Triclosan: A Cancer to Colgate’s Stock Price

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Colgate-Palmolive Co. (CL, $64.21) is under intense media scrutiny due to a potentially cancer-enhancing chemical ingredient in Colgate Total toothpaste, called triclosan.  (Read more from Bloomberg.)

I have never recommended Colgate-Palmolive’s stock because of the company’s slow earnings growth, high price/earnings ratios, and high long-term debt levels.  One would even have to wonder why anybody owns this stock.

That being said, it’s time for investors to develop an exit strategy on CL shares and to come up with a better plan for stock selection and management.  Colgate’s entire reputation is built around oral care.  Triclosan’s link to cancer now represents a cancer to the stock price.  

There was no fundamental reason for any informed investor to purchase Colgate’s stock.  And now investors will be avoiding CL like the plague.  The entire point of owning stocks is to grow investment capital faster than through other investment vehicles, including bonds, money market funds, real estate, and other stocks.  There is no way that an investment in an overvalued stock, in a company mired in bad news and potential lawsuits, can achieve that goal.

The current share price support level on CL is $63.  I expect the stock to fall through support momentarily.  The next support levels are $60 and $55.50, and so on.  Basically, you need to decide how far you’re willing to let your CL shares fall before you become brave enough to sell them.

Or you could sell them today and be done with this triclosan nightmare.

Goodfellow LLC Rating:  Sell, Public.  (08/15/14)

 

Chart courtesy of StockCharts.com.

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Crista Huff

President

Goodfellow LLC

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