Even before the mess that the coronavirus from China has caused, Clorox (NYSE:CLX) can easily make a case for belonging in anyone’s portfolio. After all, Clorox stock is a secular investment. Therefore, no matter what your age or investing philosophy, CLX represents an anchor for your portfolio, potentially mitigating damages caused by sudden bearish events.
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But with the coronavirus, not only has Clorox stock protected shareholders, it’s also providing robust capital gains. On a year-to-date basis, CLX has stormed to 15.4% lead. In contrast, the Dow Jones Industrial Average has tanked nearly 9% during the same period. Adding to the bizarre scene, consider that the household goods giants –best known today for its Clorox Disinfecting Wipes – returned only 3% in 2019.
Obviously, I stated the reason for the surge in an otherwise boring investment: coronavirus. On Feb. 24, the beginning of the final week of last month, global coronavirus cases numbered over 80,000. At the same time, financial markets the world over was in turmoil. I believe that was the time when people began scrambling for essential supplies en masse.
Further, the U.S. Environmental Protection Agency – not necessarily known as a market catalyst – released a list of disinfectants to shield oneself against the coronavirus. I don’t think it was the specific products but rather a government agency making a recommendation that reinforced in people’s minds to take this virus seriously.
Either way, the EPA was a veritable goldmine for Clorox stock. Honestly, I can’t remember a time when anyone even broached the subject of CLX. It exists, but that’s about it.
Today, it’s one of the few toasts of Wall Street and it might sustain its popularity.
Why the Coronavirus Could Be an Extended Gift for Clorox Stock
If you ask any analyst about the long-term viability of CLX, I believe the majority will state the following: while the coronavirus is a near-term catalyst for Clorox stock, the underlying company offers many other relevant businesses.
I couldn’t agree more. However, let me offer you a somewhat unpopular contrarian idea and that is, the coronavirus could be with us for a while.
When the outbreak first started gaining traction in China, many experts compared the coronavirus to SARS. Both originated in China and spread to other parts of the world. However, as the current epidemic accelerated at a ridiculous rate, the comparison quickly faded.
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Source: Chart by Josh Enomoto
This chart explains why. After two weeks following the time when both viruses first infected 100 people or more (which I’ll arbitrarily call the “starting point”), SARS sickened 1,622 people. On other hand, the coronavirus infected 24,702 people. Five weeks later (or seven weeks following the starting point), SARS cases numbered 5,633.
Now here’s the kicker: at time of writing, we still haven’t reached the seven-plus weeks following the coronavirus’ starting point. But if we were to cut short the comparison, the coronavirus has 98,422 cases. In other words, this virus has more legs to run.
After you’re done chewing on that, consider another thought. After 11 weeks following SARS’ starting point, case numbers neared its peak at 8,360. What will the coronavirus look like over the same length of time? I shudder to think. But given the rapid spread rate, along with the equally ridiculous number of countries infected, it could truly be an ugly figure.
So, when certain scientists gave warnings about millions of dead, I don’t think we should dismiss such forecasts offhand. What better catalyst do you need for Clorox stock?
CLX Is Viable Without the Doom and Gloom
Of course, that’s my dark humor coming out with my last sentence. I hope for the best for the world community. Ultimately, a global slowdown, let alone a recession does no one any good. But during the time the coronavirus is raging, Clorox stock is simply a solid buy.
And when this crisis finally fades? I think it’d be a mistake to throw CLX away along with your overpriced face masks. For one, the pandemic exposed our vulnerability to microbiological threats. It’s the coronavirus today. Tomorrow, it could be some other crazy crisis.
Beyond that, Clorox stock is, as I mentioned above, a portfolio anchor. Underlining shares are solid businesses, ranging from cleaning solutions to pet care products. Irrespective of technological innovations, we’ll always have a need for such products. And Clorox’s brand image – which the coronavirus bolstered – should do well, long after we’ve forgotten about this mess.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
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