1 00:00:00,100 --> 00:00:01,100 Welcome back. Everyone. 2 00:00:01,100 --> 00:00:03,800 On today's episode of the Joseph Carlson show, we're going to be 3 00:00:03,800 --> 00:00:07,600 discussing one company that is basically Unstoppable. 4 00:00:07,700 --> 00:00:10,400 It is a recession-proof durable dividend-paying company. 5 00:00:10,600 --> 00:00:13,600 That's outperform the market over virtually every timeline 6 00:00:13,900 --> 00:00:17,100 and it's not in my portfolio. So I want to run through some 7 00:00:17,100 --> 00:00:19,900 analysis and talk about this company later in this episode, 8 00:00:19,900 --> 00:00:21,500 you might be familiar with the company. 9 00:00:21,500 --> 00:00:23,500 You might not either way, we're going to go through it. 10 00:00:23,500 --> 00:00:26,500 It's called Church & Dwight and even if you're not familiar with 11 00:00:26,500 --> 00:00:28,900 the company, you're almost certainly familiar with the 12 00:00:28,900 --> 00:00:31,600 brand arm and Hammer. Now again we're going to go 13 00:00:31,600 --> 00:00:34,100 through this company. I'm going to try to highlight 14 00:00:34,200 --> 00:00:36,700 why the performance of it has been so incredibly. 15 00:00:36,700 --> 00:00:38,600 Good over such a long period of time. 16 00:00:38,700 --> 00:00:43,100 This is one of the contenders to be added into my portfolio or to 17 00:00:43,100 --> 00:00:46,500 be on the watch list if any of my companies in my portfolio 18 00:00:46,500 --> 00:00:48,300 aren't performing. Well this could be one that I 19 00:00:48,300 --> 00:00:50,700 could potentially swap that Holding Out for and we have a 20 00:00:50,700 --> 00:00:53,500 lot of other news to go through a lot of people understand that 21 00:00:53,500 --> 00:00:56,600 I love dividend investing, but they're not really sold on it. 22 00:00:56,600 --> 00:00:59,500 They don't really get why in this article released. 23 00:00:59,500 --> 00:01:02,600 Just From The Wall Street Journal highlights, many of the 24 00:01:02,600 --> 00:01:05,300 very points of vial of dividend investing. 25 00:01:05,500 --> 00:01:07,500 So I thought this would be fun to run through as well. 26 00:01:07,500 --> 00:01:11,100 We'll be looking at this article and why dividends really help 27 00:01:11,100 --> 00:01:13,800 lift the market up when everything else seems to be 28 00:01:13,800 --> 00:01:16,100 struggling. We also have the CEO of Costco 29 00:01:16,100 --> 00:01:20,300 being asked, if there's any chance whatsoever in any 30 00:01:20,300 --> 00:01:23,300 inflationary environment, like we're in right now, whether or 31 00:01:23,300 --> 00:01:26,400 not he's going to raise the price of the one dollar and 32 00:01:26,400 --> 00:01:28,700 fifty cent hotdogs and drink combo. 33 00:01:28,700 --> 00:01:31,200 Now, you probably can predict The answer, but the way that he 34 00:01:31,200 --> 00:01:33,300 says it is still funny so I'm going to show it anyway. 35 00:01:33,300 --> 00:01:35,200 So we have a lot to jump into in this episode. 36 00:01:35,200 --> 00:01:37,900 If you haven't already, hit the Subscribe button with the Bell 37 00:01:37,900 --> 00:01:40,600 notification. Now let's go ahead and first 38 00:01:40,600 --> 00:01:42,000 talk about the market for a minute. 39 00:01:42,200 --> 00:01:45,700 This portfolio is doing okay over the past week. 40 00:01:45,700 --> 00:01:48,800 It's move just barely one point one, nine percent that's four 41 00:01:48,800 --> 00:01:52,900 thousand dollars over the past month or up 2.7 percent, eight 42 00:01:52,900 --> 00:01:56,000 thousand, nine hundred dollars, these aren't big moves and I'm 43 00:01:56,000 --> 00:01:58,600 okay with that. So far the portfolio has 44 00:01:58,600 --> 00:02:02,800 performed this Are slightly better than the S&P 500. 45 00:02:02,900 --> 00:02:06,100 That's nothing to brag about or get excited about but it is 46 00:02:06,100 --> 00:02:09,100 doing okay. It's holding its own, it's 47 00:02:09,100 --> 00:02:11,200 preserving my Capital to some extent. 48 00:02:11,200 --> 00:02:14,500 Now, right now, in this market it feels like we're playing a 49 00:02:14,500 --> 00:02:16,600 game of just trying to hang in there. 50 00:02:16,800 --> 00:02:18,200 Just trying to have our portfolio. 51 00:02:18,200 --> 00:02:20,600 Be okay. And weather the storm over the 52 00:02:20,600 --> 00:02:22,600 past month. I'm up a little bit, but in 53 00:02:22,600 --> 00:02:26,200 dividends. I'm up. 1200 $30, I was paid 54 00:02:26,300 --> 00:02:29,800 over $1200 in dividends in the past 30 days, so no matter. 55 00:02:29,900 --> 00:02:32,800 Matter what direction the market gains go, whether investors get 56 00:02:32,800 --> 00:02:35,500 frightened, and sell out, whether they get excited and 57 00:02:35,500 --> 00:02:38,500 enthusiastic and buy-in and capital appreciation goes up. 58 00:02:38,500 --> 00:02:41,900 These dividends will continue to act as a snowball compounding my 59 00:02:41,900 --> 00:02:44,300 returns over time, come thick or thin. 60 00:02:44,600 --> 00:02:47,700 That's the whole purpose of this style of investing is so they 61 00:02:47,700 --> 00:02:50,500 don't have to worry about price movements with your company's 62 00:02:50,700 --> 00:02:53,500 we're focused on the underlying fundamentals. 63 00:02:53,600 --> 00:02:56,800 The operating results of the company's, the dividends in cash 64 00:02:56,800 --> 00:02:59,600 flow of the companies and whether they return that money 65 00:02:59,600 --> 00:03:02,900 through Benson by packs. I'm okay with either, but I want 66 00:03:02,900 --> 00:03:05,900 them to continually generate free cash flow and return it to 67 00:03:05,900 --> 00:03:06,800 me. The shareholder. 68 00:03:07,100 --> 00:03:10,800 The Dividends are the most secure way and most consistent 69 00:03:10,800 --> 00:03:14,100 way that I've seen companies do that, I love the entire concept 70 00:03:14,100 --> 00:03:17,500 of having the money moved from the customers Pockets into my 71 00:03:17,500 --> 00:03:19,600 pockets. But right now, it has been a 72 00:03:19,600 --> 00:03:22,200 game of just holding on and hoping that we're not going to 73 00:03:22,208 --> 00:03:26,000 lose more money in the market. The big fear as of right now for 74 00:03:26,000 --> 00:03:28,600 investors is that we're headed into earning season. 75 00:03:28,600 --> 00:03:31,300 It will spark a neck Equity sell off because all of these 76 00:03:31,300 --> 00:03:33,700 companies are going to be a very bad earnings reports. 77 00:03:33,700 --> 00:03:35,800 They're going to lower guidance. They're going to say our margins 78 00:03:35,800 --> 00:03:38,700 are being crushed because we're getting less customers and 79 00:03:38,700 --> 00:03:40,500 inflation's eating away at our pricing power. 80 00:03:40,500 --> 00:03:44,500 And because of that equities, which are stocks are going to 81 00:03:44,500 --> 00:03:46,500 sell off. That's what the analysts and 82 00:03:46,508 --> 00:03:48,900 experts are predicting. Now, I can't say whether that's 83 00:03:48,900 --> 00:03:51,100 true or not, that is macro investing. 84 00:03:51,100 --> 00:03:53,500 They're certainly going to be some companies that report, very 85 00:03:53,500 --> 00:03:56,600 poor earnings, they guide down and their revisions will go down 86 00:03:56,600 --> 00:03:59,700 and the stock price will go down so I could see that happening in 87 00:04:00,000 --> 00:04:02,200 Scenarios. But I think that this might be a 88 00:04:02,200 --> 00:04:04,300 concern that really doesn't come to fruition. 89 00:04:04,300 --> 00:04:07,000 I think there is a chance. These companies report decent 90 00:04:07,000 --> 00:04:09,600 earnings, the type of companies that usually report pretty 91 00:04:09,600 --> 00:04:11,800 resilient earnings are dividend payers. 92 00:04:11,800 --> 00:04:14,000 And the Wall Street Journal has an article out today that I 93 00:04:14,008 --> 00:04:16,899 thought was pretty incredible. They highlighted a lot of things 94 00:04:16,899 --> 00:04:19,800 that I've been talking about for a long time dividend payouts, 95 00:04:19,800 --> 00:04:23,600 set another record in the second quarter, a reassuring sign to 96 00:04:23,600 --> 00:04:26,600 investors, who have flocked to steady income generating stocks 97 00:04:26,600 --> 00:04:29,000 during the market downturn. This year, this is what I like 98 00:04:29,000 --> 00:04:30,700 to see. Come But he's generating more 99 00:04:30,700 --> 00:04:33,000 income returning that back to the shareholders. 100 00:04:33,000 --> 00:04:35,600 It's such a great relationship to have with a company and this 101 00:04:35,600 --> 00:04:38,000 isn't something unusual. They say, annual dividend 102 00:04:38,000 --> 00:04:41,700 payouts have notched new highs every year for a decade. 103 00:04:41,800 --> 00:04:45,200 If you exclude, the one slight decrease in 2020. 104 00:04:45,200 --> 00:04:48,600 I feel like for this entire year, most of us have heard only 105 00:04:48,600 --> 00:04:50,600 negative news. So let me highlight some 106 00:04:50,600 --> 00:04:53,400 positive news. Here payments this year, are 107 00:04:53,400 --> 00:04:56,100 projected to grow at a faster Pace than usual. 108 00:04:56,300 --> 00:04:59,200 As companies have logged strong sales and are passing on a 109 00:04:59,200 --> 00:05:01,600 slice. Of the elevated profits to 110 00:05:01,600 --> 00:05:03,200 shareholders. Yes. 111 00:05:03,200 --> 00:05:07,000 To meet a dividend payments, will jump more than 10% in 2022 112 00:05:07,200 --> 00:05:11,400 from last year's record. 511 billion, which would Mark the 113 00:05:11,400 --> 00:05:15,200 first double-digit increase since 2014 isn't that such a 114 00:05:15,200 --> 00:05:18,100 huge contrast from all the negative news that we hear these 115 00:05:18,100 --> 00:05:20,400 companies are profitable, they're generating more, 116 00:05:20,400 --> 00:05:24,800 operating income, the returning, a record amount since 2014 117 00:05:25,000 --> 00:05:27,700 increase in dividends more than 10 percent. 118 00:05:27,700 --> 00:05:30,300 That means that your dividend income if you're Your dividend 119 00:05:30,300 --> 00:05:33,200 income investor is outpacing inflation. 120 00:05:33,200 --> 00:05:35,900 You still should be making money on top of the record. 121 00:05:35,900 --> 00:05:38,500 High eight percent inflation. That's a lot better than a 122 00:05:38,508 --> 00:05:40,100 savings account. That's a lot better than 123 00:05:40,100 --> 00:05:42,600 treasury bonds. That's better than basically any 124 00:05:42,600 --> 00:05:44,900 other way to get growing passive income. 125 00:05:44,900 --> 00:05:47,700 They say business is want to send a message to investors that 126 00:05:47,700 --> 00:05:49,800 they're in good health. The dividend is the way they 127 00:05:49,800 --> 00:05:52,700 send that message. Quote, if they can maintain 128 00:05:52,700 --> 00:05:55,800 their dividend and grow their dividends despite the challenges 129 00:05:56,000 --> 00:05:59,100 that tends to signal that they're confident about their 130 00:05:59,100 --> 00:06:01,800 business out. So this is the way they signal 131 00:06:01,800 --> 00:06:04,000 to the market and they show investors things. 132 00:06:04,000 --> 00:06:06,500 What their actual business are going just fine, the broader 133 00:06:06,500 --> 00:06:08,900 Equity Market has struggled this year amid, the challenge in 134 00:06:08,900 --> 00:06:12,000 crosscurrents, but dividend stocks have seen a Resurgence in 135 00:06:12,000 --> 00:06:14,900 2022. As investors seek a regular 136 00:06:14,900 --> 00:06:18,900 stream of cash to weather the economic turmoil during easy 137 00:06:18,900 --> 00:06:21,200 mode. When the FED is on your side. 138 00:06:21,200 --> 00:06:23,500 When the FED is getting rid of all of the problems in the 139 00:06:23,508 --> 00:06:27,300 market, giving an endless stream of money to bad companies, that 140 00:06:27,300 --> 00:06:31,000 lose money on a consistent basis when cap Little is very cheap. 141 00:06:31,200 --> 00:06:34,600 Then investors start to take on excess amounts of risk, they 142 00:06:34,600 --> 00:06:37,100 want to get easy money and easy returns. 143 00:06:37,300 --> 00:06:39,100 So they Venture off in the free cash flow. 144 00:06:39,100 --> 00:06:42,000 Negative companies, they Venture off into companies have very 145 00:06:42,000 --> 00:06:44,600 unproven business models. They tell stories about how 146 00:06:44,600 --> 00:06:46,700 these companies will revolutionize and change the 147 00:06:46,700 --> 00:06:48,100 world. Then when things start to go 148 00:06:48,100 --> 00:06:51,600 south when the economy starts to slow down or run into any issue, 149 00:06:51,700 --> 00:06:55,500 investors run away from those Investments aggressively and 150 00:06:55,500 --> 00:06:59,100 they seek shelter in companies that generate real profits and 151 00:06:59,100 --> 00:07:00,800 return. Those It's the shareholder. 152 00:07:00,800 --> 00:07:03,300 This is the cycle that I've seen happened numerous times. 153 00:07:03,500 --> 00:07:06,600 And I think it's safe to say that in most cases investors 154 00:07:06,600 --> 00:07:09,600 would make more money. If they just stuck the companies 155 00:07:09,900 --> 00:07:13,000 that can weather harsh storms, companies that generate 156 00:07:13,100 --> 00:07:16,100 consistent, meaningful profits. These are good companies to 157 00:07:16,100 --> 00:07:17,800 invest in, for a long period of time. 158 00:07:18,200 --> 00:07:20,500 The companies that have the grandiose Stories, the 159 00:07:20,500 --> 00:07:23,000 companies, I don't have any business model, those are ones 160 00:07:23,000 --> 00:07:25,300 that you probably should avoid. And if anything they're 161 00:07:25,300 --> 00:07:28,000 short-term trades, if you have that mentality, the out 162 00:07:28,000 --> 00:07:31,300 performance of dividend stocks. Highlights the market rotation 163 00:07:31,300 --> 00:07:35,700 of 2022 for the past decade. Mega Cap Technology, shares and 164 00:07:35,700 --> 00:07:39,700 stocks with high valuations, led the Major indices higher this 165 00:07:39,700 --> 00:07:42,200 year, the rising rates and hot inflation. 166 00:07:42,200 --> 00:07:45,700 Turn the market upside down with investors, ditching high-flying 167 00:07:45,700 --> 00:07:49,000 companies for Overlook stocks like dividend payers, that offer 168 00:07:49,000 --> 00:07:51,200 greater stability. And I would add in this 169 00:07:51,200 --> 00:07:54,400 sentence, the ditching, high-flying companies means that 170 00:07:54,400 --> 00:07:58,600 investors in many cases, got burnt and they got burnt badly 171 00:07:58,900 --> 00:08:00,900 and now they're just King to not get burnt. 172 00:08:00,900 --> 00:08:04,400 Again, dividend payers typically provide that you're not going to 173 00:08:04,400 --> 00:08:07,500 get the most excessive Returns on a one year basis. 174 00:08:07,500 --> 00:08:09,900 But what you will get is far less volatility and more 175 00:08:09,900 --> 00:08:12,400 consistent returns. Dividends finished the first 176 00:08:12,400 --> 00:08:15,900 half as the only investment factor with a positive return. 177 00:08:16,200 --> 00:08:18,700 So, during harsh market conditions, these are the only 178 00:08:18,700 --> 00:08:21,000 companies doing well, they're profitable, they're making 179 00:08:21,000 --> 00:08:23,500 money, they're paying dividends and a rising rate environment, 180 00:08:23,500 --> 00:08:26,500 that's very effective. Of course, that's effective, but 181 00:08:26,500 --> 00:08:29,000 that's not just effective in a rising rate environment. 182 00:08:29,000 --> 00:08:32,100 Eric Didn't this is effective all the time. 183 00:08:32,299 --> 00:08:35,600 This type of investing works all the time, not just in Rising 184 00:08:35,600 --> 00:08:37,299 rate environment for lower rate environments. 185 00:08:37,299 --> 00:08:40,000 These companies will give you returns around the clock. 186 00:08:40,100 --> 00:08:42,400 Now, every time I bring up dividend investing, someone will 187 00:08:42,400 --> 00:08:45,600 inevitably bring up share BuyBacks as the better 188 00:08:45,600 --> 00:08:49,200 alternative to divot investing, it's the same thing as dividends 189 00:08:49,200 --> 00:08:52,500 essentially the company's reinvesting, the money, but it 190 00:08:52,500 --> 00:08:55,400 doesn't have any of the friction or the tax consequences that 191 00:08:55,400 --> 00:08:57,700 dividends have. That's what people profess. 192 00:08:57,700 --> 00:09:00,100 But when they say that they're emitting something, Probably 193 00:09:00,100 --> 00:09:02,400 important data that differentiates dividend 194 00:09:02,400 --> 00:09:05,800 investing from share buyback. Investing companies are also 195 00:09:05,800 --> 00:09:08,600 using their catch to repurchase their own shares at record 196 00:09:08,600 --> 00:09:11,100 levels. That's BuyBacks with the second 197 00:09:11,100 --> 00:09:15,500 quarter by back expected to set fresh highs of 286 billion 198 00:09:15,500 --> 00:09:18,700 dollars, according to the S&P, Dow, Jones, indices. 199 00:09:18,700 --> 00:09:21,400 So BuyBacks are also reaching a record high. 200 00:09:21,500 --> 00:09:23,900 So again, you could say Joseph, don't you prefer BuyBacks over 201 00:09:23,900 --> 00:09:25,500 dividends? I do not. 202 00:09:25,600 --> 00:09:28,900 And here's why corporations tend to favor BuyBacks over dividends 203 00:09:28,900 --> 00:09:32,600 because share Prices typically respond more immediately to 204 00:09:32,600 --> 00:09:36,100 repurchase programs but the ratio of BuyBacks to dividends 205 00:09:36,300 --> 00:09:39,100 which is currently higher than the historical average should 206 00:09:39,100 --> 00:09:42,700 come back down as the year goes on and the effect of the tough 207 00:09:42,700 --> 00:09:45,600 economic environment increasingly ways on companies. 208 00:09:46,000 --> 00:09:49,800 So, even though right now we're in record by backs, they're 209 00:09:49,800 --> 00:09:52,000 predicting that by the end of this year. 210 00:09:52,200 --> 00:09:55,700 Share buyback, programs will decrease, they won't increase 211 00:09:55,900 --> 00:09:58,100 for dividend programs. They're predicting that they 212 00:09:58,100 --> 00:10:01,600 will increase not decrease, This highlights, the fundamental 213 00:10:01,600 --> 00:10:04,600 difference between BuyBacks and dividends BuyBacks are far. 214 00:10:04,600 --> 00:10:08,400 Less Dependable than dividends and BuyBacks are done at the 215 00:10:08,400 --> 00:10:10,400 worst possible time in most cases. 216 00:10:10,400 --> 00:10:13,700 So although I do look at BuyBacks and I do welcome them I 217 00:10:13,700 --> 00:10:16,000 don't put them in the same category as dividends. 218 00:10:16,000 --> 00:10:19,600 I don't consider a buyback. A tax-free dividend, they are 219 00:10:19,600 --> 00:10:22,000 different in the way companies. Treat them with their Capital. 220 00:10:22,000 --> 00:10:25,200 Allocation policies is completely different quote. 221 00:10:25,200 --> 00:10:28,500 If companies want to pull back, it'll be towards those BuyBacks, 222 00:10:28,700 --> 00:10:31,900 they're not going to To pull their dividends Dividends are 223 00:10:31,900 --> 00:10:34,200 the last thing that you cut. You don't want to tell the whole 224 00:10:34,200 --> 00:10:36,400 world. You have a cash flow problem so 225 00:10:36,400 --> 00:10:41,300 companies can nonchalant anytime cancel their buyback program and 226 00:10:41,300 --> 00:10:44,300 for most of the time, investors shrug, their shoulders and keep 227 00:10:44,300 --> 00:10:47,200 investing, but cutting your dividend program is really 228 00:10:47,200 --> 00:10:50,100 signaling to the market that you have other issues with cash 229 00:10:50,100 --> 00:10:51,200 flow. You're really needing to 230 00:10:51,200 --> 00:10:53,100 preserve cash. For some reason because you 231 00:10:53,100 --> 00:10:55,800 can't support your dividend, they signal two very different 232 00:10:55,800 --> 00:10:58,000 things to the market. And again, they shouldn't be 233 00:10:58,000 --> 00:11:01,100 treated the same because they're not Run in the same manner. 234 00:11:01,100 --> 00:11:04,900 This is the BuyBacks from the S&P 500, every single quarter. 235 00:11:05,300 --> 00:11:08,900 So you can see how volatile it is in 2006, BuyBacks reached an 236 00:11:08,900 --> 00:11:11,200 all-time high then during the recession they went down 237 00:11:11,200 --> 00:11:15,200 dramatically then they kind of climb back up very volatile but 238 00:11:15,200 --> 00:11:17,800 they did climb and now they're reaching a record high. 239 00:11:18,000 --> 00:11:22,100 So investors can celebrate the BuyBacks but notice how volatile 240 00:11:22,200 --> 00:11:25,100 every single quarter is you don't know whether or not next 241 00:11:25,100 --> 00:11:26,600 quarter is going to be higher or lower. 242 00:11:26,600 --> 00:11:29,400 Compare this to the chart of dividends on a quarterly basis. 243 00:11:29,700 --> 00:11:32,000 And then tell me that companies treat these the same way that 244 00:11:32,000 --> 00:11:34,400 they're the same thing that they have the same use in the same 245 00:11:34,400 --> 00:11:36,200 implications. They do not. 246 00:11:36,200 --> 00:11:38,100 The Dividends are far less volatile. 247 00:11:38,300 --> 00:11:41,800 They barely fell in 2009 and in 2020. 248 00:11:41,900 --> 00:11:44,700 It was a minor fall that quickly recovered from 249 00:11:44,700 --> 00:11:47,300 quarter-over-quarter. They steadily increase over time 250 00:11:47,400 --> 00:11:49,600 without any of the volatility that BuyBacks have. 251 00:11:49,600 --> 00:11:53,300 So I like BuyBacks and if they were as Dependable as dividends 252 00:11:53,300 --> 00:11:55,600 and they really were consistently growing over time 253 00:11:55,600 --> 00:11:58,500 with less volatility than I would have a preference for 254 00:11:58,500 --> 00:12:01,800 BuyBacks / div Unfortunately, that's not the case. 255 00:12:01,800 --> 00:12:04,500 That's not what the data shows. So as of right now, my 256 00:12:04,500 --> 00:12:08,500 preference remains for dividends and BuyBacks is a secondary 257 00:12:08,500 --> 00:12:11,700 preference, but in my portfolio overall, I'm looking for highly 258 00:12:11,700 --> 00:12:14,600 durable companies that can weather any storm produced free 259 00:12:14,600 --> 00:12:17,800 cash flow on a consistent basis. And they can return that to the 260 00:12:17,800 --> 00:12:21,400 shareholder via dividends or BuyBacks that typically grow 261 00:12:21,400 --> 00:12:24,600 over time one of the companies in my portfolio that you might 262 00:12:24,600 --> 00:12:29,000 know by now that I kind of like this company just a little bit 263 00:12:29,100 --> 00:12:31,400 I've made. A couple videos on the company, 264 00:12:31,400 --> 00:12:34,000 one of them talking about it being the best business model 265 00:12:34,008 --> 00:12:37,000 ever and then the other one I think I said something like it's 266 00:12:37,000 --> 00:12:39,100 the best company in the world, something like that. 267 00:12:39,100 --> 00:12:42,300 But anyways I kind of like Costco a little bit and not even 268 00:12:42,300 --> 00:12:44,100 joking. This is really what I consider 269 00:12:44,100 --> 00:12:46,100 to be. Maybe the best company in the 270 00:12:46,108 --> 00:12:49,100 world in terms of how it treats communities shareholders, 271 00:12:49,100 --> 00:12:52,500 customers across the board, how it runs its company the capital 272 00:12:52,500 --> 00:12:55,300 allocation they never carry excess debt. 273 00:12:55,300 --> 00:12:58,100 And at the same time at compounds at a far greater rate 274 00:12:58,100 --> 00:13:00,800 than the rest of the market and one of Interesting pieces of 275 00:13:00,800 --> 00:13:04,200 data that you learn about Costco is that they've never raised the 276 00:13:04,200 --> 00:13:08,600 price of their one dollar and fifty cent hotdogs and drink 277 00:13:08,600 --> 00:13:11,400 combo. This is not some tiny hot dog, 278 00:13:11,400 --> 00:13:15,600 like this is a this is a good hot dog with the soda combined 279 00:13:15,600 --> 00:13:18,100 with it with the free refill for a buck 50. 280 00:13:18,100 --> 00:13:21,500 They could easily charge three, four, five dollars for this and 281 00:13:21,500 --> 00:13:23,700 nobody would blink, nobody would really care. 282 00:13:23,700 --> 00:13:26,000 That would be consistent with the rest of the pricing, the 283 00:13:26,000 --> 00:13:29,100 world's doing right now, they're charging probably less than half 284 00:13:29,300 --> 00:13:31,600 of What this would be in a fair market? 285 00:13:31,600 --> 00:13:34,100 They're the only thing really fighting inflation. 286 00:13:34,200 --> 00:13:37,500 Costco's, hot dog and drink combo is the one thing that 287 00:13:37,500 --> 00:13:39,300 hasn't gone up dramatically and value. 288 00:13:39,400 --> 00:13:43,200 Here's the CEO of Costco answering a question about when 289 00:13:43,200 --> 00:13:46,500 they're eventually going to raise the prices of this hot dog 290 00:13:46,500 --> 00:13:49,100 and drink combo. Craig, you must be tired at this 291 00:13:49,100 --> 00:13:52,000 point answering questions about food court. 292 00:13:52,000 --> 00:13:55,800 But you did tweak some prices on some items on the menu which 293 00:13:56,000 --> 00:13:58,500 inevitably leads to speculation about the hot dog. 294 00:13:58,500 --> 00:14:01,600 Combo is there. Any inflationary environment? 295 00:14:01,600 --> 00:14:03,100 Where you would raise that price? 296 00:14:04,300 --> 00:14:11,300 No, he just says no, he's not racing. 297 00:14:11,300 --> 00:14:14,700 It and this is the attitude. That Costco has I love this 298 00:14:14,700 --> 00:14:16,200 company. I love the CEO. 299 00:14:16,300 --> 00:14:18,300 I like the way that he thinks about the business. 300 00:14:18,500 --> 00:14:22,400 They are so long term, Focus. Any other company would want to 301 00:14:22,408 --> 00:14:25,900 make quick marginal gains by raising the prices of every 302 00:14:25,900 --> 00:14:28,600 items to get more money out of the customer right away. 303 00:14:28,800 --> 00:14:31,800 Costco's the Exact opposite. Everything they do is with an 304 00:14:31,800 --> 00:14:34,300 incredibly long term, Focus. So, Costco's one of those 305 00:14:34,300 --> 00:14:37,200 companies I plan on having in my portfolio for the next decade. 306 00:14:37,200 --> 00:14:39,900 Plus I really think I'll have this one for a long time. 307 00:14:40,100 --> 00:14:43,000 I've already had it my portfolio for three years so I think I can 308 00:14:43,000 --> 00:14:46,400 do at least another seven with this company plus much longer. 309 00:14:46,500 --> 00:14:49,300 This would be one that I wouldn't mind retiring with 310 00:14:49,500 --> 00:14:52,700 while owning literally going into my 60s and 70s. 311 00:14:52,700 --> 00:14:56,000 Owning this stock companies I can buy into now a known them 312 00:14:56,000 --> 00:14:57,500 for life. One company that I've been doing 313 00:14:57,500 --> 00:14:59,600 analysis on is the owner of Arm & Hammer. 314 00:14:59,700 --> 00:15:03,000 Which is Church & Dwight and I want to share with you some of 315 00:15:03,000 --> 00:15:05,000 the things I found about this company because it's pretty 316 00:15:05,000 --> 00:15:06,900 incredible. First of all, I know what you're 317 00:15:06,900 --> 00:15:11,200 thinking Church & Dwight, this is a consumer staple company. 318 00:15:11,400 --> 00:15:13,200 How boring? This is going to be the most 319 00:15:13,200 --> 00:15:16,000 boring analysis. I promise you, it won't be. 320 00:15:16,200 --> 00:15:20,600 And usually in investing, boring is good boring companies, do 321 00:15:20,600 --> 00:15:23,000 well. Exciting companies that attract 322 00:15:23,000 --> 00:15:25,800 a lot of attention of investors are usually bid up to 323 00:15:25,800 --> 00:15:28,600 incredibly. High valuations and have lower 324 00:15:28,600 --> 00:15:31,200 returns over time. I'm the companies like Church & 325 00:15:31,200 --> 00:15:34,500 Dwight, the companies like Costco that rarely ever make. 326 00:15:34,500 --> 00:15:38,300 The news typically are the best Compounders in the market over 327 00:15:38,300 --> 00:15:40,500 Decades of time. So having said that, let's go 328 00:15:40,500 --> 00:15:42,300 ahead and jump into it. Now before we jump into the 329 00:15:42,300 --> 00:15:44,900 fundamentals, I first want to highlight the performance of 330 00:15:44,900 --> 00:15:46,700 this company. The performance of Church & 331 00:15:46,700 --> 00:15:50,300 Dwight stock just to highlight how incredibly ridiculously good 332 00:15:50,300 --> 00:15:52,800 it is, this is one of the best performing companies that I've 333 00:15:52,800 --> 00:15:56,100 come across while scanning a lot of different stocks. 334 00:15:56,100 --> 00:15:58,900 I've been doing analysis on a lot of them in this one really 335 00:15:58,900 --> 00:16:01,400 struck me. As a good performing company 336 00:16:01,600 --> 00:16:04,700 Church & Dwight over the past four years, has outperformed, 337 00:16:04,700 --> 00:16:09,300 the S&P 500 with a 16%, kegger compound annual growth rate, 338 00:16:09,600 --> 00:16:13,300 compared to nine point eight seven percent for the S&P 500. 339 00:16:13,400 --> 00:16:16,300 So 16 percent verse nine, point eight percent. 340 00:16:16,300 --> 00:16:19,400 It's about double the returns of the S&P. 500 over, just the past 341 00:16:19,400 --> 00:16:21,400 four years. Let's not cherry pick data 342 00:16:21,400 --> 00:16:24,300 points here, let's go out a little bit further to 2010 343 00:16:24,500 --> 00:16:29,300 Church & Dwight has outperformed the broader Market with a 17.3%. 344 00:16:29,600 --> 00:16:33,800 Lb annual growth rate compared to the S&P 500's very impressive 345 00:16:33,800 --> 00:16:36,400 12.3. So it again, outperform to a 346 00:16:36,408 --> 00:16:38,700 large extent. Let's go out quite a bit further 347 00:16:38,700 --> 00:16:41,500 than that. Double the timeline to 2002. 348 00:16:41,700 --> 00:16:45,800 This gives the S&P 500, the benefit of the doubt because 349 00:16:45,800 --> 00:16:50,100 this is after the market crashed in 2000, which Church & Dwight 350 00:16:50,100 --> 00:16:52,800 did not crash nearly as much as the rest of the market. 351 00:16:52,900 --> 00:16:56,600 So, I'm actually doing the rest of the market, a favor here and 352 00:16:56,600 --> 00:16:59,300 starting in 2002 instead of 1998. 353 00:16:59,800 --> 00:17:03,500 Even so Church & Dwight has outperformed the broader Market 354 00:17:03,500 --> 00:17:08,300 since 2002 by returning 17.3 percent per year, while the S&P 355 00:17:08,300 --> 00:17:14,400 500 is returned. 8% 17% verse eight percent compound annual 356 00:17:14,400 --> 00:17:19,000 growth this, both beat the S&P 500 and the QQQ over this 357 00:17:19,000 --> 00:17:23,000 timeline and it did. So as a boring company with low 358 00:17:23,000 --> 00:17:27,599 volatility, that had a Max drawdown, a maximum drawdown of 359 00:17:27,599 --> 00:17:32,000 21 percent in And nine, while the S&P 500 went down roughly 360 00:17:32,000 --> 00:17:35,500 50%. So it not only doubled, the 361 00:17:35,500 --> 00:17:38,300 compound annual growth rate of spy, but it did so with 362 00:17:38,300 --> 00:17:41,600 dramatically less volatility and lower draw Downs. 363 00:17:41,700 --> 00:17:44,500 So I'm sifting and doing research on dozens of companies 364 00:17:44,500 --> 00:17:47,700 and I come across one like this. I want to find out what's 365 00:17:47,700 --> 00:17:50,300 generating this outperformance. How does a company double? 366 00:17:50,300 --> 00:17:53,500 The S&P 500's returns with the lower volatility and let's draw 367 00:17:53,500 --> 00:17:57,200 Downs for over 20 years and is still doing it to present day. 368 00:17:57,500 --> 00:17:59,100 That's something that really intrigues me. 369 00:17:59,200 --> 00:18:00,300 So let's go. Don't look at some of the 370 00:18:00,300 --> 00:18:02,700 fundamentals of this company. That's driving it dramatic 371 00:18:02,700 --> 00:18:04,800 outperformance. This is going to be using a 372 00:18:04,800 --> 00:18:06,400 website called quatrain insights. 373 00:18:06,600 --> 00:18:09,100 This is something that I developed as part of the patreon 374 00:18:09,300 --> 00:18:11,800 so that you can look at the fundamentals of a company, in a 375 00:18:11,808 --> 00:18:15,300 very easy to understand. Visual way it displays all the 376 00:18:15,308 --> 00:18:17,000 important fundamentals in seconds. 377 00:18:17,300 --> 00:18:19,900 The first chart that I typically look at is a top-line, revenue, 378 00:18:19,900 --> 00:18:22,400 growth of the company. Obviously, you can see the 379 00:18:22,400 --> 00:18:26,200 company's grown, its Revenue, all the way back from 1985, and 380 00:18:26,200 --> 00:18:28,400 it's done it on a pretty consistent basis. 381 00:18:28,500 --> 00:18:31,400 Maybe five to ten percent Percent per year and it 382 00:18:31,400 --> 00:18:34,400 accelerated a little bit over the past couple of years. 383 00:18:34,600 --> 00:18:38,600 So that might be a pandemic situation, A covert situation, 384 00:18:38,600 --> 00:18:41,200 I'm not sure but we can easily see there's a good trend of 385 00:18:41,200 --> 00:18:45,100 Revenue acceleration last year. They generated 5.1 billion 386 00:18:45,100 --> 00:18:47,900 dollars in Revenue. So they're generating 5.1 387 00:18:47,900 --> 00:18:52,100 billion in revenue and then last year they also generated 1.3 388 00:18:52,100 --> 00:18:54,900 billion dollars of ibadah. So you can kind of get an idea 389 00:18:54,900 --> 00:18:57,200 of how much of their revenue gets transferred to eat better 390 00:18:57,200 --> 00:18:59,100 there and the ibadah trans looks. 391 00:18:59,700 --> 00:19:02,400 We similar, they grow the revenue, they grow their ibadah. 392 00:19:02,500 --> 00:19:05,100 Now, the next important metric that I look at is the free cash 393 00:19:05,100 --> 00:19:07,200 flow. You can see since 2002, it's 394 00:19:07,200 --> 00:19:10,300 been consistently positive and now they're generating around 395 00:19:10,300 --> 00:19:14,800 875 million dollars of free cash flow per year as pretty good for 396 00:19:14,800 --> 00:19:17,000 a company that's doing five billion dollars in revenues. 397 00:19:17,200 --> 00:19:20,900 They're converting around 20% of that into free cash flow. 398 00:19:20,900 --> 00:19:23,700 If we look at this on a per share basis, which factors in 399 00:19:23,700 --> 00:19:26,700 dilution, they're growing it at an accelerated pace, which means 400 00:19:26,700 --> 00:19:28,600 they're doing, share, BuyBacks over this time. 401 00:19:28,800 --> 00:19:32,100 So you can see the Free cash flow per share, go up and up, 402 00:19:32,100 --> 00:19:34,500 and up, over time, which means for every share you buy of this 403 00:19:34,500 --> 00:19:37,700 company, the free cash flow on that share is increasing their 404 00:19:37,700 --> 00:19:39,000 net. Income is a next important 405 00:19:39,000 --> 00:19:40,100 thing. We would look at it follows the 406 00:19:40,108 --> 00:19:43,500 exact same Trend, it's almost always positive and one thing to 407 00:19:43,500 --> 00:19:45,700 note is the actually generate more free cash flow. 408 00:19:45,700 --> 00:19:48,200 The net income, the earnings per share of the company as you 409 00:19:48,208 --> 00:19:49,800 would suspect are going up over time. 410 00:19:49,900 --> 00:19:52,900 They had a dramatic increase in 2020 and 2021. 411 00:19:52,900 --> 00:19:54,800 Now, if we look at the balance sheet hair, this is important to 412 00:19:54,808 --> 00:19:57,800 look at for any company they have taken on more debt. 413 00:19:57,800 --> 00:20:00,800 So if I just filter by the debt only, You can see the spike 414 00:20:00,800 --> 00:20:04,100 around 2017. My guess is, they didn't just 415 00:20:04,100 --> 00:20:07,700 decide to spend on something useless, but they actually did a 416 00:20:07,700 --> 00:20:10,000 merger or acquisition. They actually purchased another 417 00:20:10,000 --> 00:20:12,600 company and raised a couple billion dollars in debt. 418 00:20:12,800 --> 00:20:15,500 That would be my initial assumption on this and now, 419 00:20:15,500 --> 00:20:18,600 they're probably working to pay back down that debt over time. 420 00:20:18,900 --> 00:20:21,900 So, with whatever they purchase, they had two point 1 billion 421 00:20:21,900 --> 00:20:25,400 dollars in debt. Now, they have 1.6 billion which 422 00:20:25,400 --> 00:20:28,600 is a very good Trend seeing The Deco down after time, especially 423 00:20:28,600 --> 00:20:31,700 after an Ian is something you want to see if we factor in the 424 00:20:31,700 --> 00:20:34,500 cache at the same time, they currently have a hundred and 425 00:20:34,500 --> 00:20:36,100 seventy four million dollars in cash. 426 00:20:36,300 --> 00:20:40,500 Now, I don't typically compare the debt to cash because that's 427 00:20:40,500 --> 00:20:42,100 not really how companies operate. 428 00:20:42,300 --> 00:20:44,600 They use cash to fund their current operations. 429 00:20:44,800 --> 00:20:47,400 They use debt as leverage to be able to do Acquisitions and 430 00:20:47,400 --> 00:20:50,600 purchases and the debts typically paid off with cash 431 00:20:50,600 --> 00:20:54,100 flows, not existing cash. So while they have 1.6 billion 432 00:20:54,100 --> 00:20:57,500 dollars in debt last year remember they made one point 433 00:20:57,500 --> 00:21:01,700 three billion dollars in ibadah Their debt is not even one 434 00:21:01,700 --> 00:21:04,500 year's worth of ibadah. Meaning they could pay off this 435 00:21:04,500 --> 00:21:07,400 debt within a year. It is not a big deal at all. 436 00:21:07,500 --> 00:21:09,700 Now obviously we're looking for good dividend payers here. 437 00:21:09,900 --> 00:21:12,000 This company is a very good dividend payer. 438 00:21:12,300 --> 00:21:15,500 I don't know what happened in 1989, they lowered the dividend. 439 00:21:15,700 --> 00:21:18,000 That's so long ago that I'm really not too concerned about 440 00:21:18,000 --> 00:21:19,600 it. I want to look at the semi 441 00:21:19,600 --> 00:21:22,700 recent history of the company. They started accelerating their 442 00:21:22,700 --> 00:21:26,100 dividend around 2009 after the recession and you can see these 443 00:21:26,100 --> 00:21:28,100 gargantuan leaps and dividend payments. 444 00:21:28,200 --> 00:21:31,400 This is a very impressive did In history, since 2009, they were 445 00:21:31,400 --> 00:21:34,300 paying a to Penny dividend, two, pennies per quarter. 446 00:21:34,700 --> 00:21:37,500 Now, they're paying 26 Cents. So if you had bought this 447 00:21:37,500 --> 00:21:41,000 company 2009, your dividend payment would have increased by 448 00:21:41,000 --> 00:21:45,500 13 times and even since 2015, they've increased by roughly 449 00:21:45,500 --> 00:21:48,300 70%. So this is a company that likes 450 00:21:48,300 --> 00:21:50,700 to increase their dividend over time and this is certainly 451 00:21:50,700 --> 00:21:53,100 because they're generating more cash flows, they have room to 452 00:21:53,100 --> 00:21:55,800 pay this dividend, it has a lower starting yield of 1.1 453 00:21:55,800 --> 00:22:00,200 percent but the payout ratio is very low at 31% for Staple. 454 00:22:00,600 --> 00:22:03,100 And the dividend growth has grown very consistently sought. 455 00:22:03,100 --> 00:22:05,700 Expect this company to continue growing, its dividend at a very 456 00:22:05,700 --> 00:22:07,900 good Pace known. As we saw what the free cash 457 00:22:07,900 --> 00:22:09,500 flow per share growing over time. 458 00:22:09,500 --> 00:22:12,100 Faster than the cash flows. That typically means the 459 00:22:12,100 --> 00:22:15,200 company's doing share BuyBacks, which you can see here since 460 00:22:15,200 --> 00:22:17,200 2009. They've also bought back a lot 461 00:22:17,200 --> 00:22:20,300 of their stock. Reducing it from 287 million 462 00:22:20,300 --> 00:22:24,700 shares outstanding to 244. It looks like recently over the 463 00:22:24,700 --> 00:22:27,400 past couple of years. They haven't been doing BuyBacks 464 00:22:27,400 --> 00:22:30,400 as aggressively, but instead of been focusing on increasing 465 00:22:30,400 --> 00:22:31,900 their dividend, which I'm fine with. 466 00:22:32,000 --> 00:22:34,700 Either way, the returning money's good, I don't have any 467 00:22:34,700 --> 00:22:36,500 problem with them doing that. Now, another thing that we can 468 00:22:36,500 --> 00:22:39,500 look at what this company is the margins of the company. 469 00:22:39,800 --> 00:22:43,100 The profit margins, for example, have been increasing over time. 470 00:22:43,100 --> 00:22:46,000 Generally speaking quarter by quarter, the average profit 471 00:22:46,000 --> 00:22:49,800 margin is up to around 16%. So, this is what we want to see 472 00:22:49,800 --> 00:22:52,300 what the company. Margins going up, not going 473 00:22:52,300 --> 00:22:54,200 down. This means that they have either 474 00:22:54,200 --> 00:22:57,000 better pricing power, they can raise prices, maybe they're 475 00:22:57,000 --> 00:22:59,400 doing more Sales Online, maybe they have more. 476 00:22:59,600 --> 00:23:02,600 Efficiency with their Logistics. Whatever they're doing, they're 477 00:23:02,600 --> 00:23:04,300 making more money with the revenue. 478 00:23:04,300 --> 00:23:07,200 They're getting basically every metric I look at across the 479 00:23:07,200 --> 00:23:10,200 board is moving in the right direction and it makes sense. 480 00:23:10,300 --> 00:23:13,200 Why these fundamentals would Propel this company to have 481 00:23:13,200 --> 00:23:15,900 long-term outperformance, but what does this company doing 482 00:23:15,900 --> 00:23:17,600 qualitatively to be able to grow? 483 00:23:17,600 --> 00:23:20,800 Like this really, what is Church & Dwight doing to make this 484 00:23:20,800 --> 00:23:22,400 happen? We look at their brands and 485 00:23:22,400 --> 00:23:24,500 products. There is nothing exciting about 486 00:23:24,500 --> 00:23:26,600 this. These are the products that led 487 00:23:26,600 --> 00:23:30,800 to 17 percent annualized returns for the Past 20 years beating 488 00:23:30,800 --> 00:23:36,000 both the Q and the S&P 500, a bunch of name brands that sit 489 00:23:36,000 --> 00:23:38,400 and grocery stores. That you wouldn't glance twice 490 00:23:38,400 --> 00:23:42,600 at Arm & Hammer Waterpik, you have home care products, 491 00:23:42,600 --> 00:23:45,500 personal care products, OxiClean and extra. 492 00:23:45,900 --> 00:23:48,200 This is boring stuff, they're not revolutionising. 493 00:23:48,200 --> 00:23:51,500 The world are using machine learning or Reinventing health 494 00:23:51,500 --> 00:23:53,000 care. They're simply selling a bunch 495 00:23:53,000 --> 00:23:54,900 of boring name. Brand products that everyone 496 00:23:54,900 --> 00:23:57,400 uses now, it's boring and uninspiring, as many of those 497 00:23:57,400 --> 00:23:59,400 products are they've led to this great out. 498 00:23:59,600 --> 00:24:02,700 Foreman's in combination of the executive team in the management 499 00:24:02,700 --> 00:24:05,000 of this company. They have what they call, their 500 00:24:05,000 --> 00:24:07,900 Evergreen model. Our long-term mission is to 501 00:24:07,900 --> 00:24:10,700 maintain a track record of delivering outstanding. 502 00:24:10,700 --> 00:24:14,400 TSR total. Shareholder returns are 503 00:24:14,400 --> 00:24:16,400 long-term plan for delivering Superior. 504 00:24:16,400 --> 00:24:20,100 Returns is based on what we call our quote, Evergreen business 505 00:24:20,100 --> 00:24:23,700 model 3%, annual organic Revenue growth. 506 00:24:23,800 --> 00:24:27,500 So three percent Revenue growth on the stuff they already own. 507 00:24:27,700 --> 00:24:30,800 That's non acquisition. Non merger growth. 508 00:24:30,800 --> 00:24:33,900 Now that's a low amount of growth but that 3% is helpful in 509 00:24:33,900 --> 00:24:36,500 their total returns. Look at how they leverage that 510 00:24:36,500 --> 00:24:39,000 organic growth to get Superior total returns. 511 00:24:39,100 --> 00:24:42,700 So we have that 3%, annual organic Revenue growth and eight 512 00:24:42,700 --> 00:24:45,000 percent annual increase in earnings per share. 513 00:24:45,200 --> 00:24:47,900 So now they're saying, they want three percent, organic Revenue 514 00:24:47,900 --> 00:24:49,800 growth. Eight percent earnings per share 515 00:24:49,800 --> 00:24:51,600 growth. That seems very reasonable to 516 00:24:51,600 --> 00:24:53,500 me. Now, they say the 3%, annual 517 00:24:53,500 --> 00:24:56,000 organic Revenue. Growth is driven in the US by 518 00:24:56,000 --> 00:24:59,400 two percent year-over-year and international by 6%. 519 00:24:59,600 --> 00:25:02,300 So the mixture between International in the US with the 520 00:25:02,300 --> 00:25:05,900 international growing faster. The u.s. growing slower equates 521 00:25:05,900 --> 00:25:08,600 to that three percent Revenue growth, then our Specialty 522 00:25:08,600 --> 00:25:11,600 Products five percent. So they also have Specialty 523 00:25:11,600 --> 00:25:14,300 Products that they've moved into their going to see five percent 524 00:25:14,300 --> 00:25:16,700 Revenue growth from those. Now the eight percent earnings 525 00:25:16,700 --> 00:25:20,500 per share growth is driven by a 25 basis, point gross margin 526 00:25:20,500 --> 00:25:24,600 expansion and a 25 basis point reduction of overhead costs. 527 00:25:24,600 --> 00:25:28,000 Resulting in operating margin improvements of 50 basis points. 528 00:25:28,000 --> 00:25:30,700 This is a lot of technical ways. Of saying that they're going to 529 00:25:30,700 --> 00:25:33,900 increase their margins and lower their overhead, which further 530 00:25:33,900 --> 00:25:36,800 increases their profitability achievement of our Evergreen 531 00:25:36,800 --> 00:25:38,900 model. Influences, both are short-term 532 00:25:39,100 --> 00:25:42,900 and long-term decisions, making a promoting financial literacy 533 00:25:43,100 --> 00:25:45,200 inside. Our company, it is an important 534 00:25:45,200 --> 00:25:47,300 part of our success. So I really like that. 535 00:25:47,300 --> 00:25:50,900 They have this very nuanced and transparent model of how to 536 00:25:50,900 --> 00:25:53,400 achieve these returns. They don't just say that they're 537 00:25:53,400 --> 00:25:56,600 going to have great you know a great company that's going to do 538 00:25:56,600 --> 00:25:59,300 great things and give really broad general terms. 539 00:25:59,600 --> 00:26:03,000 Big of specifics 3%, annual organic Revenue growth. 540 00:26:03,100 --> 00:26:05,900 Eight percent increase in earnings per share driven by all 541 00:26:05,900 --> 00:26:08,500 these different factors which include sales growth and 542 00:26:08,500 --> 00:26:11,400 marginal improvements. That is a specific framework for 543 00:26:11,400 --> 00:26:14,400 this company to achieve their goals and they even break down 544 00:26:14,400 --> 00:26:17,600 the specific factors that will lead to their long-term success 545 00:26:17,600 --> 00:26:20,100 and which have done. So in the past number one, a 546 00:26:20,100 --> 00:26:23,200 diversified product portfolio. This is something that I 547 00:26:23,208 --> 00:26:27,200 actually prefer about Church & Dwight over some of the current 548 00:26:27,200 --> 00:26:29,300 Holdings that I have. When I look at this, I see me. 549 00:26:29,400 --> 00:26:32,600 Many brands that generate a lot of Revenue across the board. 550 00:26:32,600 --> 00:26:35,400 When I look at a company, like Nike, I don't see as much 551 00:26:35,400 --> 00:26:38,500 diversification. Even though Nikes a great brand, 552 00:26:38,600 --> 00:26:41,200 everything is reliant on that one brand name. 553 00:26:41,200 --> 00:26:43,700 They really aren't Diversified in the same way that a company 554 00:26:43,700 --> 00:26:46,800 like Church & Dwight is to. They have very powerful brands 555 00:26:46,800 --> 00:26:50,800 with substantial pricing power while we sell over 80 Brands 14 556 00:26:50,800 --> 00:26:53,800 of the Brand's generate over 80 percent of our revenues and 557 00:26:53,800 --> 00:26:56,000 profits. The 14 brands are Brands, 558 00:26:56,000 --> 00:26:59,000 consumers, love and consequently are Market leaders. 559 00:26:59,400 --> 00:27:02,100 Connect with consumers, through execution of Creative Marketing, 560 00:27:02,100 --> 00:27:04,900 innovating new products and sustaining marketing spending 561 00:27:04,900 --> 00:27:07,300 resulting in high market, share for Our Brands. 562 00:27:07,300 --> 00:27:09,800 So they have that long-term vision of continually keeping 563 00:27:09,800 --> 00:27:12,000 their Market position. The company still has growth 564 00:27:12,000 --> 00:27:14,800 ahead internationally. They're Evergreen model their 565 00:27:14,800 --> 00:27:17,300 framework for growing, their business calls. 566 00:27:17,300 --> 00:27:21,100 For a consumer, international business to grow Revenue, 6% 567 00:27:21,100 --> 00:27:24,300 annually today, 18 percent of our sales are international and 568 00:27:24,300 --> 00:27:28,100 growing rapidly in 2021. We posted organic growth of 5% 569 00:27:28,100 --> 00:27:31,300 below. Evergreen model is 6% but 570 00:27:31,300 --> 00:27:35,300 lapping 8.6 percent growth in 2020. 2021 represented strong 571 00:27:35,300 --> 00:27:37,100 performance in the face of inflation. 572 00:27:37,100 --> 00:27:40,000 Widespread Global Supply Chain, disruptions impacts from 573 00:27:40,000 --> 00:27:43,500 covid-19, and weather-related events are Global Market group, 574 00:27:43,500 --> 00:27:47,400 grew almost 11 percent, and now represents 35% of our 575 00:27:47,400 --> 00:27:49,900 international business. We have fully operational 576 00:27:49,900 --> 00:27:53,700 subsidiaries and six countries, the UK France, Germany Canada, 577 00:27:53,700 --> 00:27:57,000 Mexico and Australia, and Export to over 130 countries. 578 00:27:57,000 --> 00:28:01,300 So they're doing a big push. And I think they see this as a 579 00:28:01,300 --> 00:28:04,200 major growth path ahead. I would assume most of the 580 00:28:04,208 --> 00:28:07,900 growth in the u.s. is simply by raising prices and they're 581 00:28:07,900 --> 00:28:11,100 already an 86 percent of households in the US. 582 00:28:11,200 --> 00:28:13,900 The next one, they mention here, I think is a significant growth 583 00:28:13,900 --> 00:28:18,100 path which is animal nutrition. Now, they're not talking, I 584 00:28:18,100 --> 00:28:21,300 think mostly about pets like cats and dogs. 585 00:28:21,500 --> 00:28:24,600 Actually think they're talking about animals that we eat for 586 00:28:24,600 --> 00:28:26,300 protein. And I know that there's a 587 00:28:26,308 --> 00:28:29,000 popular Trend to say that that's all going away. 588 00:28:29,000 --> 00:28:31,600 And nobody's going to become vegan and eat these fake meat 589 00:28:31,600 --> 00:28:35,100 burgers and and vegan foods. And while I think that's a good 590 00:28:35,100 --> 00:28:39,300 Movement, we probably should for health eat less animal protein. 591 00:28:39,300 --> 00:28:41,800 Overall, I don't think it's going away and I think that's 592 00:28:41,800 --> 00:28:44,500 going to be a growing Market over time Church & Dwight thinks 593 00:28:44,500 --> 00:28:46,800 so too. They say we expect our specialty 594 00:28:46,800 --> 00:28:49,600 product business to grow revenues 5% annually. 595 00:28:49,800 --> 00:28:52,900 Driven by your animal and food production business, the global 596 00:28:52,900 --> 00:28:58,700 population is expected to rise from 7.7 billion today. 29.7 597 00:28:58,700 --> 00:29:02,300 billion in 2050, the demand for protein will increase with 598 00:29:02,300 --> 00:29:04,600 population growth at the same time. 599 00:29:04,600 --> 00:29:08,300 There's a trend away from the use of antibiotics hormones and 600 00:29:08,300 --> 00:29:11,600 chemicals in animal nutrition. Our portfolio for natural 601 00:29:11,600 --> 00:29:14,500 supplements, prebiotics and custom probiotics for dairy 602 00:29:14,500 --> 00:29:18,800 cows, poultry cattle and Swine are well, positioned for This 603 00:29:18,800 --> 00:29:23,200 Global growth in 2015, Dairy represented 99% of animal 604 00:29:23,200 --> 00:29:25,600 productivity business, which is cyclical. 605 00:29:25,600 --> 00:29:30,300 Our focus on non dairy business. Now 24% has created a better 606 00:29:30,300 --> 00:29:33,000 balance, considering the population Tailwinds and the 607 00:29:33,008 --> 00:29:35,700 strength of our products we have strong confidence in the 608 00:29:35,700 --> 00:29:39,500 long-term growth DCL, smart. What they're doing here is in 609 00:29:39,500 --> 00:29:44,600 2015, they had most of this category of animal nutrition 610 00:29:44,800 --> 00:29:48,700 which is just one category in their business but the issue was 611 00:29:48,900 --> 00:29:52,000 it was cyclical and their consumer staple business. 612 00:29:52,200 --> 00:29:55,300 They don't like to be cyclical. They like to be non cyclical way 613 00:29:55,300 --> 00:29:57,000 trainings. Their business goes a long. 614 00:29:57,000 --> 00:29:59,300 No matter what's happening in any environment. 615 00:29:59,400 --> 00:30:02,200 Now they're non dairy. Business is 24 percent so 616 00:30:02,200 --> 00:30:05,800 they're diversifying even a subcategory of their business to 617 00:30:05,800 --> 00:30:08,700 have more consistent revenue and consistent profits. 618 00:30:09,000 --> 00:30:11,200 This is something that I think is incredibly smart from the 619 00:30:11,200 --> 00:30:13,200 management team. Now before I move on to the next 620 00:30:13,200 --> 00:30:16,300 point, I have to plug the sponsor real quick which is FTX 621 00:30:16,300 --> 00:30:19,100 u.s. they're supporting the channel and a lot of people know 622 00:30:19,100 --> 00:30:20,900 about them as the crypto currency exchange. 623 00:30:20,900 --> 00:30:22,500 They're one of the biggest ones in the world. 624 00:30:22,800 --> 00:30:24,300 That is true. A lot of people use them to buy 625 00:30:24,300 --> 00:30:26,700 and sell crypto. That's not something that I dive 626 00:30:26,700 --> 00:30:28,700 into I don't own any crypto currency. 627 00:30:29,000 --> 00:30:32,400 What I Do like as stocks and FTX wants people to know that they 628 00:30:32,400 --> 00:30:35,700 are going into different categories, different verticals, 629 00:30:35,900 --> 00:30:38,900 stocks is one of them, they're going to be releasing their 630 00:30:38,900 --> 00:30:42,300 stock brokerage publicly, in the upcoming weeks. 631 00:30:42,300 --> 00:30:46,200 So if you sign up now, you will have early access to it as soon 632 00:30:46,200 --> 00:30:49,500 as they release and I'm hearing that it's coming up pretty soon. 633 00:30:49,500 --> 00:30:52,000 So I'm excited about this. I've been buying a little bit of 634 00:30:52,000 --> 00:30:54,900 Amazon on The Brokerage. I've been buying a few more 635 00:30:54,900 --> 00:30:57,700 shares every single week of it and it works flawlessly. 636 00:30:57,900 --> 00:31:00,700 You can buy and sell any time. The It's open with fractional 637 00:31:00,700 --> 00:31:02,300 shares. There's no payment for order 638 00:31:02,300 --> 00:31:04,000 flow. The stock portion of this, is a 639 00:31:04,008 --> 00:31:07,100 member of finra and Si P c-- insured, and it's free to use. 640 00:31:07,100 --> 00:31:10,000 So use the link in the description or the pin comment 641 00:31:10,200 --> 00:31:12,400 that will let them know that I sent you. 642 00:31:12,400 --> 00:31:16,700 And if you sign up, use the referral code Carlson CA RL s 0n 643 00:31:16,900 --> 00:31:20,900 that gives you $10 when you do your first 100 dollar trade so 644 00:31:20,900 --> 00:31:22,600 you can sign up now and let me know what you think. 645 00:31:22,600 --> 00:31:24,400 The next thing that they highlight is their growth in 646 00:31:24,400 --> 00:31:26,500 online sales. They say their long-term success 647 00:31:26,500 --> 00:31:28,300 requires them to be digitally Savvy. 648 00:31:28,500 --> 00:31:31,700 One of the important Measures of digital skills is online sales. 649 00:31:31,900 --> 00:31:35,200 I mentioned earlier, looking at their margins increasing that 650 00:31:35,200 --> 00:31:37,600 some of that is probably due to online sales. 651 00:31:37,900 --> 00:31:41,700 They say in 2015, only one percent of our sales were online 652 00:31:41,800 --> 00:31:46,500 and 2021 approximately 15% of our Global sales were online, 653 00:31:46,700 --> 00:31:50,100 excluding click and collect, which is online ordering and 654 00:31:50,100 --> 00:31:53,400 picking up in stores. So just their pure online sales 655 00:31:53,400 --> 00:31:57,100 have grown from 1% to 15% from 2015. 656 00:31:57,100 --> 00:32:00,500 Now they go on expressing, how they're A digitally dumb 657 00:32:00,500 --> 00:32:02,500 company. They might look like a consumer 658 00:32:02,500 --> 00:32:05,600 staple company, but they do have tech savvy and they are 659 00:32:05,700 --> 00:32:08,000 increasing their market share in the online world. 660 00:32:08,000 --> 00:32:10,600 The cost structure is important. Of course, for every company 661 00:32:10,800 --> 00:32:13,700 they highlight how they're putting a focus on their gross 662 00:32:13,700 --> 00:32:15,500 margins to improve cost structure. 663 00:32:15,500 --> 00:32:18,300 Number seven, they say grow through Acquisitions Church & 664 00:32:18,300 --> 00:32:20,200 Dwight has a long history of successfully acquiring 665 00:32:20,200 --> 00:32:22,100 businesses over the past 20 years. 666 00:32:22,100 --> 00:32:26,000 They acquired 13 of our 14 current power Brands. 667 00:32:26,100 --> 00:32:29,200 So this company grows through Acquisitions 13. 668 00:32:29,300 --> 00:32:32,500 They're 14 are through Power Brands, there's nothing wrong 669 00:32:32,500 --> 00:32:34,900 with that. They do have some organic growth 670 00:32:35,000 --> 00:32:37,100 but they really grown their brand strength through 671 00:32:37,100 --> 00:32:40,800 Acquisitions to illustrate our long term acquisition mindset. 672 00:32:40,900 --> 00:32:44,900 We like to say, quote 14 power Brands today, 20 tomorrow, we 673 00:32:44,900 --> 00:32:48,400 possess a competency and targeting acquiring an 674 00:32:48,400 --> 00:32:50,900 integrating Brands and businesses in a world where 675 00:32:50,900 --> 00:32:53,400 seven out of ten Acquisitions. Do not create value. 676 00:32:53,500 --> 00:32:56,300 We have a superior track record and making a Creed of 677 00:32:56,300 --> 00:32:58,700 Acquisitions. We are disciplined and adhering 678 00:32:58,700 --> 00:33:00,900 to clear. Acquisition guidelines, we 679 00:33:00,900 --> 00:33:04,300 quickly integrate Acquisitions to leverage our existing Capital 680 00:33:04,300 --> 00:33:08,000 base and Manufacturing Logistics purchasing an other back office 681 00:33:08,000 --> 00:33:09,400 functions. Number eight, they say, 682 00:33:09,400 --> 00:33:12,600 best-in-class free cash flow conversion, free cash flow 683 00:33:12,600 --> 00:33:17,200 conversion is the rate of how much of their net income goes in 684 00:33:17,200 --> 00:33:19,800 the free cash flow. If a company has a lot of net 685 00:33:19,800 --> 00:33:22,800 income but not a lot of free cash flow, their free cash flow. 686 00:33:22,800 --> 00:33:26,300 Conversion rate is very low. They say in 2021 our free cash 687 00:33:26,300 --> 00:33:30,700 flow cash from operations - capex was a 875 million. 688 00:33:30,700 --> 00:33:33,500 That's what we saw in qualtrics on the cash flow chart with a 689 00:33:33,500 --> 00:33:37,000 free cash flow conversion rate of 116 percent. 690 00:33:37,000 --> 00:33:39,200 That's what I mentioned while looking at qual trim with them 691 00:33:39,200 --> 00:33:41,800 having more free cash flow than they had net income. 692 00:33:41,800 --> 00:33:43,100 And that's a way of saying this company. 693 00:33:43,100 --> 00:33:46,600 Generates true prophets, they generate real cash number nine. 694 00:33:46,600 --> 00:33:49,700 They say they have Superior overhead management maintaining 695 00:33:49,700 --> 00:33:51,400 tight controls on selling General. 696 00:33:51,400 --> 00:33:53,900 And administrative has been a Hallmark of Church & Dwight. 697 00:33:54,200 --> 00:33:56,800 This is something that we can look at as well to see if they 698 00:33:56,800 --> 00:33:59,200 really are keeping control over their expenses. 699 00:33:59,500 --> 00:34:03,000 On courtroom there's a tab called expenses which pulls up 700 00:34:03,000 --> 00:34:06,400 the general expenses. A company has capex which is the 701 00:34:06,408 --> 00:34:10,300 spending on hard Goods like locations trucks uniforms, that 702 00:34:10,300 --> 00:34:12,400 type of thing. Then you have a yellow hair 703 00:34:12,400 --> 00:34:15,199 orange the sales and marketing and read you have General and 704 00:34:15,199 --> 00:34:18,300 administrative which is the overhead of the company you have 705 00:34:18,300 --> 00:34:20,800 accountants and lawyers and administrators in general 706 00:34:20,800 --> 00:34:22,800 administrative. And then until here you have 707 00:34:22,800 --> 00:34:25,300 research and development, which it doesn't pull it up for this 708 00:34:25,300 --> 00:34:27,600 company but you can see what they're saying on the general 709 00:34:27,600 --> 00:34:31,199 and administrative here, if we Sir by just that they spent six 710 00:34:31,199 --> 00:34:33,500 hundred and six million dollars on General administrative. 711 00:34:33,500 --> 00:34:36,199 But this hasn't been growing at as fast of a rate as other 712 00:34:36,199 --> 00:34:38,300 companies. So they're trying to control 713 00:34:38,300 --> 00:34:40,199 this expense. This overhead rate is one of the 714 00:34:40,199 --> 00:34:42,199 lowest in the consumer product. Good space. 715 00:34:42,400 --> 00:34:46,500 We believe we have the highest revenue per employee of any 716 00:34:46,500 --> 00:34:50,100 major consumer product goods. Company 1 million dollars per 717 00:34:50,100 --> 00:34:53,699 employee a measure productivity, that is often overlooked. 718 00:34:53,699 --> 00:34:55,600 So they're talking pretty boldly. 719 00:34:55,800 --> 00:34:57,900 You know, they're really selling themselves here. 720 00:34:57,900 --> 00:35:00,600 This is for investors. They're bragging a little bit 721 00:35:00,600 --> 00:35:03,500 saying how Nimble they are how much revenue they generate per 722 00:35:03,500 --> 00:35:05,700 employee. They have crushed the market for 723 00:35:05,700 --> 00:35:08,600 the past 20 years. So the management team has every 724 00:35:08,600 --> 00:35:11,800 reason to show off what they're doing and how it's working. 725 00:35:11,800 --> 00:35:14,500 The last thing they mention is there simple incentive 726 00:35:14,500 --> 00:35:17,900 compensation at Church & Dwight, we embrace the power of 727 00:35:17,900 --> 00:35:20,200 Simplicity. This is evident in our simple 728 00:35:20,200 --> 00:35:23,300 incentive compensation plan. Our bonuses are tied. 729 00:35:23,300 --> 00:35:26,700 Directly to four equally weighted drivers of total 730 00:35:26,700 --> 00:35:29,100 shareholder returns, net sales, growth growth. 731 00:35:29,300 --> 00:35:32,300 Margin expansion, earnings per share growth and operating cash 732 00:35:32,300 --> 00:35:33,500 flow. So there's no way for the 733 00:35:33,500 --> 00:35:36,700 management team to really game the company at the expense of 734 00:35:36,700 --> 00:35:38,900 the shareholder. I really like the way that they 735 00:35:38,900 --> 00:35:41,900 laid out this compensation package, they say our Equity 736 00:35:41,900 --> 00:35:44,700 compensation consist predominantly a stock options 737 00:35:44,700 --> 00:35:48,300 that are valuable only when the value of your investment Rises 738 00:35:48,600 --> 00:35:51,200 and our senior management team is required, to maintain a 739 00:35:51,200 --> 00:35:54,100 significant investment in our stock to be closely. 740 00:35:54,100 --> 00:35:55,900 Aligned with, you are stockholder. 741 00:35:56,000 --> 00:35:58,400 In my opinion, a very good incentive structure for the 742 00:35:58,400 --> 00:36:00,500 company. So, Do analysis on this company 743 00:36:00,500 --> 00:36:03,400 and look over everything. I can see, I really liked it. 744 00:36:03,400 --> 00:36:06,900 I would want this company to be in my portfolio, it checks all 745 00:36:06,900 --> 00:36:11,200 the boxes that I look for the issue right now is the valuation 746 00:36:11,500 --> 00:36:15,700 the PE ratio on a trailing basis is 29 on afford bases, its 29, 747 00:36:15,900 --> 00:36:20,200 that's well, above the S&P 500. So you are paying a premium if 748 00:36:20,200 --> 00:36:23,500 the own this company right now, the problem with this type of 749 00:36:23,500 --> 00:36:26,900 company, these Consumer Staples that are highly profitable. 750 00:36:27,100 --> 00:36:29,100 Free cash flow generative grow over time. 751 00:36:29,200 --> 00:36:32,400 Time with low volatility is it's difficult to buy them on a 752 00:36:32,408 --> 00:36:34,700 significant dip. It's difficult to wait and by 753 00:36:34,700 --> 00:36:37,800 this company cheaper and if you wait too long, it'll probably 754 00:36:37,800 --> 00:36:41,300 get more expensive over the past five years, it's traded down a 755 00:36:41,300 --> 00:36:43,400 little bit. I could probably get it in the 756 00:36:43,400 --> 00:36:46,600 low 80s. Maybe the drops down below 20, 757 00:36:46,600 --> 00:36:51,500 20 levels to $60, a share that was during the complete worst, 758 00:36:51,500 --> 00:36:56,400 part of the pandemic at 60 and then back in 2017, it was at 48 759 00:36:56,400 --> 00:36:59,100 dollars a share but they've done many acquisition sense. 760 00:36:59,200 --> 00:37:01,400 And they've grown their free cash flow since then. 761 00:37:01,400 --> 00:37:04,800 So I don't really see this company going back down to $50 a 762 00:37:04,800 --> 00:37:06,900 share. I really think it's going to be 763 00:37:06,900 --> 00:37:09,800 difficult to get anywhere below eighty dollars a share. 764 00:37:10,000 --> 00:37:12,700 So I will be adding this one to my watch list which is a dip 765 00:37:12,700 --> 00:37:14,500 finder. I'll be looking at it from time 766 00:37:14,500 --> 00:37:17,200 to time and I may look at entering a position at some 767 00:37:17,200 --> 00:37:19,300 point in the future. If one of my other current 768 00:37:19,300 --> 00:37:21,800 Holdings isn't performing well, or I think this one's a better 769 00:37:21,800 --> 00:37:23,800 opportunity given the current price. 770 00:37:23,800 --> 00:37:27,300 So I'll look if there's any type of dips or opportunities to buy 771 00:37:27,300 --> 00:37:30,100 into this company, but as of right now, Now, I think it's a 772 00:37:30,100 --> 00:37:31,700 great company. That's going to stay on the 773 00:37:31,707 --> 00:37:33,300 watch list. So that's all for now. 774 00:37:33,300 --> 00:37:35,600 I hope you enjoyed this episode. I'll have more analysis on 775 00:37:35,600 --> 00:37:37,900 different companies that I'm looking at buying, but I think 776 00:37:37,900 --> 00:37:40,900 now is the time to really start buying into these companies. 777 00:37:40,900 --> 00:37:44,100 In my opinion, the market has come down a lot companies that 778 00:37:44,100 --> 00:37:46,200 used to be very expensive are now cheaper. 779 00:37:46,400 --> 00:37:49,000 The market could drop further, like, all the analysts are 780 00:37:49,000 --> 00:37:52,000 warning, the second half of this year, but we don't know that for 781 00:37:52,000 --> 00:37:54,000 sure. What we do know is that prices 782 00:37:54,000 --> 00:37:56,100 now are much cheaper than they used to be. 783 00:37:56,400 --> 00:37:58,300 So that's all for now. I'll see you in the next one.