Editor’s note: This column is part of our Best Stocks for 2017 contest. Hilary Kramer’s pick for the contest is Newell Brands Inc (NYSE:NWL).
I can’t believe it has already been a few months since I first shared my pick for InvestorPlace’s Best Stocks for the 2017 contest! As you may recall, I put my money on Newell Brands Inc (NYSE:NWL), a global consumer goods company with a wide portfolio of well-known brands, including Elmer’s glue, Sharpie markers, Yankee Candle and Paper Mate pens.
While Newell Brands was a little slow out of the gate this year, we’re still out in front of about 70% of the stocks on the market.
NWL is up 6% year-to-date versus about 4.4% for the S&P 500, and factoring in our first 19-cent dividend for the year extends our lead.
How Is NWL Stock Doing?
The key here is what powerhouse banks like JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS) have started discovering in the last few weeks. As NWL buys new products and sells off old ones, it’s far from a zero-sum game: the goal is always to strengthen as well as streamline the overall operating footprint.
Sometimes this means liquidating bread-and-butter segments like tools and matches in order to free up room on the balance sheet to acquire faster-growing or higher-margin businesses like the Yankee Candle chain and Jostens’ school yearbooks. Management keeps dealing cards in search of the best hand to capture today’s consumer tastes.
The current hand is relatively cash-rich and product-lean. Revenue is tracking 10% above last year’s levels and margins are creeping up as the latest round of acquisitions starts generating operational synergies. That process was a little sluggish last quarter, which hurt our standings early on, but management was confident enough about a month ago to not only confirm Wall Street’s expectations but get the whisper numbers moving up 1%-2% in recent weeks.
And with the tool business sale retiring over $1.8 billion in debt from the balance sheet, NWL is quickly opening up room to make new deals when the opportunities emerge.
A few hints of how double-digit growth is going to continue in 2018 and beyond should get the analysts buzzing again.
In fact, we’re beginning to hear some of that buzz now. Consensus already indicates that NWL can climb 20% over the next year, which would let us score close to 30% including dividends. But that’s counting the most bearish people on the Street, the ones who at worst begrudgingly admit that this stock has come as far as it can go — the real bulls keep raising their targets far beyond $60 (NWL is currently trading around $47, giving it plenty of more room to run).
While there may be bears feeling otherwise, I remain bullish on the name and look forward to where NWL goes next.
Hilary Kramer is the editor of GameChangers, Breakout Stocks, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.