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Bic: A Defensive Play For The Enterprising Investor

Founded in Paris by flamboyant baron Marcel Bich seventy years ago, Société Bic designs, manufactures and markets pens, lighters, and razors in 160 countries.

Seven decades after its inception, the company claims a share the aggregate of half of the lighters market, a fifth of the disposable razors market — trailing Gilette — and a tenth of the highly fragmented stationery market — all worldwide figures.

Every day, eight million Bic products are sold. In the Americas, two of three lighters in circulation are Bic made. A fifth of the ballpoints and correction fluids in use over the five continents has been manufactured by Bic or one of its subsidiaries.

The company sold up to 120 billion ballpoints since its organization — in ink, an equivalent of the distance from Mercury to Pluto. The brand’s flagship writing instrument, the Cystal — 5.8 grams in weight, 2 miles in writing — is for decades the best-selling pen worldwide.

Indispensable, thus fashionable: the byword would appropriately symbolize the company’s products. The three segments — stationery products, lighters, and razors — account for 80% of sales and record increasing production volumes in each of the past consecutive fifty years.

The brand has also ventured in diverse kinds of creative undertakings such as promotional products, windsurfing boards, fuel cells, and barbecues. The sum of these subordinate enterprises accounts for the remaining fifth of the business.

Yesterday the chief vectors of success in the West and in Japan, today the distinctive, economic, and essential products Bic designs prompt an expanding demand from emerging markets. The latter already represent a third of the revenue and notably yield a double-digit growth in the razor segment.

The company defends an immaculate, debt-free balance sheet. Its prudent expansion strategy coupled with a strong consumer appeal account for the steady gain of global market share, whereas a great deal of its competitors have seen their sales tumble or stagnate with the recession.

(earnings per share)

2003: €1,99
2004: €2,15
2005: €3,10
2006: €3,41
2007: €3,50
2008: €3,01
2009: €3,14
2010: €4,29
2011: €4,95

Still largely owned by the Bich family (40%), the company is ably led by Mario Guevara, a former regional executive who worked his way up to the CEO position in 2006, and has done a superb job at streamlining operating expenses.

Backed by a sheltered financial position, Bic resembles a great franchise fit to profit from fairly predictable perspectives in the fast moving consumer goods industry. Yet at €65 a share, favorable prospects are apparently regarded as something to look for but not to pay for.

A purchase of the common stock thus appears to entail a thoughtful defensive play for the enterprising investor, should these two be compatible.

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