Clorox (NYSE:CLX) is one of those blue-moon names where we witnessed a sharp sentiment shift. On the last session of February, Clorox stock tumbled in sympathy with the broader markets as fears about the coronavirus from China raged across headlines. But for the first session of March, shares jumped up nearly 8%.
Principally, the driving force behind the massive surge in Clorox stock is the underlying company’s suddenly relevant brands. As you know, the household essentials specialist makes the Clorox disinfectant wipes. These are great to have around in the home and office, as well as out in public places. Proper hygienic practices will never go out of style.
However, hygiene is not what you would call a sexy practice, nor is it cyclical. Obviously, harmful bacteria doesn’t care what season it is. But with coronavirus cases popping up in approximately 70 countries, many leery Americans saw the writing on the wall.
Thus, people did what came naturally to them: Storm their local Costco Wholesale (NASDAQ:COST) stores like it was Black Friday. And the photographs taken by intrepid individuals willing to stand amid the crowd certainly resemble a liquidation sale.
Of course, most folks stocked up on the core essentials: food and water. However, they also panic-purchased other essentials such as toilet paper, paper towels and yes, Clorox wipes. Logically, we should expect a lift in Clorox stock.
Furthermore, the Environmental Protection Agency hinted that disinfectant wipes may be effective against the coronavirus. However, scientific evidence has yet to confirm this.
As you can see, that’s good enough for the general public. But I’d also like to emphasize the longer-term case for Clorox stock.
Coronavirus Isn’t the Only Catalyst for Clorox Stock
While it’s easy for most folks to focus on the immediate picture, I’d first encourage you to think broadly. After all, shares have been surging since late November, well before the coronavirus escalated into the current epidemic.
Part of that is general enthusiasm over the phase-one trade deal between the U.S. and China. Yes, Clorox stock is a stable dividend play with comparatively less exposure to China; therefore, many analysts recommended it as a hedge against the trade war. Still, warming relations with the world’s second-biggest economy is hardly a bad deal.
More importantly — and this is something that I referenced above — Clorox’s business will never go out of style. Although I’m very bullish on the coming wave of paradigm-shifting technological innovations, there are some areas where tech is irrelevant. I’m talking about cleaning supplies, plumbing solutions, even mundane stuff like garbage bags.
Could robots eventually take over all these tasks? Perhaps. But the economies of scale probably won’t be enough to overcome the incentive to just do it yourself.
Further, even a smart sink won’t be able to unclog itself. In a way, basic chemistry ensures Clorox stock has a steady upside runway.
Another factor to consider is that the company has specific product categories that are almost guaranteed to rise. For instance, Clorox owns the popular Fresh Step cat litter brand. In 2019, approximately two-thirds of American households owned pets. This is a figure that has been steadily rising over the last several years.
If you’ve seen the societal shift in pet ownership from companion animals to veritable family members, you’ll recognize that the pet market is unlikely to fade. Invariably, this is a huge positive for Clorox stock.
Buy It for the Long Term
In many emails and articles, I have consistently urged investors not to panic over the coronavirus. Rather, they should keep everything in perspective. Most importantly, all outbreaks in human history have eventually faded.
In my view, that Clorox stock benefitted from the coronavirus panic is merely fortuitous timing. My concern about gambling on this epidemic is, what happens after it’s gone? Some companies may have trouble answering that question. For Clorox, I know that it will be relevant, in good times or bad.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
