Estee Lauder

Buy on a pullback. This is quite expensive but will grow. Great company. Buy high and sell higher.

Consumer stocks tend to see a bump up at this time of year through to May. We are still in a period of seasonal strength, which begins around the Oct/Nov timeframe. There was a bottom in December, and it has now traded higher. Trending above its 20 and 50 day moving averages. Support seems quite firm at the 20 day. A bit of caution, he sees the short and intermediate term trending positive, but the 200 day is still pointing lower. This indicates longer-term investors are selling every time it bumps up to that level, whereas intermediate or nimble players are playing the swings. Given your time horizon, it might be a bit toppy here. Chart shows a bearish candlestick, and the next level of support would be around $80, which would be the better time to pick it up.

It looks like one of the better value plays. It has to grow through acquisitions. They are expanding into Asia where people spend a lot more money on skin care. It has good cash flows.

Global and operates in over 150 countries. Skincare is where they are making their money. They are also in fragrance through licensed agreements. Shares have done tremendously well, and a big part of that has been their ability to gain traction in China. Thinks a lot of the future growth in China is already priced in. A catalyst that could add share price appreciation will be their ability to execute on their e-commerce strategy. E-commerce is about 8% of their overall revenue, and if they are able to grow that it will help their income. At 29X PE he wouldn’t be in a rush to Buy this. A very low dividend of about 1.25%.

Skin care. They are in the fragrance space through licensing, such as to Michael Kors. They have had success in the Asian markets (over 20% of revenues). He likes this name. Only 8% of revenue is from E-commerce and it moved more toward this space. Buy it in several buys over time.

There must have been something fundamental that changed in mid-August. We are running up against some resistance at $84. He would be concerned again around $93. We have a nice 3 year trend where it bounced nicely off support from an uptrend line through lows.

This is probably one you should own. Chart shows big swings, but it has a long upward trend. There is a little bit of support at around $79.

His screens show a 7%+ top line growth, bottom line growth even faster. Over the next 3 years he would expect at least 100 basis points of margin expansion per annum. This gives him a top line growth with an accelerating bottom line growth. Where he really sees leverage is on the travel side. More and more Chinese, for example, are traveling abroad. Travel retail accounts for 12% of sales, but he estimates it accounts for up to 25% of their profits. Lots of room for margin improvement. Yield of 1.15%.

Estee Lauder (EL-N) or Tiffany & Company (TIF-N)? 2 very different companies and you would invest in each for different reasons. This company had a very, very weak quarter and hasn’t really recovered from where it was trading in the mid-$70. Very good company with a good product line. Has high margins. Big exposure to the Asian consumer which is an area where you have to be cognizant and perhaps worrisome about. Great products and has a very, very strong balance sheet.

Quite an amazing little company. Biggest market in face and skin creams. Prestige beauty market is growing and these guys are growing faster. Owner is 75 years old and there is potential for a takeout but that is not why he buys it. Diversity of brands and countries.

In 2010 they purchased a cosmetics company and doubled since then. The valuation is expensive and is on the 20s on a PE level. One step back along the supply chain is International Flavors Fragrances and (IFF-N) and is a better way to play it.