Full speed for General Motors

I am excited about the prospects for General Motors (GM) as a great stock for long-term investment. I see several of its divisions powering ahead with all cylinders running. And consumers are paying attention. I will be covering the different signs I am seeing about GM getting it right in a series of postings, just because there is much going on and much to discuss. I can’t avoid drawing a historical analogy to 1941: it seems that the relentless expansion from Japan’s Toyota may have finally awakened a sleeping giant.

To start this series of posting, let’s focus on GM’s efforts in the top end of the market, the luxury segment, where its lunch has been eaten for way too long by European, and moreover in recent years, by the Japanese offers represented by Infiniti, Acura and the indisputable leader, Lexus. A few years ago, Cadillac initiated an extremely well orchestrated effort to revive a brand that at that time, in the mind of the consumers, only stood for 30-mile-per-hour seasoned seniors indulging in their golden years. A complete re-design of Cadillac’s line and an energetic, cool campaign started changing those perceptions. The effort reached its pinnacle with the launch of the Cadillac Escalade, that immediately became the gold standard for SUV opulence and coolness among the young crowd -by the way, quickly displacing the then heavyweight champion, the Lincoln Navigator-. GM continues to support the brand, and the latest campaign around the Cadillac CTS is the best yet. It is great how, in its commercials, the perfectly targeted spokespersons, exuding a cool, unpretentious confidence, go in a rather matter-of-factly way over the features of the car. Yes, they are the features to be expected from a luxury car… but the difference in Cadillac, what is really important is that when you turn the car on… it will return the favor. This is a brilliant, insightful, and totally relevant way to speak to the affluent young professionals in their own language. What is most impressive is how compelling and personal the message is, and how precise it is at capturing the sensual nature of the pleasure associated with driving a powerful and luxurious car. GM dismisses the conventional and undifferentiating car talk, which everyone else claims time and time again –yeah, yeah, exciting, exhilarating… ho-hum-, and engages the luxury consumers in a peer-to-peer dialogue, reaching deep inside at their truest emotions and desires. The message is targeting the soul, not the brain. The campaign is superbly produced and the talent is spot on for the message. I can only see Cadillac comfortably expanding the space it occupies in the luxury segment. And that is high-octane fuel for GM’s growth.

Java energy, Monster profits

When driving by a gas station the other day, I saw a sign announcing the latest hit on one of the most amazing success stories in the last years. Hansen Naturals (HANS) has been riding wild on the base of its very successful line of energy drinks, Monster. The sign that I saw advertised the latest addition to their Monster product range: Java Monster. In my view, a stroke of pure genious. Energy drinks as a category has seen double-digit growth in the last years, ever since Red Bull was introduced in the US several years ago. Hansen Naturals was able to take the lead in the category through a shrewd mix of great, cutting-edge products, aggressive distribution, and a vigorous line-extension strategy. Much has been said about Hansen Naturals and the wild increase in its share price. Many have questioned its valuation. The stock reached an all-time high north of $68 in early November, just to fall back to around $40 after what some considered a soft quarter. Yet, the share price has recovered to $49 in just a few weeks. The growth story behind Hansen Naturals is far from over. This latest introduction of Java Monster is just one more indicator of the firm grip the management has on its consumers' trends and lifestyles. Uniting two of the most relevant staples in today's Gen-Yers (energy drinks and coffee) in one product is quite smart, and as mentioned, it only demonstrates that Hansen Naturals is way capable of keeping its finger in the pulse of this important segment, and that it has the creativity and the executional drive to decisively act on the insights. As long as Monster continues to show such a proactive and vibrant vitality, profits will folow. And so far, it seems there is plenty of energy behind Monster.

Fat profits with Alli

Glaxo SmithKline (GSK) has recently launched a new weight loss drug named Alli. Alli is more than a drug: GSK has designed a whole program around Alli, and in a very honest way, warns the public that losing weight with Alli requires discipline and commitment. This is, for me, the key to its incipient success. Obesity is a serious pandemic in America, and consumers are worried about their weight. But they are exposed to a constant barrage of weight loss products offerings of dubious procedence and even more questionable effectiveness; products that offer magic formulas to lose weight while you keep eating like a Roman emperor and spend your weekends watching TV in the comfort of your couch. A combination of skepticism and desperation grasp over-weight consumers who know they need help, yet feel they are victims of unscrupulous scammers who prey on their weakness: what to believe? Who to trust?. So, when a reputable, Big Pharma company like Glaxo SmithKline finally comes to the rescue and launches a weight loss program, consumer will listen... and buy. This a serious Company that can be trusted. GSK has launched Alli in a quite vigorous way, and it's diffcult to miss their very well done TV commercials and their aisle displays at key retailers like Wal-Mart and Walgreens. Awareness of the new proposition must be high, and I assume some robust trial has ensued. I think Alli is a great initiative from GSK; in my view, this business will turn into a gold mine for this Company.

At $53, GSK share price is a little depressed right now as collateral damage of the sub-prime-driven market turmoil. It looks like a good opportunity to fatten up your portfolio.

Disclosure: I own shares of Glaxo SmithKline

Coke is it!

I used to be an avid Pepsi drinker. For me, Coke was a fairly standard, no-frills kind of drink. However, during the last couple of years I've seen with growing admiration the dramatic push The Coca-Cola Company (KO) is making in terms of innovation and outstanding product quality. First it was Coke Zero. Although skeptical at the beginning, it took me a couple of months to try this product; I mean, what could be so different from Pepsi One, anyway? Boy, was it different!! The first taste made me a convert. What a product!! Refreshing, flavorful and yet quite light. This successful introduction was followed by Coke's latest brilliant moves: the launch of Diet Coke Plus -Diet Coke with added vitamins and minerals-, and the acquisition of Glaceau, the manufacturer of the wildly successful VitaminWater line. Both initiatives strongly position the company to fully leverage the already robust -and still growing- consumers demand for healthier, balanced products that support their quest for overall well-being. In the best tradition of a consumer goods leader, Coca-Cola is strongly supporting both products with integrated marketing campaigns across several mediums. Perhaps the best example of advertising at work is VitaminWater. After just a few weeks of closing the Glaceau deal, Coca-Cola launched a vibrant, massive multi-media campaign to support VitaminWater, reinforcing its positioning as a hip, alternative brand for the in-crowd.

All this activity has not gone unnoticed in Wall Street. Coca-Cola share price has increased from around $44 in October 2006 to $54 in late August. While at 24 times trailing earnings the stock is not exactly cheap by historical standards at this point, I think Coke's portfolio strategy is definitely working. The Company is asserting its leadership position in the beverage market through a demonstrated understanding of what the consumers want and, most importanttly, where they are going in terms of priorities and needs. Growth at Coke can only bubble up.