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Friday, 12/05/2003

Making Heads Turn
By Nich Sheldon
EL - Estee Lauder Co Inc.

Company Description

The Estee Lauder Companies Inc. is one of the world's leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. The Company's products are sold in over 130 countries and territories under well-recognized brand names, including Estee Lauder, Clinique, Aramis, Prescriptives, Origins, M--A--C, Bobbi Brown, Tommy Hilfiger, La Mer, jane, Donna Karan, Aveda, Stila, Jo Malone, Bumble and bumble, kate spade beauty, Darphin, Michael Kors and Rodan & Fields.

[Source: Company Press Release]

Reasons to Invest:

This week's Drip of the week is worth a double take. Over the past year this stock has been making more than one head turn as it has been trending upwards, stopping occasionally so that traders could seek profits, and then continuing on it bullish leg higher. After a rummage of very profitable prospects I have come to choose Estee Lauder Companies Inc. (NYSE:EL) as this week's Drip of the Week.

A Look at the Figures

Over the past quarter, EL's net sales jumped 9 percent to $1.35 billion. The company's net income applicable to common rose 14 percent to $77 million. The company reported that these figures reflect growth in all product categories and geographic regions fueled by new product launches and improved margins.

Keeping that in mind, I wouldn't mind adding a company that generates sales in the billions and that has seen growth in every single one of its products in every region that its products are sold in. To me this equals one beautiful investment. However, I know that figures can be deceiving - yet, one look at the charts and I am sold.

Technical Analysis

EL has trended lower for the past three days, and in my opinion this is largely due to profit taking after the stock hit a new 52-week high of 40.20. The stock has been surfing through its regression channel with ease and if this trend continues I could see EL hitting 50 by the end of next year. A quick once over on the stochastics indicator and I noticed that EL was recently in overbought territory, but is now resting nearly 20 points below it. This generally means that there is less risk to enter the stock than there is when the stock is in an overbought range. The daily chart shows that the simple 10-DMA just broke over its 20-DMA a week or so ago, and this also indicates a buy signal.

The weekly chart also looks attractive with the 10-DMA resting above the 20-DMA. The MACD just produced a fresh buy signal and the stock is coasting through its regression channel with relatively no signs of setbacks. The Stochastics indicator says the stock is a few points over overbought territory, however this was the case from March to August of this year and in this time period the stock gained close to ten points.

The monthly chart looks the same as the weekly. The only significant difference that I see is that the stock entered the overbought range in July and is still in overbought territory even today. In this time period the stock has gained more than 8 points.

With that said, I suppose I would pay no attention to the stochastics indicator as EL has been overbought for most of the year. The reason I would discard this indicator is because most of the stocks in the major markets have been overbought since their rebounds off of March lows and a great majority of them have not looked back since. What I do like to see is that the 10-DMA is resting over the 20-DMA on the monthly, weekly, and daily charts. The MACD is giving off a buy signal on all three charts and EL has been on a bullish rampage higher since the beginning of the year.

Dividend Information

EL just increased its annual dividend from $0.20 to $0.30, which comes out to a 0.77 percent dividend yield. While this is by far one of the lowest yearly dividend paying Drips that I have spotlighted, I am still intrigued by its bullish performance and am excited to see that the company is forecasting a 3.30 percent dividend growth rate over the next five years. The dividend date for EL is set for January 6th, 2004.

This ends another exciting episode of the Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the limelight.

Until Next Week,
Nich Sheldon

Broker Recommendations

Strong Buy         2
Buy                1
Hold               5
Sell               0
Strong Sell        0

Brokers Covering   8

DRIP Information:
Shares to Qualify = 1
Auto-reinvestment = Yes
Accept Foreign Accounts: Yes
Temper Enrollment: Yes

Min/Max Investment = $100 - $10,000/Month

Reinvestment Fees - 
Dividend investment fees: 0
Cash investment fees: $5+12c/share
Auto reinvestment fees: $3+12c/share

Transfer Agent:

Corporate Headquarters:
767 Fifth Avenue
New York, NY 10153
Phone: (212) 572-4200
Fax: (212) 572-3941


Copyright 2003

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