Sex Sells: A Guide For the Socially Responsible Investor
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Sex sells. You read this far, didn't you? Socially responsible investors are missing out on some very good companies if they maintain a prudish bent. Three companies immediately spring to mind: Church & Dwight (NYSE: CHD), Johnson & Johnson (NYSE: JNJ), and Pfizer (NYSE: PFE). Church & Dwight, the manufacturer of baking soda products including kitty litter, toothpaste, detergents, and more also sells Trojan condoms and pleasure enhancing devices (I'll call them PEDs for short not to be confused with performance enhancing drugs.) Johnson & Johnson in news out today is shopping out its feminine protection line, but choosing to keep K-Y brand. And Pfizer, of course, is the manufacturer of that revolutionary drug for ED, Viagra. (Note: this post will be filled with euphemistic acronyms.)
Fellow Fool Reuben Gregg makes a case for sex-related stocks including Church & Dwight and Pfizer along with some others. I'd like to add when even magazines like Redbook, Ladies Home Journal, and seventeen (!) run sex-related articles featured on their covers sex has definitely gone mainstream. Church & Dwight had a presence at CES for its PEDs and they're just as likely to be found at CVS.
In the spirit of Valentine's Day Walgreens.com is having its own sexual wellness sale subheaded "Go Crazy, We'll Ship Discreetly". The Church & Dwight Trojan website features a Valentine's Day gift pack of condoms, candles, a PED or three, lavender bath salts, and massage lotion; all for $75 with free shipping. Such a deal!
Why not invest in companies whose market is ever-expanding as Americans finally get more comfortable with sex? These three names are dividend payers and good holds for value investors but would a socially responsible portfolio's performance be enhanced with them?
Ah yes, the Marvin Gaye classic. You might want to put it on while you read this. Pfizer is known first and foremost for its Viagra ads with middle aged dudes playing in garage bands, a standard of SNL ribaldry, but Pfizer's performance needs no enhancing having doubled since 2009. On January 30 it was pennies shy of its 52 week and multiyear high of $27.84. And it still has a yield of 3.60% returning $15 billion to shareholders in 2012.
Pfizer just reported Q4 results on January 29 beating analyst estimates on both top and bottom line. CEO Ian Read underlined the importance of Viagra (for which US patent protection expired) saying ,"More specifically in 2013, you will see us focused on continuing to maximize the value of our in-line portfolio including key in-line assets such as Lyrica, Celebrex, Enbrel, Viagra and Prevnar 13." (source Seeking Alpha earnings transcript) Pfizer is also launching two big products Eliquis, an oral anti-coagulant for stroke prevention, and Xeljanz, FDA approved for treatment of rheumatoid arthritis and in phase III trials for other uses. Past worries over its pipeline have been allayed by work on biosimilars and drugs in different phase trials.
Pfizer is buying back shares with plans to buyback more in 2013. Its planned IPO of the animal health unit, Zoetis, and the completed sale of its nutritionals unit to Nestle were undoubtedly part of the good earnings news making it a leaner operation. The P/E is 21.98 with a forward P/E of 11.71 with an operating margin of 31.27%. Pfizer is up 30% over 52 weeks but analysts only see 5 year earnings growth in the low single digits.
Johnson & Johnson is listed right behind Hershey's and General Mills by Forbes top brands with most ethical leadership list. While Johnson & Johnson doesn't have the strong sexual wellness bench that Church & Dwight has it's not surprising they wanted to keep K-Y brands. Like the other two these products have their own educational websites. Johnson & Johnson just hit a 52 week high on January 30.
The company has a 14.59 P/E and a yield of 3.30%. However, years of recalls hurt consumer confidence. The company expects to get the majority of recalled product lines back on the shelves this year. Lawsuits over their DePuy metal hip implant grind through the courts. Not to diminish the impact of these suits because several billion may be paid out over claims but the company earned $67.22 billion in 2012 and investors have trusted its dividend for 50 years.
Johnson & Johnson, enjoying steady but not thrilling growth in the high single digits, is not only a consumer staple defensive with its consumer products division (baby care, skin care, oral care, and OTC drugs) but has a health care kicker with the medical device and diagnostics division and pharmaceutical division with growth in oncology, rheumatology, and immunology drug sales.
Nudge, Nudge, Wink, Wink
Church & Dwight is a company dedicated to cleanliness, hygiene, and nudge, nudge, wink, wink, the finer things in life. This is the smallest of these companies with an $8.1 billion market cap but truly an up and comer. With a 24.83 P/E and a 1.70% yield (dividends paid continuously since 1901) it was one of the biggest movers among consumer staples for most of last year. Before you start sniggering Church & Dwight has teamed up with Indiana University for a three year academic study on various aspects of sexuality. Sexual health and wellness is here to stay and Church and Dwight is treating it most responsibly.
Church & Dwight is trading close to its 52 week high and the company reports on February 5. At the last ER in November CEO James Craigie said, "We increased market share on our four largest brands in the quarter, representing over 70% of our volume. In fact we achieved all-time high quarterly market shares on ARM & HAMMER liquid laundry detergent, XTRA liquid laundry detergent and TROJAN condoms.” On the call he also announced a $300 million share repurchase, raised guidance, and reported EPS rose 22.2% to $0.66 per share.
Afterglow, Er Afterthoughts
These three companies are dependable dividend payers, great defensive stocks with forward looking products promoting health, good hygiene and sexual wellness. Don't make your socially responsible portfolio suffer for puritanical prejudices. Valentine's Day is right around the corner.. have a little fling! Your portfolio will be grateful.
leglamp has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. 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!