McPherson’s – another Australian company which owns staple household brands like; Manicare, Lady Jane, Swissper, and Multix. Investors have been concerned that these brands were facing a terminal decline, but their latest news to the market in December tells us that these brands are still growing at 7%. On top of that, they’ve also got a new skincare brand called Dr. Le Winn which is doing extremely well both in Australia (20% growth) and the huge market of China (130%). They’re also transitioning from selling their products through third-parties, to selling direct-to-consumer, producing juicier profit margins. Considering the company is on a FCF multiple of just 8x (with share price at $1.40) in today’s market, the downside risk here is miniscule, while offering a lot of upside potential.
BWX – the parent company behind Sukin, a haircare and skincare company that ticks a lot of boxes – environmentally sustainable, no additives, vegan. The company’s old management team went on an acquisition binge and made some bad deals, but with new management and improving sales, the company is fairly cheap all things considered. Investors were burned in 2018 when the stock collapsed with the drama, and are having a hard time giving them another chance, but this spells opportunity for the rest of us.
Estee Lauder – a behemoth in the cosmetics space, owning brands like; the namesake, MAC, Bobby Brown, and Clinique. This company will continue to dominate the cosmetic space with their strong brand portfolio, but at current levels the valuation is far too high. Investors have become over-enthusiastic about the cosmetic space after the make-up industry boomed some years ago. Wait for the stock to get below $150 before jumping in here.
LÓccitane – a luxury cosmetics brand with a strong following. Again, investors are too optimistic here as most of the growth in the make-up industry has likely already passed. The stock is listed on the Hong Kong exchange for some reason, but wait for it to hit below $14 before getting into this one.
Coty – this company’s troubles started when they bought a bunch of sub-par perfume brands from Pfizer some years ago for a ridiculous price-tag. The company is drowning in debt and was facing a risk of bankruptcy when the pandemic hit them, trying to dig themselves out of this debt-hole they’ve got themselves into. This is a very risky play here and I wouldn’t suggest buying in at anything above $5 a share. Despite their troubles, the company does possess some valuable features, including; a 50% stake in Kylie Jenner’s make-up line, a 20% stake in Kim Kardashian’s make-up line, and Sally Hansen. If these bets on the Kardashian family pay-off, Coty could join the valuations assigned to its peers, leading to an appreciably higher stock price. However, they are loaded with debt, so the risk of going to $0 is very real, so wait for a cheap buy-in price.