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Colgate-Palmolive Co. Message Board

  • johnben58 johnben58 Feb 19, 2012 11:43 AM Flag

    Book Value

    I was looking at the CL balance sheet. Does it concern anyone that the book value on this stock is $4.91?

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    • Kind words, rgchjr 1945.
      Remember their top line gross is around $17 Billion, So a $46 B. market cap is pretty rich. I'm not so sure of a "double," in 5 or six years. I'll settle for incremental and steady growth, nothing dramatic. (I get nervious when a stock breaks out to new all time highs. CL is a go-to stock when money managers run out of ideas. I think that's what's driving the stock now.) No, I'm not selling it, it's definite quality, but the larger economic picture isn't great.

      On the bright side is has been a wonderful stock to give to kids. I have two, in the dividend investment plan. As the years go by they get more and more interested in the "romance" of toothpaste. Now, in their twenties, they really look forward to the Annual Meetings. (I always thought CL was a better choice than MCD or DIS for kids.) They were brought up on the mantra-"Brush and get Rich, or Else!" It worked!

    • My wife worked for Colgate back in the late 60's early 70's in product development. She choose to be a stay at home mom and then a HS chemistry teacher. We have followed the company for years and you are right about everything. In the 90's this stock helped us send 3 children to college. We had invested in the early 80's when things started to turn and after splits ended up with 1000's of shares. Sold them (College tuition) except for a few and then started accumulating again and now back ot a few hundred.

      One thing I might add is I believe they also went deep in debt as part of a poison pill to fend off a hostile take over. They have also done some writeoffs in conjunction with a number of reorgs that streamlined their manufacturing and increased their ROE. The stock ran up until 2000 when it got hit by the tech downturn and then based until about 2005. Was a good time to reinvest dividends and amass shares. It hit a low of around 46 in 2005 and has basically doubled plus in the last 7 years. The 2008 - 2009 debacle hurt them a little but if you look at their chart you can draw a line across the dip. Market cap is only $46B, which is really not that big in 2012. They have not yet approached the problems once you hit really large market cap numbers. This stock could easily double in 5 - 6 years. My 3 children and all my grand kids have CL.

    • Thanks for the info on CL. I am new to the stock and don't know much of the history (began buying when the downturn happened.) Interesting info on the shareholder's meetings. Never underestimate peace of mind and a good nights sleep, eh?

    • Yes, Book Value works best when valuing "hard assets." It is supposed to tell the Liquidation Value if the company ceased and all assets were sold. But Brands, and the franchise that goes with them are tricky things to value. Like children they have to be nurtured and protected to thrive over time. In the wrong hands you can wind up with zilch. In the right hands you can have the pot of Gold-self financing, throwing off enough cash for dividends, stock buybacks, well paid employees, etc.

      Cl has been at this point since the '90's, but it took a long time to clean up the mistakes of the '70's. Poor fitting acquisitions, that added nothing to the brand. (Hebrew National, Pebble Beach Golf Course, Helena Rubinstein, Bauer and Black.) Of course the management thought these brands could be managed like toothpaste, but it didn't work. They didn't have enough money to make it work, to become P&G. Ten years of divestment followed, (actually profitable,) and concentrated on their assets, and their worldwide strengths and were able to pick their competitive spots (like gorilla warfare), along with strategic acquisitions (Kolynos, Tom's of Maine, etc.,) that created the very narrowly focused, powerhouse, you see today. Credit K. Crane, R. Mark, and W. Shanahan, with actually husbanding the transformation and protecting and nurturing the Brand. No wishful thinking here, just a realistic assessment of who they were and the power of incremental improvement over time. Their potential market: 6 Billion people with teeth.

      If you ever have a chance to go to their Annual Meeting in NYC, or attend on the Internet, you should. 1,500 happy people who didn't get rich overnight, but seem to sleep well. (Of course, 1,200 just may want the gift bags.)

      I think it time for me to put a cork in it, but I love the corporate story.

    • I was looking at a study a while ago that suggested intangibles have been the main growth drivers of company profits over the past century.

      A company say like CL toward the beginning of the century was valued by the book, with minimal value toward brand. Fast forward to the present, and intangibles (brands) are often valued by the market 3 times the weight of the Book.

    • I might add that for an old, established company, book value doesn't mean much. The real value is the brand franchise. Or put differently, if X company wanted to buy the whole company, they would have to pay a heck of a lot, enough to be of questionably economic value. Lets hope the management keeps it that way. Of course, if the Saudis want to buy into the toothpaste business, all bets are off.

    • One word: Intangibles.

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