5 Reasons to Get a Whiff of Coty’s IPO

Bring up a name like Sally Hansen to any stodgy guy on Wall Street, and I�m guessing the reaction would be something along the lines of �Don�t know, don�t care.� But Sally Hansen — a nail polish brand, for those who don’t know — is a household name to many consumers and just one of countless popular brands owned by fragrance and cosmetics maker Coty.

Coty, by the way, just�announced a $700 million IPO.�Maybe�that will get the attention of the old guys on Wall Street. It definitely should.

5 One-Time IPO Stars Worth Considering

While IPOs still might be getting a bad rap from the Facebook (NASDAQ:FB) fiasco, Coty is looking strong. Here are five simple reasons you shouldn�t let this IPO pass under your nose. To start, the company is �

Everywhere

Just browse through some of its brands, and you’ll recognize products you see all the time: Rimmel cosmetics, OPI nail polish, Adidas fragrances, Calvin Klein cologne. Plus, enough celebrities have a fragrance line owned by Coty that laundry-listing them all would make you feel like�you�re reading TMZ, not�InvestorPlace.

I think you get the point. The company has its hands in every cookie jar, unlike a competitor like Revlon (NYSE:REV) that simply makes Revlon products. Boooring.

Coty can thus attract consumers from every demographic. And it�s not just a diversity of products, but a diversity of products that each has a mass market and that are all �

Established

Coty has been around for more than 100 years, since Fran�ois Coty started it in 1904. That incumbency also is comforting since it isn�t selling a new, hot technology (like, oh, I don�t know � Facebook) that could be in today and out tomorrow.

No, Coty keeps it simple. People need to spray on something to smell good, put on something to make their faces pretty and fancy up their nails to look presentable — demand for such products probably won�t dry up anytime soon.

Plus, Coty isn’t trapped in brick-and-mortar or relying on a gimmick like now-struggling Avon (NYSE:AVP) did with its door-to-door salesladies. It stays on the manufacturing end of it all. Even as retailing habits shift to buying more online, the company will continue to connect with customers by supplying online retail sites.

But at the same time, Coty also keeps �

Expanding

Don�t confuse established with stagnant, because Coty is never sitting still.

Here are a few numbers: Last year, Coty did $4.1 billion in sales — an 18% increase from $3.48 billion in 2010 — and for 2012, it expects to grow sales at least 10% year-over-year to a minimum of $4.5 billion, according to Reuters.

Coty also made a recent attempt to buy Avon — scratch that, two attempts. And that was coming off a busy 2010 that saw four acquisitions — Dr. Scheller Cosmetics, philosophy, OPI and TJoy — in a span of two months.

Diversity like Coty�s doesn�t happen overnight, though. Those purchases were on top of the countless others in the past century, including that of Del Labs and the global fragrance business of multinational giant Unilever (NYSE:UL).

I�d be surprised if the $700 million Coty expects to raise with its public offering isn�t used for more of the same, especially considering that CEO Bernd Beetz�s management philosophy is nothing other than �innovate or die.�

There�s more, though. The company also is …

Loaded with Loyalty5 One-Time IPO Stars Worth Considering

That�s just the culture of cosmetics. During a lunchtime conversation with friends the other day, the subject turned to what nail polish everyone uses. (I know, girl talk is riveting.) Not only did each person name a specific brand, but each one gave a specific reason about why that brand was best — price, quality, color, you get it.

Plus, the three brands named were all owned by Coty.

But if you don�t trust hearsay, trust this: The Brand Keys “Loyalty Leaders” report agreed that consumers don�t just stick with their favorite cosmetic brand, but do so even in a bad economy.

That�s because these products, even though they might seem like it, actually are �

Not a Luxury

I don�t care that Coty calls some of its products �prestige,� or that talk of its anticipated IPO often references the success of luxury companies like Michael Kors (NYSE:KORS) — which is up 80% since its recent IPO. Sure, that success is a good sign.

But Coty has a luxury feel without the same luxury status. See, cosmetics and fragrances are day-to-day requirements — no matter the price, no matter the economy — especially in a society as appearance-oriented and anti-aging as ours.

Just look at how Ulta (NASDAQ:ULTA), the salon and cosmetics company, has been faring: YTD returns are up 45% and three-year returns are up a whopping 800%!

That�s because, for women, beauty products are routine — oftentimes a necessity. And smelling good (which we can�t forget, since fragrances made up over half of Coty’s revenue last year) usually doesn�t get de-prioritized in a down year.

But that brings us full circle to the very first point: A variety of products also means a variety of price points. Even if a recession does force consumers to save some cash by choosing a new scent, there�s a pretty good chance those dollars still are going to the same place.

Well played, Coty.

The bottom line? This is a company with a strong foundation and popular brands in its corner that give it an edge — probably part of the reason Berkshire Hathaway�s (NYSE:BRK.A, BRK.B) Warren Buffett already owns a 7.5% stake, and definitely a reason to keep an eye out for its IPO.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.