Yesterday I put out a call for readers to share their picks. Calling all stock pickers - what stocks do you like now? I got some very good items to discuss further. Since I am a value investor the discussion will favor value over growth for the most part. However, It can be argued, and frequently is, that the best growth plays are also value plays of a different order. It is just harder to make the case. I have listed the readers comment followed by my thoughts.
- John: Garmin LTD (NASDAQ: GRMN). Currently hitting all time highs but the growth prospects and cashflow of this stock are too good to ignore!
Looking at a true growth stock, John makes some valid comments, and like many successful companies it is hard to know when to get in, if at all, given the risk versus reward scenario. Garmin is a world leader in GPS navigation systems and is constantly improving it's product quality, expanding the product line and competitive pricing. My first thought is that I would not buy anything at it's all time high. Last night it closed at $104.45 and as I write this morning it has reached a new intraday and all time high of $107.92. Looking at the fundamentals, GRMN has very strong metrics. It's ROE, ROA and ROI are all over 30. It pays a dividend and has no debt. It has high gross margins and high net margins of 29%. So what's not to like?
It has a very high price-to-book and price-to-sales, the former mattering less than the latter. Price-to-sales is very important, but if you believe earnings and growth estimates for next year than perhaps this figure, now about 7.0, will come down rapidly. I like this pick as an addition to everyones watch list but I'm not a buyer at this point for two reasons.
First, it is a tech stock and may slip at some point if someone else is able to leapfrog it's technology. If you do not believe this is possible you should follow Israeli start-ups that are looking to leap frog everything. I have not located a specific example yet but its always a threat. Second ,and valid for anyone ready to buy in now, is that at some point you will be able to buy this stock off it's high.
Nothing goes straight up. I say this as an early investor in Intuitive Surgical, Inc. (NASDAQ: ISRG) knowing that this company which I acquired at $7.70 and is now trading around $225, offered plenty of opportunities to jump in along the way. When this happens again I will probably increase my position. Patience is most often rewarded.
Read Chasing Value or Serious Money to find potential opportunities, and to verify my track record, as well.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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Reader Comments (Page 1 of 1)
9-05-2007 @ 11:40PM
wmpopper said...
Thank you for another important reminder...not buying at highest price points, exercising patience and calm.