralph Lauren and Procter & Gamble

The S&P 500 (SPX) continues to consolidate above 2,700. This period is healthy for the long-term health of the index. SPX gets to create a new base that would help keep its next ascent sustainable.

With bulls preserving the 2,700 support, let’s look at stocks that are flashing signs of strength.

RL – Ralph Lauren Corporation

Ralph Lauren Corporation (RL) is an American publicly traded holding company famous for the design, marketing, and distribution of lifestyle products that range from apparel, accessories, and fragrances to home furnishings and other licensed product categories. Founded in 1967 by fashion designer Ralph Lauren, the company’s wholesale segment is made up of sales to department stores and specialty stores, while the retail segment is composed of direct sales through their own retail stores and concession shops around the world, as well as e-commerce operations.

Technical analysis show that RL has taken out resistance of 130 with volume that’s 160% higher than its weekly average. The breakout is affirmed by the rally to 137.59 on May 25. In addition, 130 is a firm resistance as it is the 61.8% Fibonacci level. The strong push above this level suggests that bulls are out to play.

Also, fundamental analysis show that the trailing twelve months (TTM) price to earnings ratio (PE ratio) of RL is 69.70.  The stock appears overvalued but it has a five-year maximum of 104.74. Furthermore, the recent earnings report beat analyst expectations. Considering these figures, it seems that investors are prepared to pay a premium for RL shares.

The strategy is to buy as close to 130 as possible. As long as bulls are above this support, they have all the momentum they need to climb to our target of 180.

The process may take six months.

Weekly RL Chart

Monthly RL Chart

As of this writing, the Ralph Lauren Corporation stock is trading at 137.30.

Summary of Strategy

Buy: As close to 130 as possible.

Target: 180

Stop: Close below 125.

PG – The Procter and Gamble Company

The Procter & Gamble Company (PG) is an American multinational consumer goods corporation. Founded by William Procter and James Gamble in 1837, the company that started as a candle and soap business now has over 95,000 employees in five operational segments: Beauty; Grooming; Health Care; Fabric & Home Care; and Baby, Feminine, & Family Care. Their product portfolio includes Olay, Old Spice, Safeguard, Crest, Oral-B, Vicks, Ariel, Downy, Gain, Cascade, Dawn, Febreze, Mr. Clean, Swiffer,  Always, Tampax, Bounty and Charmin.

Technical analysis show that PG appears to have found a bottom at 70.73 on May 2, 2018 as it shows multiple signs of reversal. First, bulls came out and lifted the pair above the 61.8% Fibonacci level on May 21. In addition, a hidden bullish divergence can be spotted on the monthly RSI. This tells us to buy the dip as the uptrend is still intact.

Furthermore, fundamental analysis reveal that PG’s trailing twelve months (TTM) PE ratio stands at 19.71. While the stock appears to be fairly valued, it has a five-year maximum of 33.87. Based on the PE ratio, it looks like PG has a some room for growth.

The strategy is to buy as close to 73.50 as possible. If bulls defend this support, they will create a new base before climbing to our target of 92.

The process may take six months.

Weekly PG Chart

Monthly PG Chart

As of this writing, The Procter and Gamble Company stock is trading at 74.31.

Summary of Strategy

Buy: As close to 73.50 as possible.

Target: 92

Stop: Close below 70.70.

 

Featured image courtesy of Shutterstock.

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Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.
Comments
  • P&G is a good long-term investment if you are familiar with fundaments of the business and overall shape of the company. Latest overall PG and FMCG segment is being hit by fundamental issues which are company specific. Such as PG end of fiscal year doesnt show promising results (PG ends fiscal year end Q2, plus issues with recent CEO change, sale of PG Wella business and Coty business, lack of innovations for the next FY, etc.) My opinion is not to speculate on PG if you are not certain of fundamental changes, new innovation pipeline, cost effective cuts, strategy change or large emergin market strong growth.

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