by Marc Bastow | May 31, 2012 9:00 am
With the calendar page ready to turn toward June, all eyes on the Washington, D.C., area are turned toward … well, just about everywhere else, as the city flocks away for vacation.
Of course, while scurrying out of the area, it’s easy to be reminded that you’re not just driving around the seat of the U.S. government — but a thriving business community. From Baltimore right down through the District of Columbia and into Northern Virginia, companies that are no more than 40 miles from InvestorPlace headquarters in Rockville, Md., are growing and thriving.
So let’s take a little trip to find those companies worth the time it might take to beat the traffic — and the upcoming summer heat. First stop: Baltimore
Once you finish your famous Maryland crab cakes, head around the Inner Harbor and come to a stop at Under Armour‘s (NYSE:UA) campus facility in a formerly run-down part of town.
UA was founded in 1996 by University of Maryland football player and alum Kevin Plank, who sought to make a better athletic T-shirt. What he created was apparel that provided compression and wicked perspiration off your skin rather than absorb it.
Plank’s vision has evolved into an apparel company that offers merchandise at 25,000 retail outlets, and produces and promotes everything from basketball sneakers to sweatshirts, and wants to become the Nike (NYSE:NKE) of the East Coast. Indeed, just like its West Coast competitor, UA is featured on both professional and collegiate gear and equipment all across the nation.
UA is not just on the Eastern Seaboard, however. The company is assuming a global position with agreements like a sponsorship with the English Premier League’s Tottenham Hotspur.
UA’s revenues are growing through the roof year in and year out, as are earnings — despite the company’s need to spend money on R&D and selling expenses — and the stock currently is hovering around the $100 mark. Caution might be in order if the company continues to get squeezed in cash flow margins, as borrowing is not the way most people want to see company’s grow. But long-term, this is an exciting company with great product and marketing vision.
Heading down Interstate 95 toward Washington is no easy task, but worth the trip for a stop at Marriott (NYSE:MAR) headquarters in Bethesda, Md.
Marriott was founded in 1927 by J. Willard Marriott and his wife Alice, who started a nine-seat A&W Root Beer stand in the heart of Bethesda. Later that year they added hot food to the menu, and Hot Shoppes was born. Out of that service was born a hotel and property conglomerate know worldwide through its 3,700 properties in 37 countries, now under the eye of J.W. Marriott Jr.
You’ve probably stayed at one of Marriott’s facilities and didn’t even know it: Courtyard, Fairfield Inn, Residence Inn and Ritz-Carlton are just a few of the company’s brands. Marriott just announced the opening of the Renaissance Barcelona Hotel, in the shopping and architectural district of Barcelona, further expanding the empire and name.
For fiscal 2012, Marriott expects operating income in the range of $870 million to $930 million and earnings per share in the range of $1.52 to $1.64. Marriott also announced a 30% increase in its quarterly dividend, from 10 cents to 13 cents per share — good for a modest 1.3% yield.
Like most hoteliers, Marriott is seeing a slowdown in growth, and average per room rates — the truest measure of hotel success — is down, but the company has sold off properties and unloaded locations when necessary to raise cash. The effort continues to pay off — Marriott’s outlook is steady, just like its family ownership.
A quick trip from Bethesda to right along the Potomac riverfront brings investors to another local gem: Danaher (NYSE:DHR).
If POTUS and Veep are the true power duo inside the beltway, brothers Mitchell and Stephan Rales are not that far behind. The brothers founded the company in the early 1980s while on a fishing trip along the Danaher River in Montana. The origin of the name “Danaher” goes back to the root “Dana,” a Celtic word dating from before 700 BC that means “swift flowing” — exactly what the company has become.
In the early ’90s, Danaher consisted of a group of discrete, cyclical businesses with no focus. In the mid-’90s, the company started to create what is now five operating segments that add up to $16 billion in revenues. Segments include Test & Measurement, Environmental, Dental, Life Sciences & Diagnostics and Industrial Technologies. Investors know the segments through names such as Fluke, Beckman-Coulter, Tektronics, Kerr and others.
Danaher recently announced that it anticipates EPS for Q2 2012 to be in a range of 76 to 81 cents, and full-year earnings expectations have been upped to $3.25 to $3.35 from a previous range of $3.20 to $3.35 — all roughly in line with analyst expectations. Danaher’s net income is just north of the $2 billion mark, and cash flow continues to improve every year.
The Rales brothers have a good thing going along the Potomac, with a share price of $53 right near its 52-week high. Be sure to check in with this company before heading into Georgetown for dinner.
The District of Columbia also features yet another home-grown product, The Washington Post Co. (NYSE:WPO). The Post was founded in 1877 and very nearly did not make it. The paper was sold at auction to publisher Eugene Meyer for $825,000 in 1933, and in 1946 Donald Graham, the husband of Katherine Graham, became the owner. Katherine Graham followed Donald, and now their son, Donald Jr., runs the show.
The Post’s most famous investor is Warren Buffett, whose 37-year run on the board of directors just ended last year. Buffett clearly had a hand in the company’s growth from sleepy local paper, to multimedia, multi-outlet publishing giant. The Washington Post Co. owns, among other things, Post-Newsweek Stations, Cable ONE, The Slate Group; The Gazette and Southern Maryland Newspapers; Avenue100 Media Solutions, SocialCode, a full-service Facebook advertising agency; and Kaplan, Inc.
Like virtually everyone else in the publishing industry, The Washington Post Co. is going through tough times. Circulation and advertising dollars are drying up, and major websites’ papers still aren’t raking in enough dough. The Post’s profits were squeezed last year, down to $117 million, and cash flow, while still adequate, also suffered at $206 million — of which 16% was questionable (meaning changes in taxes payable, tax benefits from stock options, and asset sales, among other lesser-quality means).
However, investors are rewarded with a hefty dividend yield of 2.8% for their $600 entry price, so don’t short-change this Washington (and really, national) publisher quite yet — particularly in a presidential election year, when anyone and everyone associated with the political game will read The Post.
No travel would be complete without a ride into the nearby Virginia suburbs, and right outside the beltway in bustling, busy and construction-clogged McLean is Capital One (NYSE:COF) — another locally grown business, this time in the financial services sector.
Founded in 1988 by local Richard Fairbanks, Capital One is one of the 10 largest banks by deposits in the country. Of course, most people know the company through their “What’s in your wallet?” ad line, but the company also operates branches primarily in the Washington, Maryland and Virginia marketplace, with other outlets in New York, New Jersey and Texas.
Capital One is looking to expand its business, and recently has finished an acquisition of the ING Direct business in the U.S. from ING Groep (NYSE:ING) for $6.3 billion in cash and approximately 54 million Capital One shares, representing a 9.7% ownership stake.
With a paltry P/E of less than 7 even after a nice 15% run in the past half-year, Capital One currently looks like a bargain.
Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he did not hold a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2012/05/5-steady-businesses-in-investorplaces-backyard-ua-nke-mar-dhr-wpo/
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