Mention Graco and most people start thinking about baby strollers. If you've ever confused Graco Inc. (NYSE: GGG) with the company that manufactures those baby strollers, join the club! I actually developed an interest in the baby stroller company by following Peter Lynch's principle of "investing in what you know." Graco baby strollers are everywhere and they're made of high quality materials, thus prompting my interest.I thought to myself -- if the troops in the middle east ever come back from their tour of duty, historical statistics show that there should be a boom in new baby births right after a war ends. The population explosion of the last century may not have been possible without the two world wars. Foolishly, I looked up the stroller company but instead, found one of the world's premier manufacturers of fluid-handling equipment and systems.
A WW II, P-35 pilot once said that "it's better to be lucky than good." In this case, I was lucky enough to stumble upon a company that has an excellent history of generating growth and dividend increases. Net income figures have steadily increased over the years. Graco Inc. also has a good history of buying back stock and issuing very little debt for operational purposes.
I love stocks that are boring but steady-eddies and Graco could be as boring and as steady as they come. Blogging Stocks has no mention of Graco previous to this article besides a quick blurb on a Jim Cramer article. Ratio comparisons portray Graco as a best-of-breed company among its industry peers. Return figures on assets and equity are spectacular above its peers. However, Graco Inc. cannot be considered undervalued, which makes it a curious holding in my portfolio as of this writing. I usually buy companies trading at a discount, but found Graco's historical and current financials surprisingly attractive. Especially for a company that wasn't my initial interest!
My personal portfolio/stock watch list often doesn't overlap with Blogging Stocks coverage, but I want to make clear that this is not an endorsement for you to purchase stock. The last thing I need is speculators ruining a good thing (for me). Nothing should replace your own due diligence.
What happened to my initial interest, the baby stroller company? Graco Children's Products is a subsidiary of the bigger Newell Rubbermaid company. I decided that my investment thesis to invest in baby strollers didn't warrant my investment into a more complex conglomerate.
And the point of this post? If even one person is able to gain clarity about the two different Gracos, this article will have served its purpose.
[I own Graco shares as of 11/21/2006]
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Reader Comments (Page 1 of 1)
11-21-2006 @ 2:03PM
sarah gilbert said...
Great post Vince! I, too, have confused the two, even though I should know better: I did a raft of acquisition pitches for Newell Rubbermaid when I was in the i-banking business. I agree, Newell Rubbermaid is a messy mix of stuff that doesn't have a clear unifying theme. And although most of my strollers are Graco I got at least 2/3 of them as hand-me-downs!
Hmm... I really haven't paid much attention to GGG though. I guess I'll have to investigate!