Lean, experienced Colgate-Palmolive (NYSE: CL) has weathered the recession in good shape, hence it goes without saying that I'm Reiterating my Buy rating for the company, first recommended on April 13, 2009 at a price of $58.49. If you bought in April, you're up 36%.Colgate, an assertive-defensive play, stayed one step ahead of the downturn – closing about one-third of its factories, trimming excess marketing spending, and focusing on products in stronger-growth markets.
As a result, look for 10 percent earnings growth in FY2009 and FY2010. New product launches are adequate, and margins should widen as the U.S./global recoveries progress. Further, CL's footprint adds an element of revenue diversification: the company operates in more than 200 countries. The First Call FY2009/FY2010 EPS estimates for CL are $4.29 to $4.80.
Technically, Colgate-Palmolive's stock chart is strong – an uptrend, and a stock that rarely touches the key 50-day moving average. A golden cross – which is the 50-day MA crossing above the 200 day MA - and a gap-up at $64, are two, additional, positive technical indicators. Hence, it would not be a surprise to see CL above $95 by the end of 2010.
Finally, the Sell/Stop Loss has been raised to $59, or to just above cost, from $41. Hence, this is a zero-risk trade for your April-bought shares.
Stock Analysis: Colgate-Palmolive is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in CL now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CL position before December 2009. Revised Sell/Stop Loss if you bought shares in this company: $59.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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