Takeover or not, buy Avon stock
A fantastic franchise run into the ground by management, Avon makes a prime M&A target. Even if it goes unsold, the rumors may help shake things up.
By Jim Cramer, TheStreet
This is a fantastic franchise that has been run into the ground by its current management -- management that has been allowed to screw up endlessly, with both accounting woes and simple execution problems. The notion that Avon could get a bid from some other company -- Loreal or Estee Lauder (EL) for that matter -- makes so much sense that I can't believe it hasn't happened yet.
Plus, when you compare Avon with the incredible business that Herbalife (HLF) has right now -- one of the greatest stocks out there -- or with Tupperware (TUP) -- another company that has done well -- Avon is a joke.
Think of it: Year over year, Avon is up about 2%, and that's only after the takeover talk. Tupperware, despite a financial-reporting issue, is up 19%. Herbalife, the most analogous to Avon, is up more than 80%. Rick Goings at Tupperware and Michael Johnson at Herbalife, both of whom have excelled at the direct-selling model, could turn Avon back into the powerhouse it once was. Instead, Avon just stagnates, waiting for another company to put it out of its misery.
Remember, with a worldwide slowdown and so many people looking for extra income, this should be Avon's time.
Looks like it will soon be someone else's.
I would buy this stock aggressively. I believe that where there is smoke there is fire and, even if there isn't a takeover, there is always a chance that the board will wake up and give someone else besides Andrea Jung a chance to run the company.
At the time of publication, Cramer had no positions in any stocks mentioned.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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