|06-18-2011, 08:42 PM||#1|
Join Date: May 2011
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Growth Stocks to Invest in After Market is Done Correcting
Now it is time to start to analyze what we want to buy for once the bottom comes in. I know CNBC has people talking about a double dip and Greece default leading to a domino reaction, however, I do think we will have a very bad future if we do not figure out our global debt issues; however, I do not think it will be this year. I think the market will shrug all this off and by fall start to rise again. When this happens I am going to be ready with a bunch of dry powder and I will advise you to do the same.
Three companies that I think will be well positioned for the next bull market uptrend are Deckers Outdoors, Under Armour, and Green Mountain Coffee Roasters. All three of these stocks are high secular growth plays that are still fairly small in their own right and have a lot of upside potential with strong management. Another reason I am highlighting these three are that in my opinion they all are strategically placed for a buyout at a high premium. Let's look at these companies.
Decker's Outdoors is basically a shoe company with a market cap of roughly $3.5 Billion. They have almost $500 million of cash and zero debt on their balance sheet. They are the maker of the UGG shoe and boot that just about every teenage to 50 year old female has at least one pair of. They are very comfortable and stylish and this product alone has given the company some unbelievable growth over the last couple of years. The company makes all other types of shoes and sandals as well like the Teva brand, but this UGG brand has been their cash cow. Unfortunately, I was late to the party with this one and did not get in on the early days and make good money like others. Now even with all of this company's growth, it is only trading at at P/E of 19 with a growth rate around 40%. That is dirt cheap. When the cooler weather arrives and the new product lines come out, this company will be 50% higher than it is now. With its lower market cap, there are many companies that could come in and purchase them right now. VF Corp would be a prime acquirer even after their purchase of Timberland. They are just recently starting to gain traction outside the US market which also could mean more accelerated growth.
Under Armour is the next company that I want to point out. This company is running on all cylinders. They have a great marketing department as we see their commercials during the football season and everyone knows them. The company also has a very small market cap of $3.5 Billion and is ripe for someone to buy them up. The company does not have the same flawless fundamentals as Decker's but still quite good. Their PEG ratio is not as attractive on paper today, and they only have about 100 million in cash on their balance sheet with a minimal 13 million of debt. They are still growing pretty rapidly with a bunch of new investments into new product lines that are starting out really well. If they take off half as well as management thinks they will they will have great growth for years to come. A company like NIKEcould very easily come in and pay all cash for these guys with a very hefty premium which would give them a massive market share in the athletic apparel market. There would also be many scalable operations so could drastically reduce the cost of the acquisition in savings.
The last company I want to put on everyone's radar is Green Mountain Coffee Roasters. This stock is one that I have been involved in for years now and made a killing on well over a ten bagger. I still am long this stock and I think it still has a lot of upside. It is the biggest company of the three with a market cap of $11 billion. However, this company is more of a monopoly than any of the others I listed. GMCR makes the Keurig brewing system and has the patents on the single K-cup coffee that everyone loves. I have not heard one person that does not love this system as there is no waste, each K-cup pours 1 perfect cup quickly and the coffee tastes really good. The company still really has not left the North America market and has so much upside potential. Of the three companies, this one has the most debt but it is getting ready for expansion. It also has the highest growth rates out of these three. Starbucks recently partnered with them to put them into their stores as well as create K-cups for the Starbucks coffee, a true win/win for both companies and the stock jumped 40% after that announcement. I still think that they could be bought, either by Starbucks, or buy a Coca-Cola or even a McDonalds. This company has made me the most money out of anything over the last 5 years and the only stock I never fully closed out of the position even during the 2009 lows.
So with that analysis I really want all of you investors to start to think about how to stay ahead of the market and what to buy when we start going back up. Stocks like the three I suggested have the strategic ability to be purchased, but more importantly have fundamentals that will make the stock prices rise a bunch even if they do not get acquired!
Have a great weekend and Happy Father's Day to all the dads out there!
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