We’re all looking for the next big 10X investment…
One of the best places to find these hidden gems is in the IPO market.
That’s because, in the IPO market, you have a bunch of vision-driven, hypergrowth companies in the early stages of trying to change the way the world works.
An IPO marks the first time that regular investors like you and me can buy stock in those companies.
In other words, if you want get there first, then you need to be looking at the IPO market – and the data bears out why you should want to get there first.
Just imagine if you’d invested in the Shopify (NYSE:SHOP) IPO. Its IPO price was $17. Today, it is a $1,100 stock – up 65X in just six years.
Or imagine if you’d invested in The Trade Desk (NASDAQ:TTD) IPO. Its IPO price was $18. Today, it is a $660 stock – up 37X in just five years.
The list goes on and on. The lesson remains the same. Investing in hypergrowth, disruptive companies as soon as they go public can often produce significant long-term returns.
Today, we are going to dive into the IPO market and tell you all about a promising, young company that just went public – and which, in the long-run, could leverage “clean” product tailwinds to become the next Clorox.
Could This Company Replace Clorox? Absolutely…
The consumer staples market is exceptionally attractive from an investment perspective because, well, it comprises the stuff we are going to buy no matter what.
Parents will always buy diapers. Homeowners will always buy cleaning sprays. Everyone (hopefully) will always buy shampoo and body wash.
The durability of demand in this market gives investors peace of mind that the companies in this space will grow at a steady pace forever and ever…
But the lack of “change” in this market has created a sense of complacency among the industry’s titans, like Procter & Gamble (NYSE:PG) and Clorox (NYSE:CLX), to a point where those companies are putting out products these days which consumers don’t necessarily “love,” but will buy anyways because they need those products.
This creates a huge opportunity for a new market entrant to disrupt the status quo, make new products which consumers actually “love,” and unseat these giants in the steady and stable consumer staples market.
Capitalizing on this opportunity is a small company by the name of The Honest Company (NASDAQ:HNST).
The Honest Company was founded by actress Jessica Alba in 2012 with the purpose of being a consumer goods maker that created a new generation of all-natural, all-organic, healthy cleaning, household, and consumer products that did their job and were actually good and safe for (and liked by) consumers. The motto is: “You shouldn’t have to choose between what works and what’s good for you.”
So, the company set out first by making diapers out of wood sourced from sustainably managed pine and spruce trees in Scandinavia, which is then turned into a fluff pulp at a Swedish mill using totally chlorine-free processing without any toxic chemicals. The idea is that the diapers are latex-free, fragrance-free, paraben-free, and eco-sensitive.
The Honest Company packaged those diapers in a very “feel-good” brand, with purpose-driven marketing and all-natural messaging that resonates deeply with consumers who actually care about that stuff (which, as it turns out, is a big part of the population).
That’s why those diapers have been a huge it. They’ve gone from pure idea in 2012, to doing nearly $150 million in sales in 2019 and controlling about 2% of the U.S. diaper market.
Building on the success of its signature diaper product, The Honest Company has created a wide portfolio of “good-for-you” products, from chemical-free shampoos and body washes, to all-natural disinfecting spray – the sum of which have benefitted from surging demand over the past five years.
Today, then, Honest is a multi-purpose, all-natural consumer goods brand with a huge e-commerce website (55% of sales) and distribution across 32,000 stores, including Costco and Target (45% of sales).
The bull thesis here is simple.
When it comes to all-natural, good-for-you consumer products, The Honest Company is the industry leader. Consumers will continue to shift towards these good-for-you products over the next few years. As they do, they will ditch the Clorox sprays, and buy Honest products. This will lead to a huge surge in sales and profits over the next few years until, eventually, Honest becomes a top-3 player in this market.
Clorox is a $22 billion company. Honest is worth just $2 billion.
The upside opportunity here is sizable – and that’s why you should consider taking a position in The Honest Company stock today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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