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Jim Cramer's Sold The Clorox Bubble Which Opened The Door For New Investors

Mar. 08, 2020 12:06 PM ETThe Clorox Company (CLX)13 Comments
Trent Welsh profile picture
Trent Welsh


  • Jim Cramer's call to sell Clorox helped pop a short term bubble in the stock as margin calls and profit taking exaggerated a horrible day for the stock.
  • I expect continued outperformance of the stock, compared to the market, as coronavirus prevention potentially becomes a greater U.S. and international issue.
  • Homecare, laundry, professional products, and international markets make up a significant chunk of Clorox's earnings that could see a significant boost in earnings in the coming quarters.
  • Projection scenarios for the next quarter(s) and how they might lead to future earning and guidance beats and raises.

The Clorox Company (NYSE:CLX) had a dramatic recent tumble as the market held few favorites in a broad-based selloff that even included other major defensive plays like the SPDR Gold Trust ETF (GLD). Jim Cramer's morning Clorox sell call on February 28th, 2020, was timed perfectly as his charitable trust, along with other investors, took profits in Clorox and other defensive stocks. This happened as market fear reached a breaking point as overextended investors received margin calls and needed to raise immediate cash in a crashing market. An over 5.5% move down for Clorox by the end of February 28th on over 4.7 million shares (4X-5X normal volume) traded, according to Nasdaq.com, shows exactly just how bad that day was for current shareholders.

Screenshot from Twitter.com

This was, of course, a perfect opportunity for new investors to jump into a defensive stock like Clorox that could handily outperform the market in upcoming coronavirus inspired months. The massive volume of that day allowed many long-term and bubble investors the chance to gracefully exit, thus allowing new investors, seeing a potential significant increase in cleaning and sanitizing activities across the U.S. and internationally, the chance to enter. Since that fateful day and call by Jim Cramer, Clorox has handily outperformed both gold and the broader market.

I see continued outperformance for Clorox over the next quarter or two as the coronavirus spreads globally and becomes more and more of an issue across pockets of the U.S. One of the main way to combat the virus, at this time, is preventative measures including enhanced cleaning and disinfecting along with the continued intelligent closing of conventions, reduced travel, and the general avoidance of large social gatherings. This means the potentially heavy use of name brand Clorox bleach, wipes, and professional products across businesses, homes, and schools in the coming months as

This article was written by

Trent Welsh profile picture
B.S. Psychology University of Missouri-Columbia MBA University of Missouri-Columbia Full time investor looking to capitalize on market overreactions and looking for value where others see nothing but wreckage. Long term buys and short term trades to build wealth.Investing Better Than A Money Manager: The Rise Of Retail Investing - By Trent WelshI have an investing book with the title above on Amazon written for beginning retail investors looking to set up a self-directed portfolio with their IRA's, 401k's, or other retirement or trading accounts. It details how to pick and choose stocks amidst the different sectors and how to figure out how much in each sector an investor should have to help achieve diversification.Please take a look at it and let me know your thoughts. Thanks and Best of luck to all :).

Analyst’s Disclosure: I am/we are long CLX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (13)

georgefelix75 profile picture
@Trent Welsh Ask yourself where does CLX get their bleach? Olin and somehow the market has not caught on to this yet. Olin has increased shipments to CLX by 300% and the stock is near all time lows with a 8% yield they are very proud of....plus you get the epoxy business which may benefit from some lack of supply coming from China...Winchester is just a small bonus.
SubjectiveQuant profile picture
@georgefelix75 Would you provide more info about "Olin has increased shipments to CLX by 300%"? That would be surprising considering Olin has shutdown a chlor alkali plant. From Olin's Annual Report:
> On December 11, 2019, we announced that we had made the decision to permanently close a chlor alkali plant with a capacity of 230,000 tons and our Vinylidene Chloride (VDC) production facility, both in Freeport, TX. These closures are expected to be completed before the end of 2020. For the year ended December 31, 2019, we recorded pretax restructuring charges of $58.9 million for the impairment of equipment and facilities related to these actions.
georgefelix75 profile picture
Your correct but I believe that was an old plant that could not be converted to mercury free production. They have other plants in Tenn and elsewhere. So to your point....my company mfg the composite FRP tankers that haul the bleach from Olin to Clorox so you could say I’m in a pretty reliable position to know people who might have their hands on the shipping schedule. :) Did u watch the way OLN trades today? There is serious accumulation going on. I was buying it all day when I could get it to stop moving around.
Cramer says sell, so I bought on 2/28. So far, so good.
I would rather be buying high quality growth stocks that have been taken down with the broader market. Any rise in volume or organic growth that Clorox sees off of coronavirus will be back to zero after flu season.
gnwilliams profile picture
With a reliable dividend around 2.5%, I'd call Clorox only half as overvalued as treasuries.
At this time dividend aristocrat CLX, is overvalued, wait for a pull back in the stock before buying or adding.

"To know values is to know the meaning of the market"

- Charles Dow
Glad I (finally) got into CLX last year. Looking to buy more if it will ever pull back.

Retired dividend-growth investor
Hi I’m Paul profile picture
It’s still overvalued. On every metric, too much is priced in. I don’t see myself getting a market beating return buying more here, I’m selling as many calls as I can and accumulating cash to buy other values later
Thirst 4 Yield profile picture
CLX is a great defensive name to own in these uncertain times. I think the benefit from the CV will be tremendous, I also feel many families will be making permanent changes regarding household cleanliness going forward. As a result, CLX should be one of the big winners.
Hi I’m Paul profile picture
Yes it’s a great company, and the business will perform well. But there is a time to buy CLX and a time not to buy. Too much is priced in. Investors should have bought months ago ago in November. Even then it was fairly valued. It sits at about 27 pe. That’s pretty high for this name. Your paying for a lot of earnings growth, which is achievable over many years but it’s already priced in is my point. Stock prices frequently get carried away from business performance in either direction.
georgefelix75 profile picture
Agree 110% it needs to give up another 35%
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