COTY: Investors Overly Discounting Uncertainty Of A Stable Franchise In Transition

Christopher Karlin presented his in-depth investment thesis on COTY (NYSE: COTY) at Best Ideas 2017.

COTY manufactures and sells beauty products including fragrance, cosmetics, and hair products. Coty exhibits the investment characteristics of a spinoff. On October 1, 2016, Coty doubled in size through the acquisition of Procter & Gamble’s beauty business. The opportunity exists over the next few years not only for significant cost reduction, but also to establish a scale operator that can drive revenue growth. The stock has sold off sharply over the last four months due to three factors: trading disruption around the close of the deal, concerns about revenue growth and investment, and a market rotation away from consumer staples stocks. With base upside 53% to $28 and reasonable downside of -13% to $16 over a two-year horizon, COTY has a highly asymmetric reward-to- risk ratio greater than 4:1. Chris believes that at the current price, COTY offers a reasonable reward-to- risk proposition with modest downside.

About the instructor:

Christopher Karlin has been in the investment business since 1991. Prior to founding Aquitania Capital Management in 2012, Christopher held positions as a Research Analyst and Portfolio Manager at First Pacific Advisors, Kestrel Investment Management and Fairview Capital Investment Management. Christopher interned with Farallon Capital Management while pursuing his MBA. He began his career with Wells Fargo Nikko Investment Advisors which later became a part of Blackrock. Christopher received his BBA from the University of Wisconsin in 1990 his MBA from Yale University in 1998 and has held the CFA designation since 1994.

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