As every Fool knows, it is crucial to keep emotions out of investment decisions. The two simply do not mix and, as I have found to my cost in the past, investing in a company you like or whose good/service you gain enjoyment from is not a sound investment strategy.
Indeed, when I talk about Reckitt Benckiser (LSE: RB) (NASDAQOTH: RBGPY.US) being one of my favourite stocks, I am speaking with regard to its attributes as a company and an investment, as well as the potential it has to grow over the long-term.
Of course, the company has excellent prospects over the shorter term, too. CEO Rakesh Kapoor recently announced that he expected around half of the company’s revenue to be derived from China by 2015. This is a year earlier than planned and shows that, as the Chinese population becomes more affluent, they are demanding more consumer staples and medicines. Both of which are core areas for Reckitt Benckiser.
Certainly, many of us in the UK would view some of the company’s products as being basic and not particularly glamorous or exciting. For instance, Gaviscon, Calgon, Finish and Nurofen are not exactly products that set the pulse racing.
However, they improve the quality of people’s lives, whether through convenience or improved health. Furthermore, established brands in the developed world are proving popular in emerging markets due to their quality and reliability.
Therefore, there is the potential for Reckitt Benckiser to substantially increase sales in a wide range of developing nations, as people become more affluent and seek basic, reliable and high-quality medicines and consumer staples. The key difference between Reckitt Benckiser and many of its competitors in the consumer goods sector is that its goods are considered near-necessities and, as such, have wider accessibility and lower price points.
Shares currently trade on a price-to-earnings ratio of 19.7, which is a premium to both the consumer goods industry group (17.5) and the FTSE 100 (12.9). However, with near-limitless potential, I believe the premium is actually quite reasonable and Reckitt Benckiser is a company I will be looking to buy and hold for a long time.
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> Peter does not own shares in Reckitt Benckiser.