The Stock Masters submit: As a card carrying member of the US Bowling Congress and self-proclaimed league night hero, I have been given backstage access to the world of a special niche of American consumer. I love league night!
On Any Given Tuesday, you check the pulse of the very same people who fuel one of this country's most lovable companies - the Jeffrey Lebowski of the NYSE, Brunswick Corporation (BC). Brunswick admits in its own corporate history that although the majority of its sales ($5.92B in FY 2005), come from its stable of marine brands and products, the Brunswick name is still associated with bowling and billiards.
Brunswick has taken a beating over the past two years, falling from a peak in the $50 ballpark to current trading levels around $30.
Concerns over weakening retail demand for pleasure boats have kept this stock moving sideways after getting drowned in the wake of disappointing 2006 guidance below estimates back in April. The plight of Brunswick reminds us of The Dude…
Brunswick Corp. - The "Dude" of the NYSE
Jeff Lebowski, aka The Dude, bowls, drinks white Russians, and enjoys the soothing sounds of Creedence Clearwater Revival. The Dude is a simple man, a good man, a man for all seasons in a city without them (Los Angeles). The Dude has to suffer the annoying yapping of those he has chosen to surround himself with, for better or worse.
Walter - The Dude's best friend, "yapper extraordinaire"
Our boys at Brunswick are in the same boat. Not a lot of flash, category killers, or explosive growth - just consistently throwing off strong operating cash flow, buying back shares, reinvesting in the business, and dare I say, occasionally listening to Creedence. If I were a betting man, I'd say that the corporate employees are treated to a daily airing of "Looking Out My Back Door." Six Sigma? Forget that. How about a corporate cafeteria manned by John Fogerty himself. Now you're talking with Fogerty's special Bayou Cakes, a favorite up in accounts payable. Sure, there are plenty of annoyances, but Brunswick stays the course. With respected management, strong free cash flow, measured acquisitions, and a stable of venerable marine and recreation brands, does a P/E south of 10 sound right? Yeah, in case you were confused, you just heard the thunderous sound of a clean strike. Or maybe that was the purrrrrrrr of a Mercury outboard…
Concerned about the retail boat demand? As it turns out, in the nebulous area between LA and Manhattan, owning a boat makes you a folk hero:
"Yep, Don got himself an 18 foot Bayliner. He's taking us all out on Lake Pleasant this Sunday. I guess he's got a tip on a good bass spot."
"No kidding, he must be doing well."
"Damn straight he is, he's had a great year."
Don't forget that this conversation happens under the very blanket of recreation Brunswick provides. The cats from Lake Forest, Illinois made the balls, the electronics, the pool table in the corner, Don's wife's dust-collecting treadmill, the mythical 18 foot boat, Don's crippling finance contract, and even the Brunswick Zone bowling alley. Knowing what I know about the boys at league night, I'm willing to bet that the working man's status symbol doesn't change anytime soon.
Taking a run at it from a stock screen perspective delivers something interesting. As The Dude would say, "New information has come to light…" There are only a handful of S&P stocks that have a market cap of at least a billion, a P/E below 10, a Price/Book below 2, and a Price/Sales below 1. The list reads like the booking chart at the Sheraton Orlando during the National Association of Homebuilders Conference, Centex (CTX), DR Horton (DHI), Lennar (LEN), Pulte (PHM) - the gang is all here. Brunswick sits on this illustrious list of 10, and it makes perfect sense for the market to lump our heroes from Lake Forest into this category. The market, however, has never met Roger Simmons, local league bowler and Miller Lite fiend. Roger leaned back in his chair the other night and laid this gem on us:
"Man, you know what would be good right about now?"
"No Rog, what would be good?"
"A boat? OK. I guess that makes sense…boats are fun."
"You know what would be even better than that?"
"I can only imagine."
"Two boats..." (taking a dramatically long sip of a long neck to let the point sink) "The only thing better than one boat is two."
I'm in, Roger. Cramer likes homebuilders. Ben likes league night. The Stockmasters like Free Cash Flow. It's last frame and last call, even the Dude agrees, Brunswick is a bargain at $30.
Article written by Ben Ruddy.
Disclaimer: The author does not hold any shares or positions of BC at the time this article was posted.