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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerStanley manufactures tools for professional, industrial, and consumer use, and has built a business model that's been successful for more than a hundred years. A security solutions unit accounts for about 20% of revenue, but the key revenue driver here is tools: hammers, screwdrivers, pliers, sockets, saws, and measuring instruments, among other products.
Stanley has endured due to the company's diversified product line, outstanding pricing framework (matching value to price), discipline regarding costs, and durability of its products. That, not surprisingly, has led to a superior brand reputation, which the company has adeptly marketed abroad: about 40% of sales are international-based. The Reuters F2007/F2008 EPS consensus estimates for SWK are $4.01 to $4.50.
What should one not expect from Stanley? Hyper-growth or large annual losses. Stanley is a prudent, cautious company dedicated to protecting shareholder value. SWK closed Monday down 6 cents to $57.56.
Stanley's shares have pulled-back in the past few months from $64, but view that drop as an opportunity to scoop up shares at a more-reasonable price to earnings ratio of 15. Further, look for SWK to continue to benefit from a still-strong international commercial construction market.
And just imagine if the U.S. housing market rebounds in 2008? True, that's getting a little ahead of ourselves.
[Note: Technical analysis agnostics stop reading here; all others continue.]
Technically, Stanley's chart looks adequate. The stock remains above its 200-day moving average and the summer pull-back appears to have been a healthy correction following SWK's gain from $42 to $64 during the past year.
Stock Analysis: Stanley Works is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from SWK's shares. A Sell / Stop Loss if one were to buy this stock of $39 looks good.
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