The Success of Colgate-Palmolive (CL)

One of my pet peeves about the financial media is the intense concentration on popular stocks while boring stocks are widely ignored. Right now, the investment world is going nuts for the earnings report from Netflix ($NFLX). You realize there are lots of stocks out there?

Study after study has shown that boring stocks, ones that are less volatile, do better in the long run. Yet investors always seem uninterested in the boring issues. The simple fact is that there’s a lot of money to be made in the duller areas of the economy.

I think a great example is Colgate-Palmolive ($CL). The company is in the exciting business of soap, toothpaste, deodorant and other household products. Sure, they’re not inventing the new cellphone or electric car, but they make stuff everyone uses every day. Check out the long-term stock chart. CL has been an astounding performer and it’s crushed the S&P 500.

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Over the last 33 years, Colgate is up an amazing 12,500% while the S&P 500 is up 1,220%. That means that CL has lapped the market nearly 10 times.

But what’s particularly impressive about Colgate’s run is the steadiness of the gains. There are a lot of stocks that have done very well but it’s because they were market darlings for a year or two. Colgate, however, has continually churned out the gains for many years. An investor in CL would have creamed the vast majority of hedge funds.

Here’s CL divided by the S&P 500. I’ve added a 6.5% trend line. You can see that CL has consistently beaten the market for many years.

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Colgate will report its earnings tomorrow. Unfortunately, I think the stock is overpriced here. But if the stock were to come down a lot, this is one I’d love to add to our Buy List.

Posted by on October 22nd, 2013 at 10:57 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.