Black Diamond Inc (BDE), Callaway Golf Co (ELY): Three Small-Cap Consumer Goods Companies

Page 1 of 2

My equity portfolio is almost purely composed of consumer goods companies. The reason is simple. Once consumer goods companies have successfully gained market share in a respective sector in a specific geographic region, they own very strong businesses. Of course these achievements are not easy to reach. It is indeed very tough to replicate efficient distribution channels or to create a respected and highly known brand in any consumer category. Here I take a look at three small consumer good companies. They produce cash, are strong in their categories and are always fair M&A candidates.

Selling outdoors equipment for explorers

Black Diamond Inc (NASDAQ:BDE) is well positioned as one of the leading providers in the outdoor recreation equipment and active lifestyle products. The company sells its products under the Black Diamond Inc (NASDAQ:BDE) and Gregory brands, which offer almost unlimited expansion possibilities both in the US and abroad. As a matter of fact, the company is expanding into apparel, which should should help both revenues and margins.

Black Diamond Inc (NASDAQ:BDE), which I think will grow top line by 11% year-over-year (yoy) in 2013, has its long term story intact. I believe Black Diamond Inc (NASDAQ:BDE)’s three long-term growth drivers are: (1) healthy organic category growth and market share gains; (2) acquisition opportunities, as the company looks to consolidate its relatively fragmented categories; and (3) expansion into other categories, such as apparel, with a launch scheduled for fall 2013.

With a premium valuation justified in view of the robust EBITDA growth opportunities ahead (Black Diamond Inc (NASDAQ:BDE) trades at 2014 16x EV/EBITDA), I believe the company is a good company to keep an eye on.

Brands, golf and pricing power

Callaway Golf Co (NYSE:ELY)

Buffett says that you should be in a business where people asks for brands instead of products. Of course, if you are in such a business, you better own the brand people are asking for. This is the kind of business where Callaway Golf Co (NYSE:ELY) is on. The company designs, develops, manufactures and markets high quality golf clubs. The good news for Callaway Golf Co (NYSE:ELY) shareholders is that their brands do reign the golf business.

The company, which is coming out from a turn-around plan, is starting to revive. For the first quarter this year Callaway Golf Co (NYSE:ELY) reported EPS growth of 27% yoy ($0.47 versus $0.37 a year ago). Margins and sales are improving. Callaway Golf Co (NYSE:ELY)‘s net sales for the first quarter came at $288 million from $285 million a year ago.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!