Summary
- Newell Brands brings together a broad assortment of well-recognized consumer name brands under one roof.
- It sports an attractive value on most metrics with strong dividend, and improved its cash position with a $500 million bond offering.
- Even with the additional debt, operational results have been improving, and expenses are under control.
- The major risk is that the recession is both long and deep, cutting way back on consumer discretionary spending.
I suspect that if there existed such a thing as a typical American household, a survey of its possessions would turn up a surprisingly high number of items that come from the Newell (NWL) company's stable of brands. A Sharpie pen in a drawer, an Elmer's glue in a kid's backpack, maybe a Contigo drink bottle in a cup holder in the car. If not one of those, then a Yankee candle in the living room, a Crock Pot in the kitchen, or maybe a Mr. Coffee or Oster toaster oven on the kitchen counter, and Rubbermaid storage containers around somewhere (we use big ones to store Christmas decorations in our attic.)
If there is a baby or very young grandchild, then there is a decent chance of a Graco car carrier or playpen too. These are just the most common brands; a family that camps could own Coleman products or wear Marmot outdoor gear. The list could easily go on. The total number of brands is more than 40, and I would say more than half of them are well recognized general consumer brands used in homes, schools and offices around the world.
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Such a diverse assortment of brands presents a challenge to lead, but management has been taking strides to simplify and focus. Although retail-reliant businesses are challenged in the current environment coming through the Covid-19 shutdowns, I find a lot to like with Newell Brands at current levels, and recently added to my starter position, although my overall exposure remains very small.
Newell Brands: Evaluation Of The Valuation
For a company like Newell that derives its value in mostly mature product segments with high retail exposure, one would expect to see valuation on the lower end of the spectrum. When valuations get stretched too far to the low end, the common question becomes whether or not it will ultimately be a value trap.
With so many types of brands, determining quality comparisons is a little challenging. My choices are certainly incomplete and imperfect, and I may well expand them or change them in the future, but I think are enough data points to draw some conclusions.
First, I want to explain my selections for comparisons, which unfortunately I find largely imperfect. Tupperware (TUP) as an actual product solution for food storage is an old but declining brand that in some ways would have been more of a direct threat to Rubbermaid 30 years ago, but it is still around; it is not sold through traditional retail outlets, but by a direct sales force. The Container Store is a retail outlet that sells some limited Rubbermaid products, as well as competitor's products, but as the retailer, has a completely different business model; I include it primarily just to have a sense if Rubbermaid-style containers seem to be an attractive business or not.
Yeti Holdings (YETI) is still very much a young growth company making coolers and beverage containers, so competing with Bubba, Contigo and Coleman brands. ADT (ADT) home security is the comparison I like the least, as it sells hardware (smoke detectors, motion sensors, etc.) as well as monitoring service, which makes it a very imperfect comparison to the First Alert brand, which is really just the hardware. Privately-held Artsana is an Italian company and owner of the Chicco brand of baby products like strollers and car seats. The parent company is also involved in other industries, but I have it on the list as Chicco would compete side by side with Graco.
