The threshold of pain on the Kimberly-Clarke (KMB), Clorox (CLX) and Colgate (CL) cohort may soon be upon us, the threshold that gets crossed because of the leaking of the bond-market-equivalent balloon.
These stocks are neither here nor there right now. They don't have much earnings momentum. Their consistency is NOT desirable if the economy's getting stronger and their dividends aren't big enough if the Fed says it is time to cut back on bond buying.
So what do you do?
I think there's a real dilemma here. I remember in 1987 I had been a huge believer in KMB and Heinz (HNZ). I had just started my hedge fund and I was being careful to invest in what I thought of as safe names, the ones that couldn't hurt me because I was more concerned with the downside than the upside.
I couldn't have been more wrong about safety. At the very time I started, we got into one of those moments where the economy had broken out of a small slump and took off. It left these stocks in the dust and as money rotated to stocks like Alcoa (AA) and the U.S. Steel (X) these stocks started to get clocked.
When I look at Kimberly I can't believe that the high water mark was when the company announced the spinoff. It's plummeted six points since then. Can it keep going down?
I am almost certain it can. But is it worth selling? I think it's come down too much to be able to get out and then back in, but maybe I am thinking too much like an Action Alerts PLUS portfolio manager where the stock gets knocked down pretty hard on a sell alert and gets knocked right back up on a buy alert, basically giving you a trade where you got out and got in at the same prices.
But if I were fleet of foot and was able to sell some with the idea of buying it back ten points below the high, both because the company isn't expensive and because of the very attractive spinoff, I would certainly make that trade.
