A new value stock has come on my radar! Merry Christmas to me; I couldn’t be more excited.
One of the things I love about my job is searching for new gems. So, let me tell you what I’ve found.
What is it?
Croda International (LSE:CRDA) is my Christmas bargain find. It’s a global leader in speciality chemicals, serving diverse clients in personal, health and crop care.
It used to be involved in performance (coatings, lubricants, and plastics, for example) and industrial chemicals. However, it sold these divisions to become a pure consumer care and life sciences company.
Why do I like it?
I’m trying to stress ethical considerations more recently. I’m driven by doing good in the world and, as an investor, putting my money where my heart is matters to me.
No company is perfect, but Croda looks like it is trying to do good. It takes sustainability seriously, coming first in the Most Sustainable International Company rankings for non-US companies in a Barron’s report.
Also, it joined the World Business Council for Sustainable Development. Here, it collaborates on sustainable business practices with other business leaders.
When do I expect to profit?
Here’s the thing: the shares are currently trading at over 50% below their high.
While that may initially ring alarm bells, it looks like an excellent opportunity for me.
If that sounds peculiar on the surface, it’s actually a famous tenet in value investing to buy companies when the price is down.
There’s one crucial qualification for this to be true, though. The company’s financials also have to be stellar.
Also, I don’t think I will profit immediately if I buy these shares. My golden rule for myself when value investing is patience. Sometimes, it takes years for a value play to meet the light of day.
The good news is I think Croda has wonderful financials, but there are also risks for me to consider.
For example, the company has an operating margin of over 17%, which I find staggering. Also, its five-year average annual revenue growth rate is over 7%.
But that doesn’t mean the share price will continue to rise, of course.
The company faced global supply chain issues, with rising costs due to the conflict in Ukraine. That contributed to the significant share-price drop in 2022 onwards. While Croda recovered its costs, these impacts likely affected investor sentiment.
There’s also uncertainty surrounding the company’s new direction after selling its performance and industrial divisions. I think the investing public still feels sceptical of the company’s financial future.
My decision
I’d love to buy this company, and I likely will this Christmas or leading into 2024, just as soon as I’m confident I won’t need the initial investment amount for more pressing reasons over the next few years.
One of the ways I love to invest in a company is to put down a small amount first. £500 is a good amount to start with, in my opinion, but even £50 to test the waters works for me.
That way, I put some skin in the game and continue researching, building up a position in the companies I’m really convinced of over time.
At the very least, this one’s going on my watchlist.
