1 Great Long-Term Investment to Buy Today

There's a lot to be said for being able to pick out the quick growers in a sector. You get a fast return on your investment, you get to be that clever person who saw the trend coming, and you get to be involved in the newest, sexiest thing. But there's also a lot to be said for finding a solid grower, in a duller part of the sector. The Buckle (NYSE: BKE  ) is trading at a forward P/E of 11, so it's not going to break the bank, and it sells jeans, which aren't going anywhere. This is a great buy-and-hold company, and here are three reasons.

Growth pace
Buckle isn't True Religion (Nasdaq: TRLG  ) , and it doesn't want to be. That's not to say that True Religion is doing anything wrong, but it is pushing growth. By contrast, Buckle is letting growth come to it. In the companies' last quarters, Buckle opened zero new stores, while True Religion opened nine stores: four in the U.S. and five internationally. While those nine stores would be small potatoes for most companies, they represent a 6% increase in locations.

True Religion is paying for those stores, and you can see it in the company's margins. Last quarter, its gross margin was a healthy 64%, but the net margin came in at 9%. Buckle has been slower to invest its capital, and its 43% gross margin resulted in a 14% net margin. Again, this isn't a bad thing for True Religion, but the stable growth pace makes Buckle seem that much more appealing for the long term.

Management
One of the main reasons that Buckle has such a slow and steady approach is its management team. In today's world of one-night-stand CEOs, Buckle stands out. CEO Dennis Nelson joined the company in 1970 as a part-time employee. He has worked for the company since then, and has been CEO since 1997. Since he took on the role, the stock price has increased 800%. Nelson, along with other executives, is compensated based on three main areas: growth in same-store sales, gross margin, and growth in net income. In 2005, the company moved away from issuing stock options and now focuses on non-vested stock, which vests over a four-year period. I think that's a great setup for keeping managers aligned with the company, and it seems to be working well.

Brand consistency
The thing I like most about Buckle is that the company is perfectly clear on what it wants to be. This factor has held back a lot of apparel retailers, and made for some uphill battles. Both Guess? (NYSE: GES  ) and Gap (NYSE: GPS  ) have had to redefine themselves after failed rebranding attempts. Clawing your way back into the public consciousness can be a costly process, and the two companies have demonstrated that over the past few decades.

Guess? was a dominant player in the early '90s, but suffered around the turn of the century as its brand became synonymous with stone-washed jeans. The company's stock price was a little more than $10 at the turn of the century. As the brand strength eroded, it fell below $5 and trickled along until 2005, when the company started the process of reworking its public face. That's now started to pay off, with the stock having risen 170% since 2000, but those scars are still all over Guess?.

Gap has had a similar ride, but hasn't yet seen the final payoff. In 2000, Gap was trading around $45, but by the end of 2001, it had fallen to around $14. From there, it struggled with a new CEO, redefining its brand, and trying to gain relevance with its core audience again. Gap has made excellent moves over the past six months, but the stock is still down 27% since the beginning of 2000.

Buckle started 2000 around $6; by 2004 it had risen to $12. From there, it grew in a relatively linear fashion to its current $38. Buckle hasn't had to completely redefine itself, hasn't had to hire and adapt to new CEOs, and has made the most of the market it controls. That's a long-term investment just waiting to be jumped on.

The bottom line
I can't imagine looking at Buckle as a fast-growth company, but that's its strength. Over the years, it's shown that it has a clear idea of what it wants to be and how it's going to get there. That has been reflected in its consistent customer-facing brand, and has given investors an easy night's sleep. I like Buckle, what's it's doing, and where it's going. If you're in need of a consistently growing retailer, I'd suggest looking deeply into Buckle.

One of Buckle's best features is that its paced growth means that a lot of investors have overlooked it. The Fool has just released a new special report, "Middle-Class Millionaire-Makers," which covers the details of three stocks that Wall Street has overlooked. It's a great read for any investor. Get your free copy today.

Fool contributor Andrew Marder does not own any of the stocks mentioned in this article. The Motley Fool owns shares of Guess? and The Buckle. Motley Fool newsletter services have recommended buying shares of Guess? and The Buckle. Motley Fool newsletter services have recommended writing covered calls on Guess?. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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