Sometimes you don't have to scour the market for a good trade.
Occasionally, it can be found in some of the most visible stocks on
, also known as "the bleach company," looks to be one of those
trades. As a top manufacturer of cleaning products, Clorox sells a
number of other recognized consumer brands, including Hidden Valley
salad dressing, Brita water-filtration systems, Glad garbage bags,
Kingsford charcoal and Burt's Bees personal care products.
Already selling its products in more than 100 countries worldwide,
Clorox continues to expand internationally by introducing new niche
items like Green Works environmental cleaning supplies to growing
markets in Asia and Latin America.
With competitive pricing, successful marketing and effective
internal cost controls, Clorox shows the potential for solid future
Clorox is also technically strong. Since hitting a low of $43.46 in
March 2009, the stock has soared +52.5%.
From May onward, the stock has been probing a series of new 52-week
highs. In the September 6th trading week, CLX hit a high of $66.67,
and is now attempting to pierce the upper Bollinger band, currently
intersecting at $66.64.
Just this past trading week, the stock successfully broke $65.12
resistance -- which it tested several times during the summer.
The stock bullishly broke out of a small
formation, formed by $65 resistance and the major uptrend line.
In 2007, the stock reached an all-time high of $67.98. Therefore,
there would be no historic overhead resistance above this level.
CLX has moved past its rising 10- and 30-week moving averages,
which intersect at $65.62 and $65.03, respectively.
The indicators are bullish.
has just given a buy signal, while the MACD histogram is inching
into positive territory.
Relative strength index (RSI) has been on a sustained major uptrend
since February 2009. At 63,
has surpassed the key 50 juncture, but is not yet highly
Stochastics, has given a buy signal and is rising.
Clorox also has strong fundamentals and a promising outlook. In
early August, the company posted upbeat fourth-quarter and
2010 results (for the period ending June 30th, 2010).
Quarterly revenue increased in line with analyst projections,
growing +2% to $1.52 billion, from $1.49 billion in the year-ago
period. Growth would have been stronger if the company had not been
negatively impacted by unfavorable
translation of the Venezuelan Bolivar. However, increased sales of
Kingsford charcoal and Hidden Valley salad dressing helped offset
this loss. Clorox also repurchased 2.4 million shares during the
For the 2010 fiscal year, revenue rose +1.5% to $5.53 billion from
$5.45 billion in the previous fiscal year. Company-wide
cost-savings, combined with higher prices for several of its
products, drove growth.
For fiscal year 2011, Clorox expects to achieve from +2% to +4%
sales growth as the company continues to expand internationally. In
fiscal 2012, analysts project revenue will increase an additional
+3.5% to $5.9 billion.
The earnings outlook is similar.
In the fiscal fourth-quarter, earnings were $1.20, the same as the
year-ago period. However, full-year fiscal earnings increased +12%
to $4.24, compared to $3.79 in fiscal 2009. Lower expenses,
combined with higher sales, created the gain.
For the full 2011 fiscal year, Clorox projects earnings in the
range of $4.50 to $4.65, which translates to +8% growth from the
previous year. By fiscal 2012, analysts believe international
expansion, especially of the Burt's Bees brand, should cause
earnings to rise another +8.5% to $4.97.
Clorox is also reasonably valued. Its forward
price-to-earnings ratio (P/E)
is 13.3. By comparison, competitors
Proctor & Gamble (
have moderately higher
ratios of 14.4 and 14.0.
Clorox also has a more attractive price-to-sales (P/S) ratio of
ratio is 2.3 and Proctor & Gamble's P/S ratio is 2.2 -- the
lower the P/S ratio, the better the valuation.
Furthermore, Clorox also offers a solid 3.3%
. This attractive yield isn't likely to go away anytime soon:
Clorox has been paying an uninterrupted
since 1968 and has increased its dividend payment every year for
the past 31 years.
Action to Take -->
Because Clorox shows attractive valuation, steady growth potential
and solid technicals, traders may want to go long on this stock if
it pierces its upper Bollinger band, which currently intersects at
$66.60. I would place a buy-on-stop order at $66.63, just above the
upper Bollinger band. This means if CLX does not hit or go above
$66.63, you will not enter the position.
-- Dr. Melvin Pasternak
Dr. Melvin Pasternak is one of the most experienced market
technicians in the nation and Chief Trading Expert behind
Double-Digit Trading. With more than 25 years
experience... Read more.
Disclosure: Neither Melvin Pasternak nor StreetAuthority, LLC
hold positions in any securities mentioned in this article.