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Activist investor Bill Ackman's bullish predictions for The Procter & Gamble Company (NYSE:PG) "should come to fruition for patient investors," especially if the blue chip can "optimize pricing and improve productivity," notes this Barron's column (subscription required).
Late last week, Ackman said PG shares could hit $125 within the next couple of years, representing a premium of about 55% to the stock's current price of $80.68. Furthermore, the Pershing Square CEO thinks PG could eventually boast fiscal-year earnings of $6 per share; for the fiscal year ending in June, analysts expect earnings of $4.04 per share.
Just yesterday, Procter & Gamble CFO Jon Moeller hit the stage at a Goldman Sachs-sponsored event, hinting at several new products in the works. "As P&G introduces more products in developing markets -- especially in the beauty category -- it can gain share, and raise prices," the Barron's author opines. What's more, the company "already is firing on several other cylinders," thanks to ongoing cost-cutting measures, even with its Pantene and Olay brands losing market share. As such, and with Ackman in the background, the columnist says PG looks appealing right now.
PG has added nearly 19% since the start of the year, outperforming the record-setting Dow Jones Industrial Average (DJIA), which is up just over 16% in 2013. Plus, the stock recently bounced off support at its 10-week moving average, and is trading within a stone's throw of its all-time high of $82.54, tagged in mid-to-late April.
Despite PG's technical prowess and solid fundamental backdrop, not everyone on Wall Street is a fan. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.22 ranks in the 66th percentile of its annual range. In simpler terms, options traders have purchased PG puts over calls at a faster-than-usual clip during the past couple of weeks.
As a result, the security sports a Schaeffer's put/call open interest ratio (SOIR) of 2.68, suggesting puts more than double calls among options with a shelf-life of three months or less. Even more telling, this ratio sits just 1 percentage point from an annual acme, implying that near-term options traders have rarely been more put-heavy during the past year.
As PG continues its quest for new highs, the bearish holdouts in the options pits could hit the exits -- translating into a contrarian tailwind for the shares.