It may not have the glamour of many other home product manufacturing companies, but Jarden Corporation (JAH) manufactures and distributes a wide array of products that should enjoy strong and robust sales during the current consumer economic downturn.
From crock pots to Coleman camping gear and from baseball equipment to Ball canning jars, Darden products provide solutions to low-cost cooking, camping and entertainment activities.
Jarden stock is currently trading at levels more than 60% above their 52 week low, gaining the confidence of equity investors looking for value. Jarden bonds have not yet experienced a similar increase in value, suffering the same fate afflicting other high yield bonds today. With this sector pricing in a default rate of 20% or better, yields are not likely to drop significantly until investors witness a lowering of that expectation.
Jarden bonds maturing in 2015 with a coupon of 7.5% are trading below 70, generating a yield to maturity of just under 14%. Callable in 2012 at 103.75, the bond priced at this level produces a yield to the first call of 22%. The yield to the 2015 par call is 15.4%. An added plus for the company is that they do not have long-term debt principal payments due until after 2010.
Some investors have expressed concern about the company’s high leverage and weak cash position, as well as the adoption of a shareholder rights amendment to the company’s bylaws. Jarden’s growth, however, provides a basis for some optimism, particularly as consumer activities shift to conservative spending and more home-based dining and entertainment. (See also: "Bonds: Finding Safety in the Bargain Bin.")
The Consumer Solution component of the company markets crock pots, blankets, coffee makers, blenders and humidifiers, all of which should experience strong sales even during a recession.
The Outdoor Solution segment sells Rawlings baseball gloves, tents and Coleman lanterns and stoves, while the Branded consumables segment includes Bicycle playing cards, Diamond matches, smoke alarms and arts and crafts, all of which should fare well during the current economy.
The process component of the company sells plastic cutlery as its primary sales generator, which again is expected to do well as people opt for less expensive dining experiences such as picnicking rather than going to a restaurant.
With over $5 billion in sales and continued good earnings, the bonds of Jarden are a good alternative for investors looking to gain high levels of return with reasonable risk levels.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, visit www.InvestorPlace.com. James F. Dlugosch contributed to this article
