We recently published a list of 7 Consumer Goods and Retail Stocks on Jim Cramer’s Radar. In this article, we are going to take a look at where The Procter & Gamble Company (NYSE:PG) stands against consumer goods and retail stocks on Jim Cramer’s radar.

Jim Cramer, host of Mad Money, recently took a close look at market trends and explained why many stocks are continuing to struggle, specifically in sectors like consumer goods. Cramer pointed out that the ongoing bear market is showing no signs of easing, with stock prices persistently declining day after day.

While Cramer acknowledged that inflation remains a concern, with the Federal Reserve continuing to highlight the issue, he encouraged investors to keep in mind the underperformance of these key sectors.

“This is a market that rewards growth regardless of price. So, people will pay up for tech growth, which is all about real demand and pricing power, and they’re avoiding companies that have lost pricing power and offer yields that are too low to compete with Treasurys. I don’t expect that dynamic to change any time soon.”

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“They spent last year hurting the market and this year already many are in the red. It’s not just a continuation people, it’s actually an acceleration.”

He also highlighted that while tech stocks related to artificial intelligence and advanced computing have helped prop up the market, many other sectors have been facing significant challenges. Cramer singled out industries such as real estate, healthcare, housing, biotech, materials, and food, sectors that underperformed dramatically last year and are showing similar weaknesses this year.

“Bottom line: When you look at these super underperforming stocks, all I can say is, maybe the Fed had better be careful for what it wishes for. Companies that represent a gigantic chunk of the real economy have seen their stocks swoon. Could their earnings be that far behind, and could inflation be running its course a lot faster than expected?”

Our Methodology

For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 6. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

The Procter & Gamble Company (NYSE:PG)

Number of Hedge Fund Holders: 68

Cramer mentioned that companies like The Procter & Gamble Company (NYSE:PG) that were once considered a safe bet are not anymore due to various reasons.

“Why is the stock of Procter & Gamble down another 2.7% today? That’s a great company… Alright, so let’s go over the reasons. One, maybe the biggest reasons someone would say, interest rates. When long-term interest rates spike as they’ve been doing ever since the Fed started cutting short rates, these stocks have been hammered. That’s what happens. The dividends, by the way, are supposed to offer some protection, right?”

Cramer pointed out that dividend stocks become increasingly vulnerable when bond yields rise, as bonds offer more competition for investors seeking income. The situation could persist for the entire week, as bond yields continue to climb due to increasing supply. Cramer noted that the U.S. Treasury sold 3-year notes earlier, but the auction did not go well.

He noted the Treasury auctioning off 10-year notes and selling 30-year bonds last week, although Cramer is unsure whether the market is prepared for that. He emphasized that as bond prices fall and yields climb, the pressure on dividend stocks intensifies, even if the underlying companies remain in good shape.

“Odd, which brings me to the second reason this group has just been hammered. The dollar’s gotten too strong. These consumer packaged goods companies tend to be very big overseas… The consumer staples all trade together. If the dollar hurts a big international company like Procter & Gamble as it is, it’s gonna reverberate even into Clorox because they’re all in the same sector, and sector ETFs are like gravity. They pull all their subjects down, even the ones that shouldn’t.”

Cramer pointed out another major issue many are overlooking: pricing. He noted that heavy discounts on consumer products and intense pricing pressure is making it harder for such businesses to keep up. Cramer added:

“… but if the retailers are being squeezed, then their suppliers are definitely gonna be squeezed too. Maybe these companies have had so much of a run, so much price flexibility post-Covid that they’re finally losing it. Maybe the consumers had it. We’ll no longer tolerate COVID-era high prices from the likes of a Procter or a Colgate. Maybe the stocks are saying prices will indeed be rolled back…

The stock at Procter & Gamble is, oh, it’s tempting. It’s tempting, but as long as bonds go down in price, as long as the dollar stays high or goes higher, and until we see the earnings, find out there really is some price pressure that I’m sensing, it’s too risky to buy… Now, look at this counterintuitive situation. I know it sounds crazy to call Procter & Gamble and Clorox, Colgate risky. These were safety stocks for most of my life, but there’s nothing safe about their stocks anymore.”

Procter & Gamble (NYSE:PG), a major player in the consumer packaged goods industry, is facing several challenges despite its global presence. Recently, the company reported sluggish sales growth, attributed to minimal price increases and ongoing weaknesses in important market segments.

It is adjusting its marketing in China after struggling with lower sales, especially during the COVID-19 pandemic and shifting consumer preferences. Despite some positive trends, weak consumer confidence is hurting P&G’s higher-end products. CFO Andre Schulten noted that both China and the Middle East have posed challenges, with China facing low confidence and the Middle East impacted by conflict. The company expects recovery in China to take several more quarters.

Procter & Gamble (NYSE:PG) is also grappling with significant foreign exchange volatility, particularly with the Brazilian real, which is expected to negatively impact its results for the second quarter. As per Schulten’s comments at the Morgan Stanley Global Consumer Conference in December ‘24, while the second quarter has largely met expectations, the company faces currency headwinds in countries like Brazil, Mexico, and Russia.

However, Schulten expressed confidence in the company’s ability to adapt, citing the company’s flexibility, productivity, and ability to adjust product mixes both geographically and across product categories.

Overall, PG ranks 1st on our list of consumer goods and retail stocks on Jim Cramer’s radar. While we acknowledge the potential of PG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.