In a sense, Stanley Works (NYSE:SWK) is a classic low-profile, solid performing stock. Stanley makes tools used by consumers and industry. Now when one thinks of tools, one thinks about the hip, cordless power variety. Black & Decker (NYSE:BDK) dominates that market, and cordless' next-generation features and sleek look makes them prime candidates for splashy coverage in papers like the The Wall Street Journal. Power tools are decidedly cool.
Stanley, which trades at about $54, makes the decidedly un-cool tools, like hammers, screwdrivers, pliers, saws, tape measures... in other words hardware for home improvement, consumer, industrial and professional use. And Stanley has been doing this for more than 160 years.
However, that's not to say that the power tool market is not a sizeable market. It is: analysts surveyed by Reuters expect Black & Decker to post revenue of $6.4 billion in 2007, outpacing the $4.3 billon expected for Stanley.
Nevertheless, despite this latest change to its market, Stanley has managed to adapt [it has several power tools of its own], endure, and prosper. It seems that despite prefabrication and other construction advances, the U.S. and the world will always need hammers, screwdrivers, pliers, saws, and tape measures.
And about the world: Stanley has positioned itself to benefit from solid-to-strong residential and commercial construction activity in the emerging markets in Asia and Eastern Europe. From a tools standpoint, these two regions represent vast, unsaturated markets capable of generating large sales increases and profits.
And Stanley's stock and earnings performance over the years? It has been as steady as those hammer and screwdriver sales. Stanley's stock has split 6 times since 1959, not including a 3% stock dividend in 1972, with 1996 being the last split. The company has paid at least an annual dividend for 129 consecutive years. And SWK's average annual return on equity over the past 39 years? 12%. Think about it: that's a 12% annual return for a period longer than a typical U.S. mortgage. That's a steady performance, indeed.
Investment Category: Stanley Works, a moderate-risk stock, is not suitable for low-risk investors and is about 30% levered to the global economy. A slowdown in global or U.S. growth would substantially lower SWK's revenue. With that as a backdrop, SWK, perhaps more than any other stock, has demonstrated that it can reward patient investors.
And Stanley's stock and earnings performance over the years? It has been as steady as those hammer and screwdriver sales. Stanley's stock has split 6 times since 1959, not including a 3% stock dividend in 1972, with 1996 being the last split. The company has paid at least an annual dividend for 129 consecutive years. And SWK's average annual return on equity over the past 39 years? 12%. Think about it: that's a 12% annual return for a period longer than a typical U.S. mortgage. That's a steady performance, indeed.
Investment Category: Stanley Works, a moderate-risk stock, is not suitable for low-risk investors and is about 30% levered to the global economy. A slowdown in global or U.S. growth would substantially lower SWK's revenue. With that as a backdrop, SWK, perhaps more than any other stock, has demonstrated that it can reward patient investors.
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