A Perfectly Lazy Stock

Embrace the sloth
Those following my lazy portfolio know that the goal is to see whether we can find investments that will beat the market yet require the minimum of oversight. Earlier this month, we had to bootFaro Technologies (Nasdaq: FARO  ) , one of the original lazy six, after I made the difficult decision that the company's situation was simply too uncertain.

This week, I submit a replacement, and it couldn't be more different. Instead of lasers and computer-aided measurement, this outfit still sells products it began producing in the mid-1800s. It's a company that I've been watching for quite a while. And as a producer of goods used in some of my favorite lazy pursuits -- boating, bowling, and billiards -- I think the company is a perfect fit for the lazy portfolio.

Brunswick (NYSE: BC  ) is in the headlines these days because its CEO, George Buckley, recently departed for 3M (NYSE: 3M  ) , a recommendation of Motley Fool Inside Value as well as a holding of many of my Fool colleagues. As a 3M shareholder myself, I'm satisfied with this choice, but as a prospective Brunswick shareholder, I don't see any reason to be spooked, either.

More than just numbers
I'm going to confess up front a certain admiration for the company -- and it has little to do with the financials. I love going to the bowling alley. I used to live a stone's throw from a Brunswick factory in Muskegon, Mich. The company makes stuff like air hockey tables and bowling pins. And boats. And pool tables. And fitness equipment. The strength-training gear is made in Hungary. (Is there anywhere more fitting to produce weights than Hungary?) Did I mention they make bowling balls with names like "Inferno." Inferno! Those pins wouldn't stand a chance, even with my sissy rolls.

Brunswick also runs some large bowling complexes that are moving toward becoming more diversified entertainment destinations. You may have seen some of the large, funkily-lighted Brunswick Zones beckoning you from the roads.

What this adds up to is a company that is the No. 1 seller of marine engines in the world (for pleasure boats), the No. 1 seller of pleasure boats, the largest manufacturer of commercial fitness equipment, and the No. 1 designer and seller of bowling and billiards gear. Its marine brands include Mercury, Hattaras, Sea Ray, Bayliner, Boston Whaler, Crestliner, and Lund -- the latter two being the boats I grew up with in Minnesota. (As a side note, this puts it into competition with Motley Fool Hidden Gems pick Marine Products (AMEX: MPX  ) .) Brunswick's prime fitness brand is Life Fitness, and of course the big B is still the household name in bowling and billiards.

Risks to our leisurely pursuit
These are all competitive markets, but I believe Brunswick's entrenched brands, as well as its size, gives it some advantages over its smaller rivals in the fragmented space. I hate to whip out the dreaded term "synergies," but many of the company's recent acquisitions -- and there have been plenty -- have been aimed at integrating its existing manufacturing and distribution operations. Also, the stuff Brunswick sells is something of a luxury, no matter how you slice it, and therefore there is a degree of economic risk in it. When times get tough, people tend to buy more bread and bananas than boats, and boats are the biggest chunk of Brunswick's revenues and profits.

That said, I think the reported death of the American consumer is a bit premature. Furthermore, I think a degree of this fear has already been priced in (or is that out?) of the stock, which trades $5 from its $52 week low. (And it looks to me like the same malaise may be afflicting Marine Products, along with other makers of discretionary gas-burners, such as Polaris Industries (NYSE: PII  ) and even Harley-Davidson (NYSE: HDI  ) .)

The current pessimism suggests to me that -- as long as you don't believe there's a big downturn on the way, as I don't -- now is as good a time to get in as any. Remember the old Buffett bit about being greedy when others are fearful.

A lazy look at the numbers
The numbers suggest to me that many are fearful for Brunswick. In fact, the company came to my attention a while back when I was doing a screen designed to find "stealth values," companies with stable but not awe-inspiring earnings growth, trading at modest historical discounts to their usual price-to-value metrics.

At that time, Brunswick showed a P/E ratio of 11, well below the more usual 16, and it hasn't exactly sizzled since. Given the number of acquisitions and related noise in the financials, this figure may not be the best indicator of "value," but over the past few years, along with the organic and acquisition-fueled top-line growth, operating margins have improved, along with returns on assets, equity, and capital. These currently stand at 8%, 19%, and 11%, respectively.

The lazy bottom line
In closing, I think Brunswick is on firm financial footing now, has room for improvement, and is engaged in a variety of businesses that may not be barn-burners but should provide, in the long run, solid growth opportunities. Here's looking forward to the upcoming boat season.

I grabbed it for the Lazy Portfolio this morning -- which is a pretend money portfolio, but tracked with the same transaction fees I get in my real investment account, and also incorporates dividends.

As of this afternoon, here's where the Lazy Portfolio stands.

Company

"Bought"

Price

Last Price

Position Value

Total Return (Including Dividends)

Avon

5/13/04

$40.85

$27.68

$1,273

(33%)

Brunswick

12/8/05

$40.25

$40.94

$2,005

1%

*FARO

5/13/04

$23.30

$19.65

$1,557

(17%)

*Reebok

5/13/04

$34.20

$57.45

$3,333

+67.1%

Nike

10/13/2005

80.25

85.89

$3,436

+6.7%

Starbucks (NASDAQ:SBUX)

5/13/04

$18.93

$31

$3,223

+63%

SanDisk

5/13/04

$24.68

$49

$3,927

+98%

WWE

5/13/04

$12.08

$14.79

$2,440

+26.7%

Original Cash:

$12,000

Current Stocks Plus Cash:

$16,318

36%

S&P 500 Return:

+18.2%

Lazy Payoff:

+17.8 points

* Positions have been sold.

Related Foolishness:

3M is aMotley Fool Inside Valuerecommendation. Faro and Marine Products areHidden Gemspicks. Not too lazy to check out the returns Fool newsletters have been putting up? Consider a free trial to one or more of them. We have something for everyone -- value, dividends, small caps, you name it.

Seth Jayson still wishes his real portfolio was doing as well as the lazy concept presented here. At the time of publication, he had shares of 3M and SanDisk, as well as covered calls on the latter, but no positions in any other company mentioned. View his stock holdings and Fool profilehere.Fool disclosure rules are here.


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Related Tickers

12/18/2014 4:01 PM
BC $49.93 Up +1.20 +2.46%
Brunswick Corp CAPS Rating: **
FARO $59.63 Up +2.55 +4.47%
FARO Technologies,… CAPS Rating: ****
PII $148.53 Up +4.58 +3.18%
Polaris Industries CAPS Rating: *****
SBUX $80.03 Down -0.41 -0.50%
Starbucks CAPS Rating: ****

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