Blending the perfect concoction of fun and profitability Diageo remains the perfect play for our questionable economy. When a recession comes through in any shape or form consumers want to cut back, have to cut back, and in some cases, must cut back. Luckily for Diageo, these consumers that now battle the masses at Walmart instead of shopping for premium products at Whole Foods still get drunk to drown their sorrows. Not often does one come across a company that has an established presence and still exhibits growth. As the premium public traded company in the booze industry, Diageo will do nothing but raise the spirits of your portfolio.
The reasons I feel this brand stands out compared to the others in the sector is Diageo’s all encompassing list of brands. No matter if we see an uptick in Vodka sales or that of Scotch, Diageo has set themselves up to make money off of the drinking public. Not only that, but if we see trends switch to supporting that of beer or liquor, Diageo still has the ability to profit from the ever-changing consumer. Few companies put out the same quality products year in and year out like Diageo. Johnnie Walker, one of their premium scotch beverages, has been around for over 200 years. When I take a look around the stock market, I don’t find many companies that can advertise such a rich history as one of their strengths. As goes with their rich brand history, brand loyalty is prevalent as well and was a key strength during the recent financial crisis.
Looking back at this giant company of sin, we see a company ripe for the future. Having made it through the financial crisis on the backs of their brand loyalty, they sit tall upon their intoxicated throne. Their desire to reinvent and continue to improve on their business stands out. Just take a look at another one of their premium liquor brands, Ciroc. Ciroc differs from other premium vodkas because it is derived from grapes rather than methods of yore. Though Diageo stands on the back of its established brands – doing so smartly – their ability to innovate shows their long term potential by not allowing their liquor brand book to stagnate.
However you wish to break down Diageo, nothing but quality emerges. As their recent earnings release showed, they are taking the emerging markets by storm. So be it through building new brands through innovation or relying on past success, Diageo is one of the best Sunday Fundays thus far.
What is Sunday Funday?
Photo by woolenium
First off, welcome back to another installment of Sunday Funday, where I, Young Gun pick a fun oriented weekend stock ripe with potential. Over the past few years we have seen weakness in the consumer when it comes to dining in and out (excluding fast food, who benefited heavily from the trends of late). More recently, as the economy has stabilized over the past few years, dining has stabilized as well. OpenTable has had a short but troubled history, giving investors an initial great ride, then leaving them to the hungry wolves. Today, the company sits among the new tech comers as an established company. Investors are comfortable with the ins and outs of the reservation giant, ensuring that they will prevail in the future.
The competition “bears” a majority of the negativity when it comes to Opentable. Observing the argument, I see the competition merely nipping at the heels of a giant. There is a fear that Google may take on OpenTable, yes this is a possibility. Google, the king of technology, focuses on having its feet in every body of water, rather than having the control of the biggest piece of ocean. In simpler terms, Google is expected by investors to delve into every technology market, even if it is not going to be the leader. Obviously Google is a giant not to be taken lately, but when you take a look at the growing market OpenTable has capitalized on, the competition should be more fearing this established and growing company.
As a firm believer in the “new” technology sector, I believe this company embodies all that the future holds. OpenTable allows its users to not only be lazy, but avoids the phone calls and the challenges of making reservations. Having both risen and fallen significantly over the past few years, it allows investors to have access to the new and sleek technology space without as much of the ridiculous price action as these new tech companies that have come public in recent months. OpenTable may just be the perfect combination of growth and valuation in a sector that seems unbending through the fluctuations in the amount of diners.
I prefer to point out companies before they pop 15%, obviously that did not happen. The above article has been in my Sunday Funday queue for quite some time, but with the recent destruction we have seen in the technology sector, I thought it best to avoid talking up any technology based company before they prove their merit through quartely results. Refer to On This Applelicious Day, Reminding You Investing Is Not Gambling for a more detailed analysis of why to wait until after earnings to put money to work.
What is Sunday Funday?
Who doesn’t enjoy a fattening donuts on the weekend? Probably those of you who have a ridiculous diet and wake up to a juice shake. More power to those of you that take your health too seriously, me and the majority of Americans will continue to enjoy our sugary morning wake up call. Haven’t you heard, “American Runs on Dunkin’?” Though the previous statement is merely an advertising campaign, the truth reverberates throughout the catchy phrase. American prides itself on its addiction to caffeine, in turn the profits of many companies are contrived from an American enjoying a cup of joe and a breakfast pastry. Dunkin’ still is quite new to the trading block, but has served those who believed in the story well thus far. With its growth potential in the western United States, it will likely continue to do well for investors.
With huge growth opportunities, America seems to be running westward with Dunkin’. As a frequenter of these fine establishments, I see where the desire and growth both sit. The high P/E ratio lends itself to be a growth stock, which it obviously is. As I spoke of in a recent post, betting on the American coffee and breakfast market has proven itself successful in the past and will prove itself into the future. With a lower price point than other meals, Americans are more likely to spend on breakfast than lunch or dinner. As we see the economy faltering and Americans pinching pennies again, a breakfast treat will continue to be the choice of many as they pack a lunch and make dinner at home. Look at the success McDonald’s has had capturing the breakfast market and imagine the continued success a company like Dunkin’ can have, as it is symbolic of breakfast. As long as Dunkin’ performs like it did last quarter, this will continue to be a great company to be behind. Either way you cut this donut, looking at it from a growth perspective or brand recognition, Dunkin’ repeatedly keeps the masses coming back for the next vanilla creme filled donut.
What is Sunday Funday?
Retail remains a troubling sector, leaving many investors stumped when attempting to pick the best-in-breed company. The key to success in retail has always been to build a following that can not be shaken by economic conditions, by creating a cult like following of shoppers that refuse to take their money elsewhere. Cabelas undoubtedly has a set of hardcore followers, both online and in the retail store setting. By being the premiere outdoor outfitter they have found a unique niche and by continually providing for their specialized set of followers, they have seen enormous success.
What I love most about Cabela’s is unquestionably their room for growth. Investors do not have access to many retailers that have as much room to grow as Cabela’s. Compare them to a giant like Dick’s Sporting Goods, though these two entities serve somewhat of a different populous, the store totals differ substantially. For example Dick’s Sporting Goods have almost 500 stores while Cabela’s boasts almost 40. From my point of view this can be taken as a plus with huge potential for growth. Though Dick’s serves a wider range of sporting enthusiast Cabela’s has the distinctive retail offerings that Dick’s just cannot compete with. Therefore, both these entities can exist in the same market, suggesting that Cabela’s could grow their reach by hundreds of stores.
The way in which Cabela’s played the recent economic turmoil was by the playbook. When times were tough they adjusted both margins and ad revenues accordingly, looking after their core consumer. As times improve, which they have as of late, they are adjusting margins accordingly and spending more on advertisements to bring in new customers. The financial arm of this retail giant was once a burden, but as we see the populace better manage their credit card debt, this element of the business will only set to strengthen.
With Cabela’s quality offering of outdoor goods, demand for their products, and room to go, this may just be one of the better retail plays for the future.
What is Sunday Funday?
Photo by RiverRatt3
In the spirit of this hot southern summer weekend one cannot help think about being out on the water. One of the necessities for any boater comes in the form of a GPS. Even though many see Garmin as a dead company, those fools overlook the potential of the many other aspects of their company. Garmin does not merely make automobile GPS, though this is a major portion of their earnings, around 50% to be exact. The Garmin earnings sheet also consist of outdoor, fitness, marine, and aviation.
I see the most potential in both the avenues of marine and aviation for one simple reason, potential. Both these portions of the Garmin company are geared up to make moves. These are both discretionary spending items, no question, just like automobile GPS systems. Though, automobile GPS are a dying breed being replaced by the boatload of smartphones being sold. When it comes to boating and flying GPS are not an accessory but rather a necessity that will no time in the near future be replaced. As we see Americans go back aggressively to spending on high end pastimes, such as marine and aviation, Garmin will set to benefit.
When looking at Garmin one cannot overlook the fact that they have held up nicely in the lackluster automobile GPS market. With the potential for growth in many other aspects of their company they look like an overall great company that was once thought to be the next RIMM. An example of their commitment to the future can be found in their new product like the Garmin Swim, a device designed for training swimmers to track their workouts and drills in real time. Whichever way you look at Garmin they are compensating for their weakness in automotive and handling the challenges of the current economic situations well.
What is Sunday Funday?