Wrinkle-Free Skin: A Necessity in Any Economy
Even though Cramer is feeling optimistic that the problems in the system relating to the mortgage crisis will get fixed, he still wants Home Gamers to be prepared for the worst. They need a stock that should thrive in case the worst-case scenario plays out and the Fed lets seven million people actually lose their homes and some major banks fail, he said. They need a stock that’s economically insensitive and has the potential for accelerated revenue growth even if a bunch of companies have earnings that start collapsing left and right, he said. They need Allergan .
Cramer has been bullish on Allergan before - specifically Botox – which makes Allergan the ultimate play on the universal need for wrinkle-free skin, regardless of the state of the economy. But after listening to Allergan’s conference call, Cramer realized the stock is bigger and better than he thought.
Allergan got a blessing when the FDA decided to allow silicone to be used in breast implants instead of saline. Its acquisition of Inamed has given Allergan a hammerlock on the breast-implant business, Cramer said. It also has a jump on a new line of business – the lap band, which is a painless, post-surgery way to lose weight that involved crimping the stomach to make you feel full. This company has become the one-stop shop for anyone who has the incessant need to look better, Cramer said. Allergan has almost the entire body covered with the breast implants, the lap band for the stomach, Botox for the skin and also Juvederm, a skin-firming product that is taking off because of its long-term effectiveness.
But it isn’t Allergan’s ability to profit off our vanity that has attracted Cramer. It’s the numbers. Botox is 30% of the company’s sales and it grew 21% year-over-year in the last quarter with rest-of-world growth roughly matching domestic growth. Juvederm has 175% growth and 20% of the facial-filler market now. Allergan’s “breast aesthetics” division was up 22% last quarter and its obesity business, the lap band, was up 50% year-over-year.
Bottom Line: Allergan has the numbers, it’s got the growth potential and it’s economically insensitive in case things get worse. Cramer expects that the worst won’t happen, but if it does, he recommends Allergan to help weather the storm.
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