I’m a big fan of the Peter Lynch school of thought to buy what you know. One of the best places to look for ideas for your portfolio is in your cupboards, whether in the kitchen or the bathroom. Chances are that many of the same items are in your neighbor’s cupboards as well. The following companies have a strong economic moat with brands and products that we all use and can’t imagine living without.
The essential home organizer
In the first quarter of this year, core sales grew 9.5%. The strongest growth was seen in commercial products and the baby-products divisions. Earnings, however, fell to $0.19 per share from $0.27 per share in the year-ago period. The decline was due to increased restructuring costs, a loss from discontinuing the hardware and teach platform businesses, which the company is in the process of selling, and a loss from currency devaluation in Venezuela.
For the rest of the year, Newell Rubbermaid Inc. (NYSE:NWL) expects core sales to increase 2% to 4%. Earnings per share are forecast to be between $1.78 and $1.84 per share compared to last year’s $1.67 per share. The company is undergoing Project Renewal where cumulative cost savings are expected to be between $270 million and $325 million by the second quarter of 2015. The cost savings will be reinvested in the business to strengthen its brands and accelerate growth.
The products of everyday life
In the first quarter of this year, organic sales grew 4%. Net sales rose to $1.6 billion from $1.5 billion in the prior year. The gross margin remained the same at 28.1%. Jarden Corp (NYSE:JAH) reported a loss of $4.4 million; but excluding inventory charged to the cost of sales, currency devaluations, amortization of several items and a loss related to the extinguishment of debt, the company actually earned $33.1 million.
Going forward, the focus at Jarden Corp (NYSE:JAH) is increasing its revenue outside of the U.S., particularly in Brazil and China. Currently, Jarden gets 40% of its revenue from outside the U.S. and wants to increase that percentage. To do so, Jarden Corp (NYSE:JAH) invested $385 million in its brands last year. New products continue to drive sales as one-third of all revenue has come from products created in the last three years.