Procter & Gamble (PG): My best stock pick ever

Yesterday I came clean about the worst stock pick I have ever made. Today, I'd like to try and redeem myself with the best stock pick I have ever made: Procter & Gamble (PG).

In early March 2000, the PG stock price dropped by about 30% in one day due to a disappointing earnings announcement. I immediately sensed a buying opportunity since this was a pretty dramatic plunge for a company with such widespread market share and brand recognition in the consumer staples area (Pampers diapers, Crest toothpaste, Tide detergent, Bounty paper towels, etc.).

Two days after the price collapse, I bought 60 (split adjusted) shares of PG. I then bought 60 more (split adjusted) shares of PG in late June 2000 when the share price dropped about another 7%. Today, when I look at the 10 year chart (courtesy of nasdaq.com), I can see that I bought PG at its two lowest price points since January 1997!

I still hold PG to this day, and I am up 134% (including dividend reinvestment) since my original purchases over six years ago. In this case, I believe that two critical factors contributed to my stock picking success:

• The market can be irrational: I bought the stock of a quality company at a steep discount after the market overreacted to a poor earnings announcement.
• I bought stock in a best of breed company that I believed would rebound due to a strong product line and brand recognition.

The ironic part of this stock pick was that I made a good decision for the right reasons when I bought PG in the first half of 2000, but I seemed to forget this when I blundered and bought Lucent Technologies for the wrong reasons in the second half of 2000.