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 Oct 13, 2010 8:29AM

jim cramerBy Jim Cramer, TheStreet

 

Will L'Oreal (LRLCY) bid for Avon (AVP)? Wrong question. Why doesn't it?

 

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.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Click here to follow Cramer's trades for his Charitable Trust.

 

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1Comment
Nov 3, 2010 8:25AM
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Great advise Cramer lost over 15% to date on this recommendation.
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