Guys: Buy What You Know - Investment Ideas
June 29 2011 - 8:00PM
Zacks
When it comes to investing, we often opt for stocks we know. Ones
we understand and most often those are the companies that we use
regularly.
Why That's a Good Thing
A big part of choosing good stocks is a consistent demand for
their products. They also have to be profitable of course, but the
first step is knowing where that top line on the balance sheet
actually comes from.
Figuring out which drugs are getting FDA approval or which
complex technological advancement will take hold is something that
most can't even start to figure out.
But, when we look to our everyday lives and the purchase we and
our friends make, trends are easier to see.
Where it Can Hurt You
Easily, the biggest pitfall of investing in your favorite
companies though, is getting married to them. Brand loyalty runs
deep, but as long as you can recognize that your affinity for
buffalo wings may not be shared by everyone or that even if it is,
the company can mismanage itself into the ground, you will be
okay.
Investing like a Guy
So, as a cursory look, I took a look at what I'm doing on a day
to day basis and wondered; which of these companies that I
patronize could be viable investments?
While my girlfriend may not like it, I love my Harley
Davidson (HOG) motor cycle. They have arguably the most loyal
customer base in the world, but they can be polarizing even amongst
the riding community. As an investment goes, I like the idea of
having this stock but I'll hold off for now. Estimates are
inconsistent, valuations are expensive and they have a highly
discretionary product.
But some things I do like could be great additions to a
portfolio and would be easy for me to root for.
Feeding Frenzy
Who doesn't like donuts? Krispy Kreme (KKD) has been an
investor’s dream lately. Shares are currently a Zacks #1 Rank
(Strong Buy) thanks to sharply rising estimates.
Full-year estimates are averaging $0.31 this year, which is more
than 150% the year prior. Next year analysts are looking for $0.40,
another 32 percentage points of growth. While the P/E of 32 times
looks high, factor in the long-term growth rate and you get a PEG
of just 0.6, which is a great value.
And, the growth is easy to see. Yes, the nation getting more
health conscious, but the company is expected to ramp up its
beverage offerings, a high-margin product. For a comparison,
competitor Dunkin Donuts gets about half its revenue from coffee.
Even if KKD doesn’t get its coffee sales that high, beverages
should still give their bottom line a huge boost.
I alluded to my affinity for wings earlier and right now
Buffalo Wild Wings (BWLD) is a Zacks #2 Rank (Buy). It
doesn’t look as enticing at KKD, but definitely worth looking into
with growth rates of 20% or better for the next 2 years. And
estimates are still inching higher.
Burn Off the Calories
In order to eat all that junk food, a guy's gotta work some of
the extra calories off. Whatever method you choose, running,
basketball or other sports you are going to need some gear. Foot
Locker (FL) analysts are expecting the athletic retailer to
grow 40% this year and another 13% next year. The P/E is near 14
times, so you won't need to break the bank for the stock.
Heading Outdoors
I'm heading to Wisconsin to do some fishing over the 4th of July
weekend and while there is some overlap with FL, Dick's Sporting
Goods (DKS) also offers fishing, camping and other products for
outdoor recession.
Shares are a Zacks #3 Rank (Hold) right now, but estimates are
still moving up. Expected growth rates for the next 2 years are in
the upper teens and the stock trades with a PEG ratio of 1.2
times.
But That's Just Me
These stocks make sense to me, but we all lead different lives.
So, take a look at what you do. Where you spend your money. And
follow your greenbacks to potentially profitable additions to your
portfolio. Just don't go falling in love with them until you dig
into the financials.
Bill Wilton is the Aggressive Growth Stock Strategist for
Zacks.com. He is also the Editor in charge of the Zacks Small Cap
Trader service
BUFFALO WLD WNG (BWLD): Free Stock Analysis Report
DICKS SPRTG GDS (DKS): Free Stock Analysis Report
FOOT LOCKER INC (FL): Free Stock Analysis Report
HARLEY-DAVIDSON (HOG): Free Stock Analysis Report
KRISPY KREME (KKD): Free Stock Analysis Report
Zacks Investment Research
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