Monday, August 15, 2016

Stumbling Upon Opportunity Outdoors?

Just last week while on an awesome 32 mile bike ride I was thinking about how hard it is to buy into certain sectors in the outdoor category.  Specifically the firearm, hunting, and cycling industries.  Probably not topics everyone else thinks of while cycling, but I also brought Investor's Business Daily to read during my 8th grade lunch.

Not that I was dead set on buying something, but it's one of the few sectors with not a lot of publicly traded names. The reason being is I love the outdoors and devote a lot of my time, and hard earned money to these industries. I'm an avid skier, hunter, cyclist, hiker, and general outdoor enthusiast for those interested. I feel like there is nothing more rewarding then spending time doing outdoor activities. Plus it follows my theme of buying what I love(examples are DEO, COST, HAIN, MKC).

Off the top of my head I can think of the following companies related to this space:

Smith & Wesson(SWHC) - Firearms
Sturm Ruger(RGR) - Firearms
Olin Corp(OLN) - Manufacturing
Dicks Sporting Goods(DKS) - Retail
Cabela's (CAB) - Retail
Columbia Sportswear (COLM) - Retail

And to a lesser extent...

Tractor Supply Co(TSCO) - Retail
Under Armour (UA) - Retail

I previously discussed my prior ownership of SWHC, but I still find this sector difficult to invest in.  Mainly because the companies are either too focused, or subject to trends I don't find appealing. Taking those same names I can give a quick fundamental reason why I currently avoid them.

SWHC - subject to government and social trends.
RGR - subject to government and social trends.
OLN - low margin manufacturing.
DKS - moats in retail are more easily eroded than other industries(ie The Sports Authority)
CAB - same as DKS, although this is more focused on the hunting enthusiast which can be good and bad.
TSCO - mainly focused on providing farmers with supplies, and outdoors is secondary.
UA - consumer style preferences are hard to keep pace with and they face heavy competition.
COLM - consumer style preferences and too focused on a specific outdoor niche for my liking.
Not that these stocks are bad investments. In fact plenty of them have served their shareholders very well over the years. Many of these companies represent areas I find desirable for long term investing. It's my personal preference and what I'm comfortable owning that we are discussing here. For one I like buying the brands, not the retailer, since they can then sell to every retailer around and not be limited by how they reach consumers. Plus brands have name recognition and many times loyal customers.  Of course I can make the argument both ways for buying retailers over brand's, and vice versa. I obviously own Costco, but I'll try to stay on track. Retailers are more subject to the price sensitivity of consumers than their brand name suppliers. Example is you can go to Dick's or Cabelas to find Columbia branded clothing. You'll end up just buying the jacket where it's cheapest.  Side note Columbia actually utilizes both approaches by being it's own retailer, and distributor to retailers.  

During my normal perusal of daily briefs I saw a stock named Vista Outdoors(VSTA) getting slammed 16% on an earnings miss. Never hearing of the company before I decided to check it out.  I first checked to see how long it has been publicly traded, and found that it's IPO was back in January 2015. I then visited the company website and investor relations page. I was shocked to see them owning 48 outdoor brands. They manufacture firearms, ammunition, clothing, a wide range of outdoor accessories, and cycling gear. They have products diverse enough to serve the skier, hunter, cyclist, and just about every other outdoor enthusiast imaginable.
I was salivating at this find especially since I use some of the brands. Funny is during the winter of 2015 I joked to a friend while buying ammunition for a hunting trip we should buy "Federal Premium" stock* since we were always loading up on it, and then literally blowing our money into thin air(hey I'm not the best aim sometimes). And literally a month ago I joked to the fiancee about "Bell" stock as we perused The Sports Authority aisles for a bargain on a new helmet**. I just find it funny how you cannot be aware of these things sometimes. Even though I try to stay on top of everything in the investment world I'm not infallible.  That aside I'm  just excited to discover a new interesting company. 

If you look closely you can just make out the earnings miss and ensuing drop

I'm not making a buy or sell recommendation here since for one I'm not done doing my research into the company. My point is you never know when a possible investing opportunity will arise, and its up to us as individuals to seek out the proper information to make a decision.  Feel free to share your own experience like this, or anything related to what I've discussed above. The more the merrier as we go through our investing journey!

* Meanwhile unbeknownst to me I could have!!! 
** We didn't find the price we wanted, and remember my comment above about retailers subjected to pricing? And yes I make bad jokes.

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