CAGNY Day 4 – Call it a Tie – Four Solid Presentations

I am going to call this last group of CAGNY presentations a four way tie – I know, it’s a dodge, but four very good companies that put forth compelling long-term value propositions for investors.  If pressed, I am going with L’Oreal because I appreciate a sense of humor when delivering what is, at the end of the day, pretty dull material.

L’Oreal (OR FP)


Nice sleek, black background presentation that was fitting for a very French company that is the market leader in beauty.  The company competes across all beauty segments, with the exception of direct sales (by design, according to CEO Jean-Paul Agnon, followed up with a backhand comment directed at AVP).  And the new word for the day is “Universalisation” – globalization that respects local identities.  Good strategy, bad word, but the strategy is what is important.  The company has had five chairmen in 100 years, and you get the distinct impression that the company doesn’t do anything without thinking about the long-term implications.  The company is becoming less dependent upon the Eurozone for sales.  The company’s goal is to outgrow the market every year and has largely achieved that in the recent past.  China play?  Yup – the company is the fastest growing beauty company in “new Asia” (excluding Japan).  Very solid presentation of a good global growth story in an attractive category – if the stock traded in the U.S. market, it would probably trade 2-3 P/E turns higher.

Colgate (CL)


“Why we are positioned for 2013 and beyond.”  The company has a long history in emerging markets and less than 50% of its profits in developed markets.  Colgate took its traditional victory lap, highlighting numerous return metrics over the course of distant and recent history.  The presentation moved next into a discussion of innovation – the company has a strong pipeline across geographies and business segments.    Interesting discussion of expanding distribution opportunities in emerging markets (India highlighted).  Consumer engagement at the retail level is very valuable, and can debate the value of that type of spend versus spending on traditional media – not a wholly unreasonable position, in my view.  Credit where it is due – 25 presentations behind us, and Colgate is the first one that discussed pricing as a strategic core competency.

Estee Lauder (EL)


Global growth, fueled by innovation – opening slide for Estee.  Prestige beauty should grow at 4-5% per year going forward (3% in ’13), EL plans to stay ahead of the market.  What is driving growth – the usual, emerging markets where we are seeing women joining the middle class at an increasing rate.  I am pretty “innovated out” in terms of listening to the topic, but EL has created an interesting presentation highlighting its capabilities as a global research and development organization – science based approach to global beauty.  Most detailed discussion of this key theme that I have heard at the conference, and I have heard all of them.  Interesting contrast with PG and ENR here – a significant cost savings program that is underway while the top line is still healthy.

The Coca-Cola Company (KO)


2020 Vision – profitable sales growth, focus on economic profit (I guess CLX isn’t the only company to have figured this one out).  Global non-alcoholic beverages are an attractive industry because of – you guessed it – favorable demographics arising from growing global middle class.  The consolidation of the global bottler network can provide the platform for long-term profitable growth.  The company lays out a compelling thesis as to why it is in a position to capture the continued growth in non-alcoholic beverages.  I would say a productive presentation, if somewhat dry – even with the rum and Coke plug toward the end of the presentation.

Safe travel home,

Rob

Robert  Campagnino

Managing Director

HEDGEYE RISK MANAGEMENT, LLC

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Matt Hedrick

Senior Analyst