Alfredo Martinez

Snap-On: The Future Looks Promising

I would have to respectfully disagree that Snap On is a good investment right now.

Snap On makes some great tools, but they really are like Tiffany jewelry, it's all about the status symbol. They make a few "have to own" diagnostic type tools, but most of it really is about the "bling". In a down economy, that's the last market I would want to invest in. A mechanic can get by just fine with much less.

Also, technicians in emerging markets simply cannot afford Snap On's products. A complete set of wrenches costs around $800, a good sized tool chest costs $10,000. An well-paid American has a hard time swinging that even with financing . How in the world could a mechanic in China or India afford that?

Also, dealerships are the bread and butter for Snap On. My guess is at least half of all the dealerships currently open will close down. As was stated above, mechanics take their tools with them, so new independent shops opening doesn't necessarily mean new tool sales. Also, a lot of these laid off technicians will just sell their tools and find different jobs.

Snap On is heavily dependent on financing, it's essentially a bank disguised as a tool company. With job uncertainty in the automotive industry, mechanics will have a hard time taking on thousands of dollars in debt if there's a good possibility they may get laid off next week.

It may be a good long term play at the current pricing, but to me your looking at least 5 years before you see any real returns.