Analysis: COLPAL

Colgate-Palmolive [stockquote]COLPAL[/stockquote] investors have had a tough 2013. After hitting an all-time high of Rs. 1580, the stock has slid to Rs. 1250 levels – a whopping 21% drop. Investors have been worried about falling sales in spite of holding prices steady and the imminent entry of P&G into the oral-care market. That said, Colgate holds over 54% of the toothpaste market and has been busy expanding its distribution and marketing into rural areas where per capita consumption of toothpaste is half that of urban areas.

COLPAL Technical Chart

We were a short-term buy back in February. However, the technicals this time are giving mixed signals. Our 4-9-18 model has been flipping between buy and sell all of this month and Aroon is stuck in neutral. However, RSI levels seem to be headed toward over-sold levels, suggesting a bounce from support at Rs. 1250 levels is possible.

The stock does pay a fair amount of dividend – Rs. 8/share was recently announced and given that its in the FMCG space, it is more-or-less recession proof. An extremely low beta of 0.16 provides a certain measure of comfort during volatile times.

COLPAL quarterly results

We would be buyer’s if the stock can hold on to its Rs. 1250 support levels over the next few days. Otherwise the next support is around Rs. 1200. This is a good stock to own for long-term buy-and-hold investors at these levels.

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