Sometimes the better company isn’t necessarily the better stock.
That’s the lesson Cramer learned when comparing his favored Procter & Gamble to Unilever, using the same strategy against which he tested McDonald’s versus Burger King, Coke versus Pepsi, Tiffany versus Coach and Hershey versus Cadbury .
Returning to Cramer’s 10-point rating system, we start with sector first when valuing a stock. Soft goods is a great business in which to invest during a slowing economy, especially when inflation has peaked and the companies’ costs are coming down. So both companies get five points right off the top because a sector is responsible for half of a stock’s worth.
The next factor to consider is growth. Procter for the last quarter beat earnings estimates and said that the company still expects 5% sales growth and earnings growth of 6% before interest and taxes, despite $3 billion more in higher commodity costs. Volume growth wasn’t great, but it still surprised analysts, who were bracing for the worse. Compare that with Unilever that reported in-line numbers and negative volume growth. Two points to Procter for this category. Score: 7-5, Procter.