Tuesday, April 26, 2011

"With the Royal Wedding coming this week, will this spur a new fashion age with sales of Fancy hats and Revlon makeup?"

Dow Jones Industrial Average  12,595.37 (UP)  04-26-2011 Tuesday

Royal princess Kate Middleton
 Nothing like a Royal Wedding to launch a new wave of fashion and makeup trends, especially since the new princess already is known for her fashionable hats. It also doesn't hurt that she is the loveliest lady to arrive at Buckingham Palace since it was graced by William's mother, Lady Diana. (I wish Diana were here to see it, but I know she is here in spirit and will certainly be present in everyone's mind).

One company that will certainly benefit from this new and exciting trend will be the well known brand and franchise of Revlon Inc. (Symbol REV, $16.20).  

I do not think that Revlon's stock has really priced in the value of their worldwide reknown leading brand. I could see their own possible marriage to an Avon or an Estee Lauder Cosmetics company.

Revlon, Inc. through its subsidiary, manufactures, markets and sells an array of cosmetics, women's hair color, beauty tools, fragrances, skincare, anti-perspirants/deodorants and personal care products. They live at the high fashion address of  237 Park Avenue, New York, NY 10017.

 Revlon was founded in the midst of the Great Depression, 1932, by Charles Revson and his brother Joseph, along with a chemist, Charles Lachman, who contributed the "L" in the Revlon name. Starting with a single product — a new type of nail enamel — the three founders pooled their resources and developed a unique manufacturing process. Using pigments instead of dyes, Revlon developed a variety of new shades of opaque nail enamel. The company has had a wild history including Michael Milliken junk bonds at one point being involved in a buyout.

It has not been a bed of roses for Revlon, with the stock dropping to as low as $2.37 back on March 10th, 2009.  In April 2006 , the stock was at $34.40 per share. Talk about Beta. This is not my traditional stock pick based on the fundamentals because the numbers are just too crazy. The company has $25.26 in revenues for every share of the company and the company operates at 70.51% Gross margins, outstanding. The flip side is, the company has a negative book value and $22.17 a share in long-term debt. Such is the world of high fashion, not for the faint of heart.

Revlon's stock has a 3 year total return on the stock of 69.3%.
Earnings for 2011 look like $1.33 and for 2012, $1.43 per share, so they are making money. It looks to me like there is a trade here, with a target price of $23-$24.  Revlon reports earnings this week on Thursday, April 28th with a slew of other companies. I think beauty products will benefit from having a whole world market to expand in to. Most cultures embrace a whole range of beauty products.

Revlon also sells to the growing market for hair colors for covering that gray, and also even sell wigs!

Jessica Biel
Lot's of celebrities with Revlon's advertising including spokeswoman Halle Berry, Jessica Biel, Jessica Alba and others.

So get on the Revlon Trolley, (pictured below Hong Kong tram) and take a ride to a nice capital gain. Happy earnings report week.


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