Our Motorsports Portfolio is up 63% YTD!
 Building
a diverse portfolio of stocks attached to motorsports can work
It’s October 2009 and the stock market is showing early signs of
a rebound. It might be time for you to consider buying a few
motorsports stocks. Adding a few to your portfolio adds some
diversity you might not have considered.
Let’s start with Harley-Davidson (HOG). The motor company sells
motorcycles – right. That puts them in the consumer/recreational
products category. But back at the turn of the century, H-D added
financial services to its customer offerings and makes a handsome
profit on the loans it provides to its buyers when they purchase a
new bike. Thus, they are diversified into the financial services
field as well.
Then there’s Honda (HMC). The little motorcycle company that
began selling Honda Cubs hand over fist in the U.S. out of lawn and
gardening shops in the 1950s, has grown up to be quite an entity,
doing much more business in the sales of its cars than motorcycles.
And like H-D, Honda offers in-house finance services which are very
competitive to others offering loans, so much so, I once figured
they were just offering me a rock bottom rate to close the sale and
make more money on me than if I financed the car through my own
bank. And beyond motorcycles and cars, Honda has been busy dabbling
in aircraft, thus they are tinkering in the aerospace sector.
How about a few shares of Yamaha (YAMHF)? You can buy two ways
here. Investing in the motor company gets you not only dabbling in
the two and four wheel toys we see at the motorcycle shop, but they
also sell a number of other recreational things like sport boats and
engines, golf carts, utility vehicles, generators and bicycles. The
company also has developed robots and automotive engines.
But we all know that Yamaha also makes pianos, other musical
instruments and hi-fi equipment, however you’ll have to invest in
Yamaha Corporation (YAMCY) to get in on that action.
And it’s not just motor companies to consider. How about the
clothing manufacturers? Fairchild Industries (FCHDQ) which owns the
Hein Gericke line of motorsports clothing is like investing in the
apparel department of your local shop. However, at this time for
numerous reasons, it’s not a safe stock to invest in. But there’s
still a way to tap into the apparel part of motorsports – read on.
We all need fuel to run our bikes. Adding more diversification to
your portfolio you could seek an energy stock – like Royal Dutch
Shell (RDS.B), the parent of Shell Oil. Their stock is on the rise
and despite where the motor companies are, while buying a new bike
in the coming year may not be on your list of things to do, you’ll
no doubt be purchasing fuel for the one you own.
And like fuel, we need tires for our bikes. If you’d invested in
Cooper Tire and Rubber Company (CTB) back in January, your stock
would be up substantially by now. Cooper is the parent of Avon Tyres,
the motorcycle tread that competes well against the Dunlops and
Michelins of the world in the consumer market.
And speaking of rubber, the sector of basic materials such as
metals and plastics is one to consider as well. Perhaps a few shares
of Alcoa (AA) to go along with that aluminum frame on your
sportbike, or some shares of Dow Chemical (DOW) who owns Union
Carbide, the originators of Carbon Fiber. The latter traditionally
pays some pretty nice dividends on a stock that also grows well over
time. And wouldn’t you know it – they have invented many of the
synthetic fabrics used in motorcycle apparel today.
Aftermarket goodies? I’ve got a GPS on my bike. Investing in
Garmin (GRMN) is proving to be an excellent buy!
Finally, it’s important to remember just how important knowledge
is to your ride. The internet plays a definite role in obtaining
information about where and when to ride. A hot stock at this point
is Google, of course. We could consider a media stock closer to
motorsports, but Cycle World's and Motorcyclist's parent stocks
trade on European exchanges, so it’s not easy to get your
hands on them. It’s important to note that most publicly traded
media companies that own domestic motorcycle magazines aren’t here
in the U.S.
Suppose at the beginning of the year we had the foresight to
plunk $10,000 into 9 stocks directly or indirectly related to the
motorsports world. What would have happened? Taking the nine
mentioned here, placing them into a grid of small, mid and large cap
stocks and spreading them out by their volatility based on their
Price/Earnings ratios, we break the purchase down nine ways being
careful to put the brunt of our money where the low P/E’s are.
CLICK HERE for the spread (page 1) and results (page 2).
The exercise is hypothetical of course, but reflects the current
market and portfolio of some good performers based on the gloom and
doom we've been hearing about the market as of late.
Happy trading.
Patrick Thomas/Fall 2009 |
