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Market Overview

Avon Getting A Facelift


Avon's JungSince our last article on Avon (NYSE: AVP), its stock had been languishing as we believed that losers would be sold towards the end of the year. Avon had been one of the biggest losers this year, having lost almost half of its value in 2011.

Apparently the board of Avon finally wakes up to this, and a facelift is warranted to re-energize this once great company. After market closed on Tuesday, the company announced that it will start a search for a new CEO, while its long time leader and CEO, Andrea Jung, also a director of Apple (NASDAQ: AAPL), will be remaining as both chairwoman and CEO in the mean time, and will remain chairwoman thereafter. This appointment for a facelift is greeted by the street as Avon's stock rose >6% in after-hours trading - even though there's no certainty when the new CEO will come, and who that person might be.

Under Ms. Jung's longtime leadership Avon has stalled, and there's no strategic path for growth. New leadership can potentially reinvigorate the company, and give a shot to its stock. However, we believe it would be better if Ms. Jung gets completely out of the picture and gives the new CEO and management a chance to freely restructure the company. With the statement from the company that Ms. Jung would remain chairwoman afterwards, it remains to be seen who will be brought in as CEO, and how it will go from there.

While we believe that Avon's stock has a good chance to recoup its loss in the past year, the uncertainly is keeping us from holding its stock for long term investment. The best way to play a turn-around on Avon, we believe, is still a LEAP with the stock. Investors should look into the 2014 Jan $20 Call and 2014 Jan $20 Call to give plenty of time to see the results of a facelift of Avon.


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