Diamonds and Dogs

10/19/18

Procter & Gamble (PG) leading the Dow and the markets higher. The maker of detergent Tide and Gillette razors is trading up 8% after beating earnings estimates by 3 cents as revenues rose 0.2% year over year to $16.69 billion. The bulls are focusing on organic sales growth which accelerated to +4%, the strongest quarterly sales growth in five years. Not sure that deserves an 8% rally, but it's always tough to value these blue chip stocks growing at 5%, but trading for multiples much higher like they are growth stocks.

Something wrong in the bogs of the Ozarks. The Arkansas-based Bank of the Ozarks (OZK) is down 24% after earnings and loan losses. This is how not to run a bank. The bank took a $45.5 million charge for bad loans for two Real Estate Specialties Group ("RESG") credits. These two unrelated projects are in South Carolina and North Carolina, have been in the Bank's portfolio since 2007 and 2008, and were previously classified as substandard. Okay, loan losses are normal. Then, the bank spent $10.8 million on a strategic rebranding by changing their name in July to Bank OZK, changed its ticker symbol to "OZK," and adopted a new logo and signage. With the stock down 50% in the last six months at a five year low, the rebranding is not off to a good start.