Jim Cramer, never one to rest on a single industry segment, discussed the quest for youthfulness tonight on his ever-popular MAD MONEY show.
If you want your body to look like a teenager's but your bank balance to scream "old fogey," Cramer advises that you avoid Bare Escentuals, Inc. (NASDAQ:BARE). He calls it a fad that isn't going anywhere, and says if you own it you should "ring the register." It was spun off by an LBO firm, but now it's too late; the company won't make you money. Cramer had regrets over this one: he didn't tell a caller on Friday to sell, and wished he had.
Better options if you want to capitalize on America's quest for eternal youth? Cramer likes Allergan, Inc. (NYSE:AGN) for its Botox and Medicis Pharmaceutical Corporation (NYSE:MRX) for its competing product. He counselled against the big, luxury names in the space: Avon Products Group (AVP), The Estee Lauder Co. (NYSE:EL) or Revlon, Inc. (NYSE:REV). Cosmetic companies are unreliable to Cramer.
Cramer did say International Flavors & Fragrances Inc. (NYSE:IFF) is a good alternative, even though it is close to a 52-week high. He thinks the company is much better with scents and steady end markets. Soon it will split into two businesses, he says, as it creates sweet ingredients that it sells to large companies like P&G. He said IFF only trades at 16x forward earnings and it has consistent 10% earnings growth. The best pick of the bunch? IFF, Cramer says.
Cramer: look younger with Botox, IFF; Bare Escentuals old news
Posted Oct 23rd 2006 6:29PM by Jon Ogg
Filed under: Analyst reports, Television, Allergan (AGN), Estee Lauder (EL), Revlon (REV), Medicis Pharmaceutical (MRX), Avon Products (AVP), Intl Flavors/Fragr (IFF)
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Reader Comments (Page 1 of 1)
10-24-2006 @ 3:08AM
Gary E. Sattler said...
I have a mixed response for Cramer on this makeup item. One thing I can tell you for sure is that he may wish to consider using some more of the stuff.
Cramer counsels against holding shares of Bare Escentuals. I stand against that. Bare Escentuals is realizing good success with their Bare Minerals line... in the US and UK. Cramer doesn't like it because Bare Escentuals competes directly against his chemical and drug buddies. That's the same reason Cramer points you away from the cosmetic classics. Avon, Estee Lauder and Revlon all do business in a different field than IFF but they draw their incomes from the same demographic. Cramer's just trying to cut a path. The only "fad" in this story... is him.
Now I'm not saying to keep away from IFF. The company is huge and solid and VERY well managed. The October 11th 2006 press release announcing a share dividend increase should be proof enough of that. The only thing I find a bit unsettling is their declared intent of yet another corporate stock share buy back, a trend I feel we're seeing too much of.
If Cramer was to do you a favor in suggesting that you avoid a cosmetic investment, he should have pointed you away from that nasty botox. That would have been better advice in my opinion. They still don't know all the long term effects of that stuff. To me, it's just plain dangerous.
So in conclusion I'll take my stance like this:
Bare Escentuals: Hold. Buy if your research suggests it.
Botox: Dangerous... I wouldn't own it.
Avon, Estee Lauder, Revlon: Hold if you have them. If you feel some concern, check their performance. If your research indicates a good long term investment and dividend return, then you may even want to buy some, but I don't have the information to suggest that.
International Flavors and Fragrences: A safe bet.
10-28-2006 @ 1:55PM
Wen said...
The cosmetic industry is very competitive. Even though Bare Escentuals has great mineral products but other cosmestic companies are coming up with the same products. I have to agree Bare Escentuals can be very popular for now what about next year? I have to go with IFF and I think it is good for the long run. For short gains maybe Bare but long run I have to go with Cramer IFF.
11-10-2006 @ 12:09AM
M Chadwick said...
One needs to look at the facts on BARE. The company used all of the $370 million in proceeds from the IPO to repay debt. They still have over $250 million in LT debt and the stockholders equity is -$200 million+. The company trades at an enterprise value to sales of 7.8 which is very rich. Is BARE overvalued? The lead manager that took BARE public, Goldman Sachs, thinks so and initiated coverage with a neutral (HOLD) rating on Tuesday. I just went short.