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CLOROX  
About The Company
2011:
Market Capitalization $8.9B
Revenue (FYR) $5.2B
Total Debt $3.15B
EPS $3.71
P/E Ratio 17.2x
Shares Outstanding 139.4 M
Avg. Daily Share Volume (Last 10 Days) 1.8 M
Dividend: $2.20
Book Value: $2.00
P/Cash Flow: 12.6X
Operating Margin: 15.20%

Clorox Co is a profitable Personal & Household Prods. company that trades on the NYSE. I am sure you will recognize the products from this company - Brita, Armor All, STP, Glad, Burt's Bees, Hidden Valley, KC Masterpiece, Kingsford charcoal, Green Works, and of course Clorox Bleach, among many others.

The Company sells its products primarily through mass merchandisers, grocery stores and other retail outlets. It primarily sells these products in North America, while having a smaller presence outside our continent. It is working to grow its brands beyond our borders and has increased its revenue and its dividend each year. This is a large consumer products corporation with an attractive dividend.

Over the next few years Clorox believes it will grow its revenue between 3 to 5 percent annually. This could be higher if its brands become more common place outside North America. Presently they have 10 number one brands out of the top 16 consumer brands. Clorox is very strong when it comes to its brand names and that could be the key to my success as well.

The biggest problem Clorox faces is that many of its brands are related to the commodities which they are derived from. This has meant an increase in actual cost to produce by about 600 million dollars annually. The company believes this cost will decrease by about 100 million annually starting in 2010 going forward. They have managed to increase the cost of their products aside from Glad, by close to 50% and the consumer has not balked at these price increases. This bodes well for Clorox brands.

Their profit margin is around 9.85% which is reasonable for a consumer products company. Their debt is 3.15 billion and declining gradually. Return on assets is again good at 13.96% but book value is poor at $2.00 per share outstanding. The chart below shows that the price for the stock however remains range bound, which is okay for my strategy as I want low volatility in the stock in order to have some degree of comfort for both my puts and calls.  

 

 

 
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Nothing presented is financial advice, trading advice or recommendations. Everything presented is the author's ideas only. The author accepts no liability for its use including errors and omissions. You alone are solely responsible for your own investing and trading. There are considerable risks involved in implementing any investment strategies and losses can be large. Trade at your own risk.

 
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CLOROX STOCK  - 2011 TRADES
Clorox Stock Symbol - CLX
ONGOING EVALUATION & TRADE Year 3
Strategy: Selling Naked Puts Until Assigned

My strategy is selling naked put options at the money and in the money on Clorox Stock until assigned shares. Then I will sell covered call options until exercised and repeat the cycle. Clorox Company is a profitable Personal & Household Products company that trades on the NYSE. I am sure you will recognize the products from this company - Brita, Armor All, STP, Glad, Burt's Bees, Hidden Valley, KC Masterpiece, Kingsford charcoal, Green Works, and of course Clorox Bleach, among many others. This will be a core holding but through selling naked puts, I will let other people pay some of the cost of those shares. Options are thinly traded and premiums are reasonable but not terrific. The stock has an excellent trading range and is widely held by institutions. Once I have made enough income I will accept the assignment of my naked puts. Then I will turn to covered calls and collect the dividend until exercised out of those shares and repeat the process. Should the stock fall too low making covered call selling impractical I will add to my stock position through selling naked put options again, to lower my overall cost.

CLOROX TRADES BY YEARS
VIEW CLOROX-2011 TRADES
VIEW CLOROX-2010 TRADES
VIEW CLOROX-2009 TRADES
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Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 

YEAR 1: 2009 - Trade Commenced March 2009
Goal for 2009: 10% (10 months)
Strategy: Sell Put Options Until Assigned
 
Capital In Use At End Of 2009 32,500.00
Income Earned in 2009 (10 months) 5740.00
Return On Capital in 2009 (10 months) 17.66%
   
YEAR 2: 2010
Goal for 2010: 12%
Strategy: Sell Put Options Until Assigned
 
Capital In Use At End Of 2010 78,000.00
Income Earned in 2010 9245.75
Return On Capital For 2010 11.85%
   
YEAR 3: 2011
Goal for 2011: 12%
Strategy: Sell Put Options Until Assigned
 
Capital Currently In Use 31263.25
Income Earned in 2011  5758.50
TOTAL INCOME EARNED TO DATE 20744.25
Total Of My Own Capital Required 10519.00
Number Of Shares if assigned 500
Share Price Valuation
(Total Capital Required/Number of shares)
21.04
TRADE COMMENCED March 23 2009
ONGOING STRATEGY - SELLING PUT OPTIONS UNTIL ASSIGNED
* ACTIVE TRADES ARE HIGHLIGHTED IN YELLOW

Carry Forward from 2010 - $14,985.75

Jan 3 2011 CLOROX ANNOUNCES SLOWER GROWTH AND BURT'S BEES WRITE DOWN
Clorox Co gave a disappointing outlook this morning and also advised that it would write down the value of its Burt's Bees acquisition. The earnings forecast for 2011 was between 4.05 to 4.20 a share, but I would think this would now be revised downwards. Part of the problem Clorox has is it is focused primarily on the United States while so many of its competitors, like Proctor and Gamble are international with their focus on emerging markets. The United States is a mature market and this will make it difficult for Clorox to continue to expand as the same pace as other more international focused companies. As well the write down of the value of Burt's Bees shows again the fallacy of overpaying for acquisitions. Basically, when Clorox paid 925 million for Burt's Bees plus an additional 25 million for tax benefits, it paid probably 250 million too much. I would believe the write down will easily be 250 million. With its shares down 4% this morning I stepped in and sold 5 put contracts for JAN $60.00 for .60 cents, on the news.
Jan 3 11 60.65 STO 5 Naked Puts JAN 60 @ .60     13.25   30013.25 286.75 0.95 15272.50
Jan 21 11 63.74 Expiry 5 Put Options JAN 60 expired                
Jan 25 11 63.27 STO 5 Naked Puts Feb 60 @ .50     13.25   30013.25 236.75 0.78 15509.25
FEB 11 2011 Carl Icahn's announcement to the  Securities and Exchange Commission of his investment in Clorox boosted the stock over 9% in one day as Clorox set a new 52 week high of $72.43 before pulling back. Ichan said he likes Clorox's "emphasis on 'mega-trends'" and its portfolio of brands. He also said he supports the company's plan to buy back 10  to 11 million shares by the end of this fiscal year. Ichan said that he believes Clorox is undervalued and he may speak with its directors.

So is Clorox "undervalued"? It's true that it has popular names like Glad, Clorox Bleach, Fresh Step, Kingsford Charcoal, Hidden Valley dressing and KC Masterpiece barbecue sauce. But right now sales of cleaning and household products are being discounted as consumers remain bargain shopping, picking up no name brands at much lower prices.

As well Clorox's announcement of the Burt's Bees fiasco on Jan 3 2011 is another sign that the company has lots of tough slogging ahead.

On top of that, commodity costs are rising, especially on resin, a key component of Clorox's packaging and containers. Clorox earlier this month said input costs were expected to rise $70 million this fiscal year alone and will put pressure on their products for price increases.

Here is what Ichan owns presently:  He is controlling 12.5 million Clorox shares, including 1 million common shares, which he bought on Thursday and Friday (Feb 10 and 11) at an average cost of $66.35. He is also holding 11.5 million shares underlying call options which expire late in 2012.  The average per share cost of the options was $22.23 and they are all in the money at prices between $61.17 and 66.26. If we assume exercise of those calls, that would make him Clorox's largest holder. 

For me I am pleased with his announcement as he has placed all of my put options out of the money. I expect my Feb naked puts will expire worthless in another week and I then will hold for a bit to see what happens to the stock. I believe it may pull back toward the $65 level which I feel is top value presently for Clorox.

Feb 18 11 68.15 Expiry: 5 Put Options Feb 60 expired / 6 Put Options Feb 65 expired               15509.25
POSITION UPDATE Feb 18 2011: With Feb options expiry my Clorox ended up expiring. I am left hold 5 naked puts for April at $65.00. Ichan's announcement of his 9.6% position in Clorox as being "undervalued" I feel smacks of stock manipulation. Ichan is notorious for his "announcements" and grand standing. Do you think he unloaded some shares on the big jump up? The next day the stock came back to earth. I will wait a few days as this is a slow grinding stock. How can it be "undervalued" as Ichan put it. I guess you can believe any stock is "undervalued" if you want, but the earnings from Clorox have not been stellar. The company is not diversified among emerging markets like Johnson and Johnson is. In fact most of its sales still depend on the United States. It's recent acknowledgement of overpaying for Burt's Bees is just another sign of "nothing to get too excited about here." There is no point in jumping back into selling naked puts until I see some selling. Then I will consider my "options"

Mar 15 11 67.00 STO 5 NP Apr $67.50 @ 1.15  (expired)     13.25   33763.25 561.75 1.66 16,071.00
Mar 15 2011: I believe that Clorox will hang on long enough for me to sell the April 67.50 put options. Long term though I am not convinced that the higher price for Clorox can last.

Apr 15 11 69.64 Expiry: 5 Naked Puts April 65 expired
           5 Naked Puts April 67.50 expired
              16,071.00
Apr 15 2011: All of my put options expired freeing up a total cash position of 66,250.00, The question now is where to put it back to work. Looking at the chart, all the good news goes back to Carl Ichan's announcement. Is there real support here? I doubt it. $65 is a far more comfortable level, but even at $65 I had sold that naked put for quite a while and it was always in the money until his announcement. Any bad news or a severe stock pullback and this stock will probably head to $62.50 to $60.00 where there is a lot more support.

So now I have to figure out where to sell the next set of put options. I think the summer is slower and the stock could pullback. Last summer (2010) in July the stock got down to 62.50. Time to split my naked puts and ease my way into the selling put options.

Apr 15 11 69.64 STO 5 Naked Puts May $67.50 @ .80     13.25   33763.25 386.75 1.14 16457.75
May 3 2011: INCREASED COMMODITY PRICES HURT CLOROX STOCK AND EARNINGS:

Clorox third quarter earnings fell 8.5% and did not meet analysts estimates. Higher commodity prices are taking a toll on earnings. To offset these costs Clorox is raising prices on many products. Glad garbage bags have been increased 9.5%.

The price of gasoline alone is hurting bottom lines for many Clorox products that have to be transported to markets in the United States and around the world.
But raising prices in the environment Clorox faces may not work as demand for many of Clorox products is declining. Clorox stock has been up ever since Carl
Icahn's announcement about Clorox being undervalued and his large holdings in the stock. (I wonder if he is still holding all those shares?).

Clorox shares fell more than 4.2% and just like Procter & Gamble Co. (PG), Colgate-Palmolive Co. (CL) and Kimberly-Clark Corp. (KMB), Clorox expects 2012 will be even more difficult.

For the quarter ended March 31, Clorox reported a profit of $151 million, or $ 1.09 a share, down from $165 million, or $1.16, a year earlier. Earnings from continuing operations rose to $1.02 from $1.00

Sales rose 1.3% to $1.3 billion, with 3% growth in its cleaning-products business offset by a 3% decline in its household products division that was hurt by weak performance by Glad trash bags and storage containers. Analysts in general had an average forecast of $ 1.04 per share and were expecting 1.32 billion.

So the question now is where is Clorox stock headed? Below is the 12 month Clorox stock history chart and it may hold a clue. Back on Feb 18 2011 above, I indicated that I believed Clorox stock had weak support at $62.50. I still believe that support is weak at that level. At $60.00 there is much better support on this stock. But looking at the chart for the year, I would say that there are three levels of support for Clorox stock prices.

First is around $64.50, the second at $62.50 and the third at $60.00.  Each of these has support at varying strengths with the best at $60.00. However when I look at last year (2010) stock history and volume, there is much more support at $57.50 than any of the above three Clorox price levels. I believe anything above $68.00 is over valued and anything below $58.00 is undervalued. I hope to sell right within the mid range as per below. Right now I am holding 5 put options for May $67.50. If they expire I will not sell at that level again. However if they do not expire I will buy to close and roll them either out, or down and out.

I may be caught here and fine my strikes in the money, if the stock begins to pull back. I am not concerned since I have already made $16.700.00 to date which will reduce my price level if assigned. In fact, I plan to increase the amount of capital being used from about $34,000 to around $66,000 so I can sell more options. There are a few reasons for this:

1) With $66,000 of capital, LESS the $16790.00 already made I am risking roughly $50000.00 of capital, which if assigned, would put me in Clorox Stock at $50.00.

2) If assigned, the Clorox dividend is safe and at $50.00, the $2.20 (present Clorox Dividend), earns me 4.4% and I would sell Clorox covered calls.

3) However the main reason I have increased the capital I will risk with the Clorox trade is volatility. The volatility level on Clorox Stock for much of the past 6 months has been low at around 13%. This has made just "OK" option premiums. Now with more investor fear the volatility in Clorox is already up to 16% and hopefully will climb higher. Today I sold the June $65 put option strike for .70 cents. I am hoping this is a sign of even better Clorox options premiums to come.

May 3 11 67.47 Sold 5 put options 18JUN11 $65 @ .70     13.25   32513.25 336.75 1.03 16794.50
May 20 2011: Clorox At The Crossroads
Today I sold 5 puts but all the way out to Oct and I bought and closed my June Puts. With Clorox now trading in what i consider is over valued prices, I have adjusted my trade strategy. You can read about Clorox At The Crossroads here.
May 20 11 69.95 Expiry: 5 Naked Puts May 67.50 Expired                
May 20 11 69.95 Sold 5 Naked Puts Oct $67.50 at $2.19
This works out to 0.64% per month
      13.25 33,763.25 1081.75 3.20 17876.25
May 20 11 70.12 Bought to close 5 Put Options 18JUN11 $65 @ .08       13.25   (53.25) (0.16) 17823.00
July 1 2011 : Clorox remains range bound.

First is around $64.50, the second at $62.50 and the third at $60.00.  Each of these has support at varying strengths with the best at $60.00. However when I look at last year (2010) stock history and volume, there is much more support at $57.50 than any of the above three Clorox price levels. I believe anything above $68.00 is over valued and anything below $58.00 is undervalued. I hope to sell right within the mid range as per below. Right now I am holding 5 put options for May $67.50. If they expire I will not sell at that level again. However if they do not expire I will buy to close and roll them either out, or down and out.

I may be caught here and fine my strikes in the money, if the stock begins to pull back. I am not concerned since I have already made $16.700.00 to date which will reduce my price level if assigned. In fact, I plan to increase the amount of capital being used from about $34,000 to around $66,000 so I can sell more options. There are a few reasons for this:

1) With $66,000 of capital, LESS the $16790.00 already made I am risking roughly $50000.00 of capital, which if assigned, would put me in Clorox Stock at $50.00.

2) If assigned, the Clorox dividend is safe and at $50.00, the $2.20 (present Clorox Dividend), earns me 4.4% and I would sell Clorox covered calls.

3) However the main reason I have increased the capital I will risk with the Clorox trade is volatility. The volatility level on Clorox Stock for much of the past 6 months has been low at around 13%. This has made just "OK" option premiums. Now with more investor fear the volatility in Clorox is already up to 16% and hopefully will climb higher. Today I sold the June $65 put option strike for .70 cents. I am hoping this is a sign of even better Clorox options premiums to come.

Clorox stock - Jul 1 2011

Jun 30 2011 68.00 Sold 5 Naked Puts August $65 @ .60       13.25 32513.25 286.75 0.88 18109.75
July 11 2011 :Clorox Calls Go Through The Roof.

To understand the trade I have put in place read this article.

Jul 11 11 69.90 Bought 3 Calls August $70.00 @ 1.75
COMMENTS: This trade is explained in the article Clorox Call Options Go Through The Roof
      10.75 535.75 (535.75)   17,574.00
Jul 11 11 69.90 Sold 3 August $67.50 Puts @ 1.20       10.75 20,260.75 349.25   17923.25
Jul 11 11 70.70 Bought 4 Puts August $62.50 @ .15       12.00 72.00 (72.00)   17,851.25
July 15 2011: With Carl Ichan's sort of Bid for Clorox shares, I sold my calls and bought to close my August $67.50 puts. I see no reason to stay in either of them. I am still holding the Oct $67.50 puts for a bit longer. The August $62.50 puts are at .05 cents so I would rather just let them go as they only cost me $72.00 and were for protection and who knows, if the Clorox "sale" doesn't work out which is common with Carl Ichan, then they just might be worth something in a month. You can read about Carl Ichan's sort of bid here.

I can see many wondering why I would close my August $67.50 puts which I sold. The reason is because you just never know with Ichan how things may work out. He is notorious for "bad choices" and many of his "endeavors" don't always yield great results as it were. Therefore for .15 cents why bother to be exposed. Besides I have always felt that at $67.50 the stock is fully valued and I am holding $67.50 puts which I sold for October.

Jul 15 11 75.25 Sold 3 Calls August $70 @ 5.20       10.75   1549.25   19,400.50
Jul 15 11 75.25 Bought to Close 3 Puts August $67.50 @ .15       10.75   (55.75)   19344.75
Aug 4 2011: What an incredible day. The market ended down 511 points and amazingly my August $62.50 puts made a very nice profit! Who would have thought! Clorox is back to before Carl Ichan's bid. Finally Clorox is coming back to earth. I couldn't believe that my August $62.50 puts made money AND I rolled my Oct $67.50 puts. Nice to see this stock back to earth. For now I am leaving my October $67.50 puts alone as I wait to see if the market can bounce back.

Clorox Stock Chart Aug 4 2011

Aug 4 11 64.55 Sold 4 PUTS August $62.50 @ .60       12.00 25012.00 228.00 0.90 19572.75
Aug 19 11 64.00 Expiry: 4 Puts August $62.50 expired                
Aug 19 11 64.00 Sold 4 Puts 17SEP11 $57.50 at .65       12.00 23012.00 248.00 1.07 19820.75
Sep 16 11 69.47 Expiry: 4 Puts 17SEP11 $57.50 expired                
Sep 22 11 65.65 Sold 5 Puts 22OCT11 $57.50 at $.70       13.25 30013.25 336.75 1.1% 20157.50
Oct 21 11 69.56 Expiry: 5 Puts Oct $67.50 expired
5 PUTS Oct $57.50 expired
               
Nov 23 11 63.53 Sold 5 Puts 21JAN12 $62.50 @ 1.20       13.25 31263.25 586.75 1.8% 20744.25
CLOROX TRADES BY YEARS
VIEW CLOROX-2011 TRADES
VIEW CLOROX-2010 TRADES
VIEW CLOROX-2009 TRADES

 

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
By using this site, you agree to be bound by its terms of use. The full terms of use can be read here. If you do not agree to the terms of use, do not use this site. The author of fullyinformed.com assumes no liability for topics and ideas discussed, errors and omissions, ads and their content and external links. Any corporate insignia used are registered trademarks of their respective company or corporation and are being used for identification purposes only. All material copyrighted by FullyInformed.com. Reproduction in whole or in part prohibited. Copyright 2008

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