Clorox has ‘found a bottom,’ Morgan Stanley’s Aaron Dunn says
Some often ignored areas of the market could see some gains ahead, Aaron Dunn, co-head of value equity at Morgan Stanley Investment Management. Dunn joined CNBC’s “Power Check” on Friday to give his bullish take on a couple stocks he views as ripe for the picking. Take a look at the names below: Clorox Clorox is a great add-on for a balanced portfolio, Dunn said. Shares of the consumer products maker are down more than 24% this year. Last month, Clorox predicted a greater drop in its annual sales and profit than originally expected. But the stock has fallen alongside a broader drop in the consumer staples sector. Consumer staples now contributes to just 5% of the S & P 500, the lowest level since the tech bubble of the early 2000s, Dunn said. “This is a company that’s great at innovation,” Dunn said. “It looks relatively inexpensive. It’s a defensive company that also doesn’t have the food deflation issue that we think a lot of other staples are going to have. So that’s one where we think it’s found a bottom. … Where we think there’s not a lot of downside to it, and a lot of upside optionality and potential relative outperformance should the market roll over from all time highs.” Dunn noted Clorox is in the midst of a five-year effort to improve its supply chain and inventory management that began in fiscal 2022, and included a new enterprise resource planning (ERP) system. Steel Dynamics Steel Dynamics is a strong play on an industry that’s set to grow due to the protections of steel producers through the Section 232 tariffs, according to Dunn. “We believe that if construction comes back, infrastructure spending starts to get a little better, CEO confidence gets better, they loosen the purse strings, that there’s a lot of projects out there that need steel. And we believe that the demand for steel is going to reaccelerate,” Dunn said. “If that’s the case, Steel Dynamics, that’s a low cost variable producer, is going to be fantastically positioned.” Dunn also appreciates that the company has been buying back its stock. Over the past four years, Steel Dynamics has purchased 25% of its outstanding shares, he said. “We think this sets up again for another situation where they’re really returning cash to shareholders. Looks very interesting to us,” he said. The stock has gained 10.8% year to date.
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