Ring in the new year with more stocks for 2008.

As the old year draws to a close, and you search for advice on which stocks to buy in the new year, I've got just one word for you: Garmin (NASDAQ:GRMN).

The world leader in GPS navigation devices, Garmin was tapped by Fool co-founder David Gardner to join the Motley Fool Stock Advisor portfolio in October 2005. Back then, David described Garmin as merely "a world leader in GPS technology" (emphasis added). The subsequent change in articles makes all the difference.

From "a" to "the"
Historically, the world has been divided into two halves. Haves and have-nots. Communist and capitalist. Or, more apropos to today's column, Europe and the U.S. In the world of GPS technology, the European market belonged to a Dutch company called TomTom, while Garmin owned the U.S. Within their respective demesnes, each company held a commanding market share, approximating 50%. Worldwide, they split the globe closer to 25/25, with smaller players such as Mio, Magellan, and Navman divvying up the balance, and TomTom usually edging out Garmin by a few points. No longer.

At last report, Garmin has the upper hand over TomTom on all fronts -- the best margins (grossing 48.9% to TomTom's 45.5%), the largest global market share (24.9% to 24.3%), and the fastest sales growth by far (73.7% vs. TomTom's 34.5%). (Margins and growth rates were confirmed by the Fool's data provider, Capital IQ, for the trailing-12-month period.)

So basically, Garmin is outgrowing its Dutch rival by a factor of two. It's gaining scale that translates into better margins, which translates into pricing power, which enables Garmin to grab still further market share. This virtuous cycle helps to explain how "a" became "the" for Garmin.

Past as prelude
How long can Garmin retain its shiny new definite article? Well, let's consider. Raise your hand if you remember when AMD (NYSE:AMD) was going to dethrone Intel (NASDAQ:INTC) as the world leader in semiconductor market share. (Oh, come on. It wasn't that long ago.)

Excellent. Now, raise your hand if you remember what happened next: AMD got a little big for its britches, ate ATI, and in so doing opened up a two-front war against Intel and NVIDIA (NASDAQ:NVDA). Ever since, AMD's share price has looked something like this. In contrast, Intel's looks more like this.

I can't say that the ATI acquisition, and the demands that integrating ATI into its business placed on AMD management, caused AMD's fall from grace. But I suspect the two events were not unrelated. And I wouldn't be at all surprised if we see something similar happen to TomTom, now that it has famously bid to buy its mapping data provider, Tele Atlas, for $4.2 billion.

Despite all appearances to the contrary, Garmin elected not to pursue either of the two leading map data providers. After feinting at Tele Atlas, possibly to force TomTom to raise its bid, Garmin made the smart choice to bow out of that race. Nor did Garmin overbid for its own preferred data provider, Navteq (NYSE:NVT). Instead, Garmin wisely allowed Nokia (NYSE:NOK) to do the overpaying there, contenting itself with inking a long-term data supply agreement with the mapping-software firm.

As a result, both Nokia and TomTom are now busy shepherding their new acquisitions through the anti-monopoly clearance process. If they survive that minefield, they'll be further occupied integrating their new businesses. Nokia has the easier job here, since it's acquiring a very profitable business (and not coincidentally, another of David's Stock Advisor recommendations). TomTom's task is trickier -- it'll have to prod TeleAtlas into earning a profit. In contrast, Garmin can just keep on doing what it's been doing these last two years. Given how the stock has tripled in value over the two years it's been on our scorecard, that seems to be working just fine.

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