Estee Lauder Companies Inc (EL), Avon Products, Inc. (AVP): The Search for Immortality – Spawning Great Investments in Any Era

There are few market drivers as strong as the desire to remain “forever young,” and many smart companies in the personal care and health care space are capitalizing on this.  Now that the infamous Baby Boomers are greying, or at least starting to pull out the first grey hairs with tweezers, this trend has hit a fever pitch.

A post detailing all of the stocks riding on making Aunt Mable act, look and feel less than 55 years young would stretch the length of Tolstoy’s “War and Peace,” so this Foolish blogger has chosen to focus on the biggest of the major anti-aging booms: youthful appearance.

Women are the primary force behind the anti-aging cosmetics bonanza, and because of this stocks like Estee Lauder Companies Inc (NYSE:EL), Avon Products, Inc. (NYSE:AVP), and L’Oreal stand to win big. The last time I bought a women’s magazine, I had to flip at least twelve pages full of nothing but ads before I even got to the first article, which means women everywhere are being bombarded with the messages that they can have wrinkle-free skin, glowing eyes, a great body, and an overall youthful appearance at any age.

One stock truly worthy of watching is good old Avon Products, Inc. (NYSE:AVP). I have fond memories of the “Avon Lady” ringing our doorbell when I was a young teen, and sitting with her and my mother while she sprayed us with wonderful smelling fragrances and rubbed lipstick samples on the back of our wrists to find just the perfect shade.
Today, Avon represents significant cost savings over drug store brands for the average consumer, and the quality outperforms most drug store brands while just falling shy of the top shelf brands like Estee Lauder Companies Inc (NYSE:EL) and Clinique. In addition, the anti-aging products they offer are very popular, and they appear to work (yes, I speak from personal experience).

I like Avon Products, Inc. (NYSE:AVP) as an investment because, as a multi-level marketing company, it has dramatically reduced SG&A (Sales, General and Administrative) overhead costs, which it can then turn into consumer savings.  Avon stockholders have suffered greatly in the past several years due to many management missteps resulting in higher than acceptable debt levels.   Indeed, the stock’s CAPS rating is only 2. But a new CEO may be able to turn this around, and the recent results are promising. Avon Products, Inc. (NYSE:AVP) began trading ex-dividend on May 10 of this year, and the dividend is projected to be around 1%; the same as giant Estee Lauder Companies Inc (NYSE:EL). Looking at the debt picture, the Quick Ratio of 0.80 and Current Ratio of 1.5 are quite respectable, and bear witness that a turnaround is underway. Gross margins are also healthy, at 63.50% – strong, but still less that Estee Lauder Companies Inc (NYSE:EL)’s laudable and recently announced 80.7% (think of that the next time you buy the highly touted and high priced Performing Extract).

And even outside of the wildly popular anti-aging products, Avon Products, Inc. (NYSE:AVP)’s products are solid and of consistent quality. Millions of women (myself included) trust Avon for their jewelry, nail polish, basic cosmetics, and toiletries. Skin-so-soft has been known for many years to be a more effective insect repellent than products directly marketed as insect repellents.