When it comes to investing, we often opt for stocks we know. Ones we understand and most often those are the companies that we use regularly.
Why That's a Good Thing
A big part of choosing good stocks is a consistent demand for their products. They also have to be profitable of course, but the first step is knowing where that top line on the balance sheet actually comes from.
Figuring out which drugs are getting FDA approval or which complex technological advancement will take hold is something that most can't even start to figure out.
But, when we look to our everyday lives and the purchase we and our friends make, trends are easier to see.
Where it Can Hurt You
Easily, the biggest pitfall of investing in your favorite companies though, is getting married to them. Brand loyalty runs deep, but as long as you can recognize that your affinity for buffalo wings may not be shared by everyone or that even if it is, the company can mismanage itself into the ground, you will be okay.
Investing Like a Guy
So, as a cursory look, I took a look at what I'm doing on a day to day basis and wondered; which of these companies that I patronize could be viable investments?
While my girlfriend may not like it, I love my Harley Davidson (NYSE: HOG) motorcycle. They have arguably the most loyal customer base in the world, but they can be polarizing even amongst the riding community. As an investment goes, I like the idea of having this stock but I'll hold off for now. Estimates are inconsistent, valuations are expensive and they have a highly discretionary product.
But some things I do like could be great additions to a portfolio and would be easy for me to root for.
Who doesn't like donuts? Krispy Kreme (NYSE: KKD) has been an investor's dream lately. Shares are currently a Zacks #1 Rank (Strong Buy) thanks to sharply rising estimates.
Full-year estimates are averaging $0.31 this year, which is more than 150% the year prior. Next year analysts are looking for $0.40, another 32 percentage points of growth. While the P/E of 32 times looks high, factor in the long-term growth rate and you get a PEG of just 0.6, which is a great value.
And, the growth is easy to see. Yes, the nation getting more health conscious, but the company is expected to ramp up its beverage offerings, a high-margin product. For a comparison, competitor Dunkin Donuts gets about half its revenue from coffee. Even if KKD doesn't get its coffee sales that high, beverages should still give their bottom line a huge boost.
I alluded to my affinity for wings earlier and right now Buffalo Wild Wings (Nasdaq: BWLD) is a Zacks #2 Rank (Buy). It doesn't look as enticing at KKD, but definitely worth looking into with growth rates of 20% or better for the next 2 years. And estimates are still inching higher.
Burn Off the Calories
In order to eat all that junk food, a guy's gotta work some of the extra calories off. Whatever method you choose, running, basketball or other sports you are going to need some gear. Foot Locker (NYSE: FL) analysts are expecting the athletic retailer to grow 40% this year and another 13% next year. The P/E is near 14 times, so you won't need to break the bank for the stock.
I'm heading to Wisconsin to do some fishing over the 4th of July weekend and while there is some overlap with FL, Dick's Sporting Goods (NYSE: DKS) also offers fishing, camping and other products for outdoor recession.
Shares are a Zacks #3 Rank (Hold) right now, but estimates are still moving up. Expected growth rates for the next 2 years are in the upper teens and the stock trades with a PEG ratio of 1.2 times.
But That's Just Me
These stocks make sense to me, but we all lead different lives. So, take a look at what you do. Where you spend your money. And follow your greenbacks to potentially profitable additions to your portfolio. Just don't go falling in love with them until you dig into the financials.
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