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You could always go with a tie, barbecue tools or an invitation for a round of golf. But why not give Dad something more lasting for Father's Day this year -- something that could make his retirement just a little bit richer?
We're talking about stock, of course. If you want, you might even be able to get a single certificate framed to hang on the wall of the den, at sites such as OneShare.com or Frame-a-Share.com
But your first order of business is picking a stock that'll pack some punch in Dad's portfolio. We looked at a long list of manly stocks, ranging from La-Z-Boy to Men's Warehouse to Calloway Golf Corp. Some, like Harley Davidson, qualify as great companies whose stock may not hold much sizzle right now. Below is the bunch that we think will make great gifts this year.
O'Reilly Automotive (symbol ORLY). This specialty retailer of auto parts, tools, supplies and equipment, headquartered in Springfield, Mo., has more than 1,800 stores in the South and Midwest. High gasoline prices are a challenge for O'Reilly, as demand for auto parts softens as vehicle owners cut back on driving. But O'Reilly serves professionals as well as do-it-yourselfers, so it is somewhat insulated from the vagaries of consumer spending.
The recently announced acquisition of CSK Auto will give the company a national presence, and should be a good strategic fit. Wall Street analysts expect O'Reilly to earn $1.76 per share this year and $2.02 next year, giving the stock, which closed at $25.60 on June 10, a price-earnings ratio of 14 times '08 estimates. That's less than the P/E of similar companies and to the market overall. O'Reilly closed at $25.60 on June 10.
The Stanley Works (SWK). Stanley is one of only two companies offering a complete line of hand tools for consumers (the other is Danaher, which makes the Craftsman line for Sears). But this global company, headquartered in New Britain, Conn., is shifting its sales mix to focus on more profitable and reliable professional users (65% of tool sales.)
The company is also expanding its industrial tool division and a security business that serves retailers, schools, hospitals, government and corporations with security software, automatic doors, locking mechanisms, related installation and maintenance. The security business accounted for less than 10% of revenue in 2002, but will approach 50% by the end of the decade. Earnings overall are estimated at $4.18 a share this year, giving the stock, at $47.60, a bargain P/E of just 11. Look for $4.63 a share next year.
Diageo (DEO). After he's fixed the car and tackled the honey-do list, Dad deserves a break. Give him a drink -- or maybe stock in this British-based spirits maker, which claims eight of the world's top 20 brands, including Smirnoff vodka, Johnnie Walker scotch, Jose Cuervo tequila and Guinness Stout -- all the top sellers in their respective categories.
Diageo's sales in Latin America and Asia are increasing at a double-digit pace, offsetting flat markets in Europe. Analysts expect annual sales growth over the next five years to come in close to 6% annualized, while they project annual earnings growth at about 10%. At its closing price of $77.56, the stock sports an above-average yield of 2.6%.
Dick's Sporting Goods (DKS). Dick's, a haven for weekend athletes, operates nearly 300 stores in 34 states. But when this Pittsburgh-based retailer reported earnings on May 22, it was clear the stock was no longer a haven for investors who'd become accustomed to its meteoric growth story.
Sales from stores open at least a year came in below what analysts were expecting. And the company said earnings would likely come in at $1.22 to $1.36 a share for the year ending January '09, below its previous guidance of $1.49 to $1.54 a share.
Analysts still expect earnings growth rates approaching 20% annualized over the next five years. Nonetheless, after the first-quarter report, the stock plunged 16% on ten times normal trading volume. Before the selloff, 42% of Dick's shares were owned by mutual funds, hedge funds and other institutional investors that focus on companies growing faster than the average and share prices that follow suit -- a classic momentum play. The stock, at $22.70, is down nearly 40% from its 52-week high, but with the company still thought of by many as one of the best-managed in retailing, Dick's may now hold appeal for investors with a more patient frame of mind.
Best Buy (BBY). Did you buy Dad a Blackberry, an iPhone, or a GPS navigator this year? You could also have invested in Research in Motion (RIMM), Apple (AAPL) or Garmin (GRMN). All are stocks we've recommended in the past.
But why not buy stock in the big box retailer that sells all of the gadgets that Dads love? It's tough to be a retailer now -- even if you're selling the coolest tech toys. But while rivals such as Circuit City, Radio Shack and Tweeter are struggling, Best Buy is securing its dominance of the field with innovations such as Geek Squad, Best Buy Mobile and Apple stores-within-a-store.
At $45.07, Best Buy shares trade at just 13 times estimated earrings of $3.25 per share for the fiscal year ending February 2009, a discount to its historical P/E and to the overall market. Now that's a deal as good as any you'd get on a flat screen. Happy Father's Day.
POSTED BY: David Altenbach (June 11, 2008 07:05 AM)
Best Buy's punishing return policy may soon become a problem for them...
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