We came across a bullish thesis on Colgate-Palmolive Company (CL) on Kontra Investment Xchange’s Substack by Kontra. In this article, we will summarize the bulls’ thesis on CL. Colgate-Palmolive Company's share was trading at $100.46 as of Oct 18^th. CL’s trailing and forward P/E were 29.29 and 25.97 respectively according to Yahoo Finance.

An array of toothpaste, toothbrushes, and mouthwashes on a bright background, highlighting the company's oral care products.

Colgate-Palmolive is a leading global consumer products company, offering a diverse range of oral, personal, home care, and pet nutrition products across over 200 countries. Notably, approximately one-third of its sales stem from Latin America, bolstered by well-known brands like Colgate, Palmolive, Ajax, Softsoap, and Hill’s. The company's strong presence in sustainable and growing categories such as oral care and pet nutrition is particularly appealing, along with its focus on premiumization and innovation, which drive pricing and organic growth amid robust end-market demand. Colgate-Palmolive's strategic positioning allows it to benefit from rising global consumption, especially in emerging markets, where it derives 45% of its sales. While acknowledging the challenges posed by foreign exchange fluctuations and the company’s lackluster performance over the past decade, I view Colgate-Palmolive as a defensive investment in a tough macroeconomic climate. Its product categories face less trade-down risk compared to competitors, supported by volume growth in key segments and consistent pricing power, evidenced by a five-year average gross margin of 59%. Furthermore, its historical average return on invested capital (ROIC) of around 28% signals a strong track record of financial productivity, positioning the company for continued value compounding.

Basically, the bulls' thesis on CL is that it is a quality compounder. Quality compounders continue to grow at consistently above average growth rates and as a result investors don't mind paying a slight premium to buy these stocks. Over a decade or longer, these stocks tend to outperform the market by a wide margin.

Colgate-Palmolive Company is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held CL at the end of the second quarter which was 50 in the previous quarter. While we acknowledge the risk and potential of CL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.