Market Beat: The baby and the bath water
While most of us are familiar with the expression, “Don’t throw the baby out with the bath water,” there are probably not that many people out there who know how that expression originated.
That saying goes back to the Middle Ages, back to a time when people only bathed once a year, in the springtime. When it was time to take their annual bath, they’d prepare the bath water; the men would bathe first, followed by the women, then the children, all in the same tub of water.
The babies would be last and the water would be so murky by the time the infants were bathed, that it may have been possible to accidentally throw a baby out with the dirty water.
Without soap, fragrances and regular bathing, human beings are a very stinky species. There are anthropologists who theorize that people smelled as bad as they did to ward off predators. The history of fragrances goes back a long way, to the Egyptian days.
Fragrances are everywhere in today’s products — not just perfume, but soap, toothpaste, shampoo, conditioner, deodorant, etc. Fragrances are a huge industry and one that is expected to grow.
Global Industry Analysts forecasts that worldwide sales will exceed $36 billion by the year 2017. Europe is the leading market, and there are still huge, untapped markets in China, Japan and other countries.
Most fragrance sales occur around the holidays between the months of October and December. About 15 percent of holiday shoppers will purchase a fragrance as gift, making it the number four choice for holiday gifts.
Leading stocks in this area include Colgate Palmolive, a $60 billion company; Kimberly Clark, a $41 billion company; and Estee Lauder, with a $29 billion market cap. Avon and Revlon are also dominant names in the industry.
Nu Skin is a company that I wrote about several months ago in a column on the anti aging trend. Nu Skin has a market cap of $7.5 billion, and the stock is up 245 percent year to date and over 180 percent in the last 12 months.
The future of fragrances should be interesting — sales should be strong, but we could see new regulations and many of the ingredients used in the production of fragrances are not regulated by the FDA. Some forecasters are predicting a trend in the use of fragrances from purely cosmetic, to more use as aromatherapy for health purposes.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information on his money management service can be found at his blog at http://www.sellacalloption.com or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.
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