Housewares Have a Spot in Your Cupboard And Your Portfolio
Mark is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I'm a big fan of the Peter Lynch school of thought to buy what you know. One of the best places to look for ideas for your portfolio is in your cupboards, whether in the kitchen or the bathroom. Chances are that many of the same items are in your neighbor's cupboards as well. The following companies have a strong economic moat with brands and products that we all use and can't imagine living without.
The essential home organizer
Newell Rubbermaid (NYSE: NWL) is best known for its Rubbermaid food storage, home organization, and refuse container products. The company also owns the world's broadest assortment of writing instruments with the brands Sharpie, Paper Mate, Parker, Waterman, and Uni-Ball. Newell Rubbermaid also owns the Graco line of baby products.
In the first quarter of this year, core sales grew 9.5%. The strongest growth was seen in commercial products and the baby-products divisions. Earnings, however, fell to $0.19 per share from $0.27 per share in the year-ago period. The decline was due to increased restructuring costs, a loss from discontinuing the hardware and teach platform businesses, which the company is in the process of selling, and a loss from currency devaluation in Venezuela.
For the rest of the year, Newell Rubbermaid expects core sales to increase 2% to 4%. Earnings per share are forecast to be between $1.78 and $1.84 per share compared to last year's $1.67 per share. The company is undergoing Project Renewal where cumulative cost savings are expected to be between $270 million and $325 million by the second quarter of 2015. The cost savings will be reinvested in the business to strengthen its brands and accelerate growth.
The products of everyday life
Jarden (NYSE: JAH) has grown mainly through acquisitions and it sells items for the home and outdoors, particularly camping items. The company's brands include Coleman, Rawlings, Bionaire, Crock-Pot, Mr. Coffee, Oster, Sunbeam, and First Alert.
In the first quarter of this year, organic sales grew 4%. Net sales rose to $1.6 billion from $1.5 billion in the prior year. The gross margin remained the same at 28.1%. Jarden reported a loss of $4.4 million; but excluding inventory charged to the cost of sales, currency devaluations, amortization of several items and a loss related to the extinguishment of debt, the company actually earned $33.1 million.
Going forward, the focus at Jarden is increasing its revenue outside of the U.S., particularly in Brazil and China. Currently, Jarden gets 40% of its revenue from outside the U.S. and wants to increase that percentage. To do so, Jarden invested $385 million in its brands last year. New products continue to drive sales as one-third of all revenue has come from products created in the last three years.
Jarden is also buying back stock. In the first quarter, the company launched a $250 million share-repurchase program that will be completed this summer. For fiscal 2013, Jarden expects full-year earnings to be $3.20 to $3.25 per share, up from the prior guidance of $3.03 to $3.13.
Products found in your bathroom cupboard
Helen of Troy (NASDAQ: HELE) is best known for its electric hair dryers, curling irons, and straighteners. It also produces combs, brushes, hair care styling products, body powder, and skin care products. Its branded products include Vidal Sassoon, Revlon, Dr. Scholl's, Brut, Sea Breeze, and OXO.
Helen of Troy beat earnings estimates with its latest quarterly report last week. The market was expecting earnings of $0.71 per share and the company came in at $0.82 per share. The stock hit a new 52-week high on the earnings beat. Revenue for the quarter was $304.5 million compared to expectations for $301.2 million.
Going forward, the positive earnings trend looks set to continue this year. A key reason for this is expanded shelf space at several key retailers and a new 1.3-million square-foot distribution facility that the company is opening this year in Mississippi. Helen of Troy is also launching several new products this year in its housewares and healthcare/home environment segments to boost revenue.
Helen of Troy also has significant opportunities for expansion overseas. The company currently only gets 16% of its revenue from outside the U.S., and that's primarily from Europe and Latin America. An expansion into Asia would certainly boost growth.
After the recent earnings beat, my favorite would be Helen of Troy. Its forward P/E is only 12.7 and the PEG ratio is less than 1 at 0.8. My second favorite is Jarden. Its forward P/E is 12.2, but it has a higher PEG ratio of 1.3. Newell Rubbermaid is slightly more expensive with a forward P/E of 13.4 and a PEG ratio of 1.6. However, Newell Rubbermaid has a dividend yield of 2.3%. In the end, buying what you know has been a proven winner and all three have been good performers over the past year.
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Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!