Can you achieve the diversification financial advisers always harp on with a single stock?
Real Money’s Paul Price says you can.
“Few companies have the brand recognition that Energizer Holdings (ENR) has, thanks to its famous energizer Bunny,” Price wrote recently in a Real Money piece. “What many people don't know is that the company owns three other brands of batteries, plus an assortment of well-known automotive care and accessory brands.”
Energizer Holdings fills drugstore shelves with its well-known batteries. It also makes discount consumer batteries, car batteries and industrial power sources. When it isn’t in the business of portable electricity Energizer Holdings makes ArmorAll, air conditioner supplies and even air fresheners. In other words, this one company occupies a wide footprint in the marketplace.
Which means that investing in this one company will give your portfolio exposure to three or four different industries all at once. That’s essentially automatic diversity in a single equity.
The company “is on track to post record sales, cash flow, earnings, dividends and book value in fiscal 2021, which ends on Sept. 30. Further improvements are expected in fiscal 2022 and beyond,” Price wrote.
"From 2016 through 2020 ENR carried an average multiple of 17.2-times, accompanied by around 2.4% in current yield. Each of those five years plus 2021 saw ENR change hands for at least $52.80. During 2017 and 2028 Energizer Holdings commanded north of $60 while fetching up to 20.2-times earnings at peaks," he noted.
Holding assets that span several different markets is essential to a well-balanced portfolio. While it removes some high-end potential, it protects your portfolio from a single industry crashing or a single product taking a dive. For the most part you can achieve this by investing broadly and buying a large number of different assets across industries.
However it’s well worth remembering that in a market with large, diverse companies, you can often invest in many different industries at once by purchasing a single stock.