5 Best Pet Stocks To Buy Now

4. Colgate-Palmolive Co (NYSE:CL)

No of HFs: 46

Total Value of HF Holdings: $1.51 Billion

Colgate-Palmolive Co was founded in 1806 by William Colgate. They own a wide variety of brands that aim to provide a healthier future for people and animals. Their pet nutrition product Hill’s reported $680 million in net sales in 2019. The company offers a dividend yield of 2.35%. During the fourth quarter of 2020, the company reported an increase of 7.5% in net sales brought about by recent investments in digital advertising and e-commerce.

As of the end of the fourth quarter, 46 hedge funds in Insider Monkey’s database of 887 funds held stakes in CL compared to 47 funds in the third quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the biggest stakeholder of Colgate-Palmolive Co with 11.9 million shares, worth $1.02 billion.

VGI Partners mentioned a few stocks in its FY 2019 investor letter and CL was one of them.

Here is what VGI Partners had to say about the stock:

Colgate has a large international exposure with 70% of its revenue generated from outside the US, including 50% from high growth emerging markets. Colgate’s global market share of toothpaste is a staggering 42%, up from 35% in 1995. The below chart also shows that Colgate’s global market share today is almost three times its nearest competitor. The brand’s share of some of the largest emerging markets is even higher, with Brazil at 72% and India at 50%.

Colgate’s high share of the toothpaste market in these geographies owes a great deal to the company’s decision to set up distribution early, providing a first-mover advantage. Market shares in toothpaste are generally quite stable as consumers show strong loyalty to the brand of toothpaste they grew up with. We believe Colgate’s emerging market exposure is a significant positive over the For personal use only long-term as growth in population and disposable income outpaces that of developed markets.

Colgate follows a strategy of long term premiumisation. Once it has established a leading market position, it slowly but steadily introduces superior products at a higher price point and gross margin. This progression is almost too slow to be noticed by customers but over many years has led to significant gross margin expansion for the business. Remember the original plain red tube of Colgate toothpaste that contained no teeth whitening, mint stripes or sensitive pain relief? You can still buy this at the local supermarket at a relatively low price, however Colgate has most likely traded you up to one of their more expensive products.