CLX: A Steady Winner in a Sea of Volatility

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Clorox (CLX) is 103 years old this year.

clx-clorox-stockIt made a franchise selling only bleach for more than 5 decades. It has raised its dividend for almost 40 consecutive years. And 80% of its products are either No. 1 or No. 2 in their product categories.

The crazy thing is, the company only has a $16 billion market cap. Its competitor Colgate-Palmolive (CL) is more than three times that size; Procter & Gamble (PG) is more than 10 times that size.

CLX is certainly a company that has punched well above its weight for most of its existence.

Granted, Clorox doesn’t sell sexy consumer electronics, cutting edge biosimilars or make electric cars. It makes and sells some of the most iconic brands on America’s (as many other countries as well) shelves: Clorox, Pine-sol, Glad, Hidden Valley and Burt’s Bees, to name a few.

The thing about dominating such a fundamental sector is it’s almost recession-proof. Come good or bad economies, CLX brands keep on chugging along. It’s easy to justify a 20- or 30-cent price differential as opposed to having to spend an extra dollar or more for a similar bargain product.

CLX Has Things Under Control

CLX also has done a great job is maintaining quality in all the brands it owns. There are complimentary product lines as well, but the point is, at every price point, CLX brands deliver quality that is worth the premium.

And that is obvious in its recent Q2 numbers (for the quarter ended Dec 31, 2015). Earnings growth came in at 18% as earnings  increased from $128 million to $151 million.

When times are tight, the one place consumers will hold the line on (and the first place they will buy up) is household cleaners and similar items. This kind of brand loyalty is what has kept CLX in business all these years.

Also, lower commodity prices will be helpful to Clorox’s bottom line, because its products command higher pricing levels, so any cost savings are raw materials that will go into company coffers.

The opportunity here is that it looks like the market bought the rumor and sold the news on CLX. The stock was on a tear up to its earnings announcement and then it dropped almost 5% in trading after earnings on Thursday.

That means you can pick up Clorox at 2015 levels and also grab a 2.5% dividend. Remember, this dividend is about as rock solid as the 103-year-old company it represents. In the past year, CLX stock has risen about 17%; add the dividend and you’re looking at a stable, low-beta company that is kicking off nearly 20% in a very tough market.

Sex may sell, but in this case, stability is the buy.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool,PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/clx-steady-winner-sea-volatility/.

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