Show BUSINESS I I II BRIGHTENING OUTLOOK FOR FOIL COSMETICS cos STOCKS During the period a few years back ball when investors fancied growth stocks the cosmetics and fragrances issues attracted their share of investment In fact In the late and the early leading stocks in this segment of the market basked in the heady heady atmosphere of price price- earning ratios ranging from the high to to the high Institutional and individual Investors investors Investors In In- alike were apparently blithely unconcerned about the miniscule yields offered at that time lime by cosmetics and fragrances issues THE RUDE HUnE AWAKENING With the appalling slump in stock prices spanning significant portions of 1973 and 1974 these issues lost their superstar status suffering a frightful pummeling The credit crunch double digit inflation and money rates and an economy reeling from recession abruptly shifted investor psychology to the conservative side ide Investors looked for vehicles offering more generous income returns and their preference shifted to stocks which were trading at substantially lower price- price earnings ratios The net result was a drastic shrinkage in the multiple of earnings at which growth stocks were considered reasonable By the 1974 low area of the the market decline once highly vaunted cosmetics I and fragrances stocks had undergone undergone undergone un un- un- un such a wringing out that p-e p ratios around 10 were the rule rather than the ex ex- During th the early stages of the ensuing recovery in stock prices bargain hunters in included included included in- in issues in this thus industry group on their shopping lists of purchase candidates Since then however this sector of the market has either un- un or barely kept pace with the general market Only Revlon was able to win back all of the ground lost during the 74 1973 decline in the stock market FUNDAMENTALS FOil FOR GROUP NOW BETTER BETTEn SITUATED In the course of the 1973 74 economic recession wholesalers and retailers trimmed their inventory holdings of cosmetics Producers were forced to try aggressive promotion programs to spruce up laggard demand while operating costs went soaring with the widening inflation So profits of companies companies companies com com- in this field fared poorly during 1974 But the past two years have been relatively favorable even though many fragrances and cosmetics companies were still beset by problems which kept earnings from being really satisfactory The strong Christmas selling season on which 1976 was wasa a most encouraging development development development develop develop- ment for the industry as a whole making many of its leaders look ahead with high hopes for 1977 sales and ear ear- Although the brutal winter weather which afflicted widespread sections of the nation during the first six weeks of the current year ear has undoubtedly undoubtedly undoubtedly un un- diminished this industry's industry's in in- enthusiasm to some degree the best hest selling periods for 1977 still lie ahead And when weather conditions improve improve im im- im prove the anticipated strength in industrial and building operations should boost boast public sentiment with resulting benefits for consumer spending There are arc many plus factors in the outlook for the industry including increased emphasis on skin care items recent additions to cosmetics and fragrances lines and the constantly growing number lumber of women in the country's labor force CURRENT T n BABSON ADVICE U The Research Department of I labson's Reports recommends retaining Avon Faberge and Revlon among outstanding cosmetics and fragrances fragrance's stocks For purchase we e favor Norton Simon and Squibb The former gained its prominence in the field through acquisition of Max l Factor and Halston Ralston We feel that Squibb Lanvin- Lanvin Charles of the Ritz has been overlooked too often as a promising investment and that its future is good F free reports on either or both of these stocks write to Babson's Reports Inc Wellesley Hills Mass |