Someone's Got To Make Them

On Monday morning Ansell reported earnings that were pretty good but the company gave mixed signals in comments about its outlook. What is Ansell? Never heard of it? Neither had I. Ansell is an Australian company, the local ticker is ANN and the ADR ticker is ANSLY, it is the world's largest rubber glove maker. It makes occupational gloves, like for hospitals and EMS and it also makes gloves for home use, like the rubber gloves you might use for certain types of cleaning.

According to the Businessweek quote page (which is fantastic for information on foreign stocks) it trades at 11 times earnings, has a $1.3 billion market cap (not sure if that is AUD or USD), yields 2.9%, trades at 13 times cash flow, has AUD$73 million in cash, it does have a fair bit of debt but has cut the debt load substantially in the last couple of years.

A few days ago I mentioned that at some point I will want to increase my exposure to Australia from a target of 3% to more like 5-6%. I said I did not want to add another bank and while a mining company would be an obvious choice many countries have materials companies that it might makes sense to save that part of the portfolio for tougher to reach countries.

From the top down, reducing cap size and adding foreign in the healthcare sector is not so easy to do (well not for me anyway). There is no reasonable risk of the gloves poisoning people, no generic replacement risk, there is no chance that a hospital will decide to cut back because the product is too expensive. I suppose one threat would be a rubber glove that somehow was more comfortable (meaning your hands don't sweat as much). As someone who has to wear rubber gloves every so often it is not a fun thing. I obviously have no idea whether such an innovation is possible but given that Ansell prides itself on Technological Leadership it would be tough to imagine another company sneaking up on them with a sweatless rubber glove.

The chart is somewhat compelling in that the stock at times clearly diverges from the ASX 200 and holders have come through the bear market thus far much better than buying the index, save for a few week window last fall.

The thesis here is simple to construct, the question is whether or not Ansell fits in or not. If not are there any others? Cochlear, the hearing aid (apologies if that is the incorrect term) company is an Aussie company that trades on the pinks with ticker CHEOF. I don't know anything about Cochlear and last night was the first time I ever heard of Ansell so for now all this is about is the first step in the process of learning about a company, its stock and whether it could fit in to the portfolio in the future.