“Clorox is a star out of nowhere,” Cramer said, “the golden-girl stock that’s now back in action.”
Now that we have the “what” out of the way, here’s the “why”:
Clorox, maker of everything from Hidden Valley Dressing and Burt’s Bees personal-care products to Fresh Step cat litter and Kingsford charcoal, is squeezing growth out of even these long-known brands by tying them to “big-picture trends,” Cramer said, like health and wellness, personal care and sustainability.
For the latter, look no further than Clorox’s Brita water filters, which offer a greener, lower-cost alternative to the bottled kind. The company is also leveraging its popular cleaning agents as a way to fight germs, in both homes and hospitals. And Burt’s Bees benefits from the “rapidly growing natural personal-care market,” Cramer said.
There is a bit of rebranding going on here, too, though. Clorox is trying to make obvious the link between grilling with Kingsfords and football season, extending the product’s typical three-month summer shelf life. At the same time, the company is looking to change the perception of Hidden Valley as mere dressing to a healthy condiment that adds to your vegetable intake. Last year, it even outperformed ketchup.
In addition to the product focus, Clorox has a few other things going for it. A focus on the Hispanic demo should boost the company’s international growth to way past 20 percent of revenues. Selling the auto-care biz made sense because STP and ArmorAll didn’t exactly fit in with the rest of the portfolio. And CEO Don Knauss is working to turn word-of-mouth marketing among customers into another way to drive sales.
Back to products real quick before we close: Clorox is innovating. The number of new products in 2010 is double that of 2009. And R&D spending as a percentage of sales, already high for the industry at 2 percent, is up as well while competitors cut back.
New wares or not, though, Clorox is still your classic defensive play, Cramer said. The company’s cost conscious and focused on returning profits to shareholders in the form of a respectable 3.3-percent dividend yield. That’s an 83-percent jump from fiscal 2007. The stock right now is trading at just 13 times earnings with a 10-percent growth rate.
But “with this new Betty White image,” Cramer said, “it deserves to go much higher.”
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