One of the best things about a general stock market decline is that shares of solid, well-run companies are often valued as though they have no prospects of going anywhere. The fast-money, impatient crowd, often misses the boat and won’t touch these stocks with a 10′ pole.
What the get-rich-quick crowd doesn’t seem to realize is that if a stock doubles but takes three years to do it, they’ve made a 24% compounded annual rate of return. If a stock takes 4 years–they’ve pocketed 18% annually.
Brunswick Corp. (BC) is one company patient investors might want to buy today for double-digit rewards tomorrow.
It’s currently out-of-favor with the get-rich-quick crowd because frankly, nobody actually needs their products: namely boats, marine engines, fitness equipment and even billiard tables. Their products are expensive and these days, consumers seem to have better things to spend their money on. That being said, the get-rich-quick crowd is very different from the old-money crowd, who aren’t as affected by a downturn in the economy.
Brunswick Corp: Smooth Sailing Ahead
BC trades at just 60% of book value and at 12 times fiscal ’09 earnings estimates. Last Friday, the stock took a beating, falling to an all-time low to $12.75, a level it hasn’t seen since September 1998. In addition, Standard & Poor’s announced that it was removing BC from the S&P 500 Index and adding it to the S&P SmallCap 600 due, in part, to its diminishing market cap.
While the current market environment isn’t exactly ideal for a company that focuses on high-end toys for those with money to burn, BC has remained profitable in this economic downturn: It has a strong balance sheet with $267 million in cash with a debt-to-capital ratio hovering at just 27.6%
And even though skyrocketing fuel prices might make even the richest boating enthusiast curse the oil barons, that’s not going to stop them from taking their Laguna® out for a long-weekend deep-sea fishing expedition.
With an extended joint venture with GE Capital Solutions to provide long-term whole sale source of wholesale floor plan financing for Brunswick boat dealers and increased sales outside the U.S. thanks to favorable exchange rates, BC is perfectly positioned to set sail for profitable horizons.
Looking for other undervalued stocks ready to set sail? Then sign up now for your risk-free trial subscription to Richard Band’s Profitable Investing and cash in on this cruise line stock! In this month’s issue, Richard Band will also show you exactly how to reposition your portfolio in order to take advantage of the stock market’s slow but steady rebound!
