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David DriscollReckitt BenckiserRBGLYBUY ON WEAKNESSAug 08, 2013

Their pharmaceutical division is about 20% of their total revenues. 80% of the business is doing well but 20% is going to suffer a little bit when their big drug comes off patent. Watch the stock and see if there is an entry level a lower price from here. Very good company. Executes extremely well on the products that they have. Margins are high. Dividend growth over time is there.

David Driscoll

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misc consumer products

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He recently sold. Sadly, baby died from its high-risk infant formula. $60M judgement. Billions more in lawsuits just waiting in the wings. Asked himself if he'd buy today if not already owned, the answer was no, so he sold.

DON'T BUY

Many UK stocks have been hit by Brexit. The UK pound has been declining against the Canadian dollar. The company isn't doing well, either, though its valuation is cheap. Look elsewhere like P&G.

PAST TOP PICK

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Own this for defence. They've benefitted from inflation. Are getting into emerging markets which enjoy population growth, and in turn fuel company growth.

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It also trades under the symbol RKT-LON. Lysol, very popular during the pandemic, is one of its major products, among others. It is undergoing a turnaround and is very well run, trading at a discount to other consumer products businesses, a good area to be in. Trades at 17X earnings with a 3% dividend and growing margins. It has unique products and could make some good niche acquisitions. Buy 16 Hold 5 Sell 0

TOP PICK

price target 7,153.68 GBP Like a mini Unilever in packaged goods. They make Lysol, for example. They made a bad purchase in 2019 of a baby food company that had distribution problems. That pressured the stock, but is now behind them. Revenues are growing near 10%, operating margins are up 3% and free cash is up 4% in the last year. They have a portfolio of brands that will do well. Highly defensive.

PAST TOP PICK

(A Top Pick Nov 11/21, Down 5%) Consumer products company (Lysol etc.) Difficult times, but undergoing turnaround. Revenue growth estimated to be ~8%. Will continue to hold.

PAST TOP PICK

(A Top Pick Nov 11/21, Up 9%) Has done well along with other consumer staples. Back on track, growth has come back from depressed levels. Growth in high single digits. Investing in brands they already own.

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Hygiene products, lozenges, baby formula. Global. Suffered with management missteps, but has cleaned house. New team has increased revenues and profit margins. Getting better penetration in other markets and geographies. Going to see good earnings growth and rising dividend. Cheap. Yield is 2.80%. (Target price is in pounds.) (Analysts’ price target is $7088.50)

BUY

Reckitt's CEO says that hygiene is the strongest theme in this industry now and will endure. Habits will stick beyond the pandemic. Investments to expand the company are now paying off.

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TOP PICK

Another consideration is Benckiser (RBGLY:OTC) which owns a wide portfolio of consumer products (e.g. facial washes, heartburn meds, condoms, cleansing pads, sore throat solutions). These are products that consumers will buy even in a recession, which makes RB defensive. Another plus is that RB products are sold in more than 200 countries with the U.K. totaling only 8% of revenues (from 2018). So, if British consumers do tighten their wallets if there's no trade deal, then RB is largely protected from that hit. Also, RB pays a decent yield of 2.32%, but boasts 16 straight dividend increases. That said, RB suffered a “modest decline” in operating margins last October when it guided down, but the new CEO plans to unveil a new plan this month when the company reports annual results. Again, RB isn't a screaming buy, but it's a fairly safe, long-term bet.

BUY ON WEAKNESS

In portfolios for clients who have European exposure. Abbott is a big competitor. CEO left, so the stock's taken a hit. Were on a growth spurt in last decades, but now it's the law of diminishing returns. In the right areas, and will do well as long as they stay focused. An opportunity to pick away at it.

COMMENT

A consumer stock. It has detergent, some pharmaceuticals, lozenges, etc. Has this for his children’s and grandchildren’s portfolios. Dividend yield is very small because a lot of their cash flow is going towards product development as well as acquisitions.

DON'T BUY

Makes everything from over-the-counter birth-control products to food sauces. This has probably been the most popular European consumer staples stock. Very respected management team. Unfortunately most of that has been caught up in the price. Wouldn’t recommend at these price levels.

HOLD

Is it a good entry point after their big drug goes off-patent? When companies come off patent, it really comes down to the quality of the management team. This company’s management has done a terrific job at growing earnings, cash flow, dividends and sales. Doesn’t think it would be that great a concern that one of their drugs is coming off patent because they can just turned around given that they’ve got more of the consumer product business as a backdrop.

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David DriscollReckitt BenckiserRBGLYBUY ON WEAKNESSAug 08, 2013

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