Bank of America and JP Morgan both came out this week to suggest that investors need to be wary of recession risk in the back half of 2023. JP Morgan Asset Management went so far as to say that an incoming US recession is a virtual certainty.
Yet, at the same time, equity markets are starting to perform better over the past month than we have seen in the past two years.
Navigating such an uncertain environment takes finesse and a strategic mindset. History shows that certain areas of the stock market can continue to drive returns even through the rocky waters of a recessionary environment. One of the best examples of such a subgroup is consumer staples.
Staples consist of companies that sell the types of products people need in any economic context. We’re talking about band-aids, toothpaste, toilet paper, and household cleaning products. But an investment diet of staples doesn’t have to exclude real growth potential for investors. The needle can be threaded.
Right now, one of the most interesting opportunities to thread that needle and capture both non-cyclical recession-proof stability and genuine growth potential is in the anti-viral and antimicrobial disinfectant products space. The pandemic has left us with a hangover—a legitimate one—that has driven demand higher for next-gen disinfectant solutions.
That presents a viable recession-proof growth thesis with the potential for explosive returns, especially for players in the space that have yet to emerge as established entities.
With that in mind, we take a look below at a few of the more interesting stories in the space.
Merck & Co. Inc. (NYSE:MRK) bills itself as a healthcare company that engages in the provision of health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. It operates through the following segments: Pharmaceutical, Animal Health, and Other.
The Pharmaceutical segment includes human health pharmaceutical and vaccine products. The Animal Health segment discovers, develops, manufactures, and markets animal health products, such as pharmaceutical and vaccine products, for the prevention, treatment, and control of disease in livestock, and companion animal species. The Other segment consists of sales for the non-reportable segments of healthcare services.
Merck & Co. Inc. (NYSE:MRK) recently announced a new global grants program, Solutions for Healthy Communities (SHC). SHC will invest in strategies that are designed and led by local stakeholders to meet local health needs and priorities. Grants will cover two years of project implementation, and awards will range in size from $50,000 – $300,000.
SHC aims to catalyze innovation and facilitate access to quality health care. The strategies that the program invests in should reach populations that are historically underserved by the health care system, including Black, indigenous, and other people of color; People experiencing poverty; People living in rural areas; Migrant populations; People with diverse gender identities and/or sexual orientations; and People living with disabilities.
SHC will be available in all of the regions in which the company operates, including the United States, Europe, the Middle East, Africa, Canada, Latin America and Asia Pacific, and the program will prioritize nonprofits that operate within 50 miles of a company site.
Even in light of this news, MRK has had a rough past week of trading action, with shares sinking something like -3% in that time. That said, chart support is nearby, and we may be in the process of constructing a nice setup for some movement back the other way. MRK shares have been relatively flat over the past month of action, with very little net movement during that period.
Merck & Co. Inc. (NYSE:MRK) managed to rope in revenues totaling $14.6B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top-line growth of -8.7%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($10.4B against $23.1B, respectively).
Plandai Biotechnology Inc. (OTC US:PLPL) is interesting because it just completed a share exchange agreement with ByoPlanet. So PLPL is now ByoPlanet. And ByoPlanet looks very interesting.
First off, ByoPlanet appears to have some strong IP giving it a market edge in the disinfectant space. Secondly, ByoPlanet looks like it is already on an aggressive path to drive growth through strategic relationships. In its release on Wednesday, the company’s CEO, Rick O’Shea, noted, “Our tech represents a truly disruptive solution ready to slam into the disinfectant marketplace and make waves. We are in the final stages of negotiations related to multiple deals, and we have already identified additional strategic targets for both partnerships and acquisitions. In other words, a number of important catalysts have been piling up behind the finalization of this Agreement. Now that we have it in place, it’s time to get moving.”
Plandai Biotechnology Inc. (OTC US:PLPL) followed that news up this morning by announcing the relatively big news that it has partnered up with Merck through the establishment of a comprehensive one-year distribution agreement with Merck Animal Health, a global leader in animal health solutions and a division of Merck & Co., to distribute Merck Animal Health’s Armatrex antimicrobial solution to the $36 billion animal health market.
This strategic collaboration between ByoPlanet and Merck Animal Health aims to leverage the strengths of both companies to deliver advanced antimicrobial solutions to customers across the animal health marketplace, including the commercial and companion animal sectors. ByoPlanet’s extensive reach and expertise in the disinfection industry combined with Merck Animal Health’s reputation for excellence in animal health will provide customers with unparalleled access to cutting-edge solutions.
Armatrex, developed by Merck Animal Health, is an antimicrobial chemistry specifically designed for the animal health market that bonds to the substrates and creates a powerful bacteriostatic finish. It offers a comprehensive and efficient solution to combat the spread of harmful pathogens, ensuring the well-being and safety of animals. By incorporating Armatrex into their hygiene protocols, customers can maintain a healthier environment and protect animals from potential diseases.
Plandai Biotechnology Inc. (OTC US:PLPL) CEO noted, “We are excited about this partnership with Merck Animal Health. By joining forces with an established global leader, we can expand our offerings to the animal health market and further solidify our position as an emerging force in the advanced disinfectant solutions market. This collaboration underscores our commitment to innovation and our dedication to providing our customers with the most effective products available.”
Now that the share exchange agreement has been completed, it looks like PLPL is moving fast.
Clorox Co. (NYSE:CLX) engages in the manufacture and marketing of consumer and professional products. It operates through its Health and Wellness, Household, Lifestyle, and International segments.
The Health and Wellness segment consists of cleaning products, professional products and vitamins, minerals and supplements mainly marketed and sold in the United States. The Household segments consists of bags and wraps, grilling products and cat litter marketed and sold in the United States. The Lifestyle segment refers to food, natural personal care products and water-filtration products marketed and sold in the United States. The International segment covers products sold outside the United States, excluding natural personal care products.
Clorox Co. (NYSE:CLX) recently reported results for the third quarter of fiscal year 2023, which ended March 31, 2023. Results included the facts that net sales increased 6% to $1.91 billion compared to a 2% net sales increase in the year-ago quarter. The net sales increase was driven largely by favorable price mix, partially offset by lower volume; organic sales were up 8%; gross margin increased 590 basis points to 41.8% from 35.9% in the year-ago quarter, due to the benefits of pricing and cost savings initiatives, partially offset by unfavorable commodity costs, and higher manufacturing and logistics expenses; and diluted net earnings per share (diluted EPS) decreased 241% to a loss of $1.71 from $1.21 in the year-ago quarter. This decrease includes a noncash impairment charge of $445 million ($362 million after tax or $2.92) in the Vitamins, Minerals and Supplements business and continued investments in the company’s long-term strategic digital capabilities and productivity enhancements (17 cents) as well as the implementation of the company’s streamlined operating model (13 cents).
“Our strong results this quarter reflect solid execution against our priorities to rebuild margin and drive top-line growth amid a challenging operating environment,” said CEO Linda Rendle. “We continue to take a broad set of actions to address persistent cost inflation, including pricing and cost savings efforts. At the same time, we remain committed to investing in our advantaged portfolio of leading brands, innovation pipeline, digital transformation and streamlined operating model to create a stronger, more resilient company. These strategic choices, supported by the superior value our brands offer consumers and the steps we’ve taken to further position our business for long-term, profitable growth, are working as planned and support our decision to raise our fiscal year 2023 outlook.”
Even in light of this news, CLX hasn’t really done much of anything over the past week, with shares logging no net movement over that period. CLX shares have been relatively flat over the past month of action, with very little net movement during that period.
Clorox Co. (NYSE:CLX) managed to rope in revenues totaling $1.9B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 5.9%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($242M against $2B, respectively).
Other key players in the space include Henry Schein Inc. (Nasdaq:HSIC), Ecolab Inc. (NYSE:ECL), Kimberly-Clark Corp. (NYSE:KMB), Albemarle Corp. (NYSE:ALB), and Church & Dwight Co. (NYSE:CHD).
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