Invest In The Lip Balm Portfolio

By Will Ashworth | October 05, 2010 AAA

Though they're frowned upon by serious investors, theme portfolios tend to work better than much of the stuff produced by the financial services industry. It seems the number of lip care products sold today is astronomical, and thus was born the "lip balm portfolio". The list of six stocks and two ETFs provides investors with a remarkably diversified portfolio, not to mention properly moisturized lips.
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Brand Company YTD Return
Chapstick Pfizer (NYSE:PFE) -2.6%
Vaseline Unilever Plc (NYSE:UL) -5.8%
Alba Botanica Hain Celestial Group (Nasdaq:HAIN) 41.1%
Burt\'s Bees Clorox (NYSE:CLX) 12.4%
C.O. Bigelow Limited Brands (NYSE:LTD) 46.9%
Neutrogena Johnson & Johnson (NYSE:JNJ) -1.7%
Labello Beiersdorf AG / iShares S&P Europe 350 Index (NYSE:IEV) 0.4%
Soft Lips Rohto Pharmaceutical / iShares MSCI Japan Small Cap Index (NYSE:SCJ) 7.1%

Chapstick Vs. Blistex
Finding readily available information about the lip care industry isn't an easy task. In 1998, the U.S. market was approximately $260 million and by 2005, that number was $538 million. Chapstick and Blistex accounted for 50% of U.S. market share in 1998. And according to Wyeth's 2008 10-K, Chapstick's revenue was $137.6 million. In 2009, Pfizer acquired Wyeth. Its consumer healthcare revenue (Chapstick, Advil, Preparation H) in 2009 was $494 million, so it's safe to assume that Chapstick's sales were about the same as 2008. Blistex is a private company but its revenue would likely be about the same. It is still the biggest player in non-medicated lip balm.

Vaseline's Long History
Robert Chesebrough created Vaseline in 1870 after experimenting with rod wax extracted from an oil well in Pennsylvania. By 1911, it had factories in the U.S., Canada, Europe and Africa. In 1955, the Chesebrough Manufacturing Company merged with Pond's Extract Company to form Chesebrough-Ponds, which was acquired by Unilever in 1987 for $3.1 billion. Eleven of Unilever's brands had global revenues of $1 billion in 2009. Although Vaseline isn't one of them, it's an important part of Unilever's personal care products, which generated 30% of the company's $39.8 billion in total revenue. (For related reading, see 50 Years Of Consumer Spending.)

Other Brands
Amazon.com (Nasdaq:AMZN) sells 3,963 lip balm products, providing online shoppers with a cornucopia of brands both large and small. In addition to Chapstick, Blistex and Vaseline, there is Alba Botanica (owned by Hain Celestial), Burt's Bees (Clorox), C.O. Bigelow (Bath and Body Works/Limited Brands), Neutrogena (Johnson & Johnson), Labello (Beiersdorf AG) and Soft Lips (Mentholatum Company/Rohto Pharmaceutical). Despite the lip care market having revenues of less than a billion dollars in the U.S., it's remarkably competitive, especially when you consider Chapstick and Blistex account for almost half the amount.

The Bottom Line
Year-to-date, the lip balm portfolio is up 12.2%, 780 basis points better than the S&P 500. Though it's a complete portfolio, there are still some companies that were left off of the list, which leaves room for modification. Also, the medicated lip balm market, which treats cold sores and cankers, was not included. This would add several pharmaceutical companies; the choice is yours. (For more, see A Guide To Investing In Consumer Staples.)

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