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They say sex sells. But apparently nobody told Wall Street.
Shares of Estee Lauder, the maker of a wide range of make-up and fragrances worn by the sexiest people in the world, just don't seem to be getting much love lately.
And the Street's lackluster interest comes despite a strong earnings report, "in which Estee Lauder blew away the estimates, both top line and bottom line, and also raised its guidance," Cramer said.
Although shares popped on the news when two weeks ago, investors have since turned their backs, with most of the gains relinquished.
Conversely, shares of Clorox, a stock Jim Cramer says is the opposite of sexy, has continued to attract interest, even after recent earnings, which were unimpressive at best. "Clorox missed numbers on both the top and bottom line and gave lackluster guidance," Cramer said.
And that's led Cramer to question whether sexy has gone out of style on Wall Street. After all, shouldn't a faster growing cosmetic company with impressive earnings attract greater interest than a respectable but quiet maker of bleach?
Here's the rub.
Cramer says the recent decline in interest rates is somewhat counter-intuitive for many money pros.
That is, interest rates continue to languish even though the economy appears to be improving. "The yield on the 10-year Treasury has slipped all the way back to 2.5 percent," Cramer noted. "In the 35 years I've been trading on Wall Street, an improving economy has always been met with rising interest rates," Cramer said. "But that's not happening now."
Because of these unexpected events, Cramer says investors are seeking yield anywhere they can find it.
And Clorox has yield. "The company just boosted its payout by 4% a couple of days ago, giving it a bountiful 3.3% yield. And while some of their business lines may be struggling, the fact is, people will always buy bleach and laundry detergent and trash bags."
Conversely, Estee Lauder only has a 1.1% yield.
Therefore, Cramer says pros won't view the stock as a bond alternative; the way they see Clorox.
That's not to say Cramer doesn't think Estee Lauder warrants investment; he does.
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Cramer says the company has a lot going for it. He called it an international growth story with rapid growth overseas. And he added, "by next year, China could be Estee Lauder's second largest market." Also he said Estee Lauder is cutting costs, finding capital efficiencies and making better use of its balance sheet.
"If you're comfortable with risk, you can totally own the sexy, well-run Estee Lauder right here," Cramer said.
However, if you find the Treasury yield concerning, and if you feel like this is a moment to hunker down and preserve capital, "then stick with Clorox," Cramer said. "You can think of it as a domestic security play. Clorox's brands are either number one or number two in the categories where they compete."
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