‘Everything can be fixed by either duct tape or WD40: If it doesn’t move and it should, use WD-40. If it shouldn’t move and it does, use duct tape’
As I probably know a little bit more about investing rather than home DIY I would not take the above popular quote as gospel… but it does indicate how the famous household product has entered the popular consciousness.
With my finance geek hat back on again, the other aspect I really like about WD-40 as a company is that they report early in the global quarterly earnings cycle. As a company that sells its eponymous product all around the world to consumers and businesses alike, it also provides some great insights into the big, bad, global world out there.
So what did their results out after the American market close on 6 April say? The first insight is that Asia is growing quicker than any other part of the world, while Europe is getting a bit better versus a year ago and the Americas are decidedly mixed. Maybe no surprise about Asia, but again the positive vibes about Europe are very striking.
Of course, regular readers of this column will not be particularly surprised by this. However, more useful than a sole voice agitating into the wind, were the most recent global fund flow statistics which showed that western European stocks enjoyed their largest two-week inflow in more than a year. Meanwhile, the US saw the largest weekly outflow since September 2015. That sounds to me as if keeping up your European investments makes perfect sense… and Asia remains strong.
Back to WD-40. They made another fascinating comment about Europe and that was the impact of the falling British pound. The company loved this shift of the UK currency as more of their costs are in sterling than actual sales, so overall it was a real positive for them. To put it into context, the overall increase in WD-40 gross margins were up by a single percentage point but looking at just the foreign exchange benefits primarily from the fall in the pound accounted for a positive 1.6 percentage points. Yes, the fall in the pound even for a company like WD-40 has been huge. For me this shows again that sterling is just too cheap and has just fallen too far. Don’t buy your foreign holiday currency yet… the pound is going to recover.
But not all is fine and dandy. WD-40 did cut their sales growth target for 2017. And the reason for this? Flat America sales and very mixed trading in Latin America with Mexico getting a particularly negative call-out. That does not sound too much to me as America is effortlessly becoming great again. With those lousy auto sales and falling second hand car sale prices crimping sentiment I just cannot see the US Federal Reserve raising interest rates much more in 2017 – and certainly not the three or four times that most analysts baked in at the start of the year. Given the not flawless backdrop, expect President Trump to conclude his inaugural face-to-face chat with President Xi in a workmanlike and positive manner. There are few incentives to blow up global trade right here, right now.
One final point from the WD-40 numbers. One area that is still working for them is innovation. Yes, the company is much more than just a basic spray can of the famous liquid. Be it ‘EZ-reach’, ‘non-aerosol’, ‘Big Blast’ or new products for bikes, product innovation was dubbed as a clear positive for sales. Even with a famous global product like WDD-40 you cannot rest on your laurels and you have to keep innovating. A very good attribute to look for in any company that you are potentially investing into.
And you thought that WD-40 was just a handy product to have around the house.
Chris Bailey has over 20 years of investment industry experience at long-only and long-short institutions as a global multi-asset fund manager, strategist/macro thinker and, in the earlier part of his career, as a securities and fund analyst.
In 2013 he founded Financial Orbit focusing on daily macroeconomic comment and securities analysis. In December 2016 his Twitter account (@financial_orbit) was named as one of the ’50 accounts investors should follow in 2017’.
The content on this page does not constitute financial advice and is provided for general information purposes only. Nothing on this page should be regarded as an offer to conduct investment business or to buy/sell any investment