Core Concepts: Sleepers in Household Products

If you asked me for just one tip about investing in the stock market, I would give you this: Take advantage of investors' linear bias.

Most investors don't view stocks through a cyclical lens. Instead, they extrapolate today's conditions far into the future. The stocks of companies that are thriving, with operating metrics at peak levels, are priced for more of the same in the future. And the stocks of companies that are enmeshed in problems and turmoil are also priced for more of the same ahead.

The net result is that this linear bias offers a rich vein of actionable stock ideas. The market prices struggling companies as if their struggles will never end. Investors who get in front of operating improvement, who have the courage to buy when times are tough, have a chance to reap outsized gains.

In this series on various sectors in the stock market, we've taken a look at chemicals, computers and office supplies, oil stocks and telecom.

Today, we continue our search for stock ideas in the household products sector. Leading companies in this sector include Procter & Gamble (PG - commentary - Cramer's Take), Colgate-Palmolive (CL - commentary - Cramer's Take), Kimberly-Clark (KMB - commentary - Cramer's Take) and Clorox (CLX - commentary - Cramer's Take).

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At time of publication, Alsin and/or ACM had no positions in any of the stocks mentioned, although holdings can change at any time.

Arne Alsin is the founder and principal of Alsin Capital Management, an Oregon-based investment advisor, and portfolio manager of The Turnaround Fund, a no-load mutual fund. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback; click here to send him an email.