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

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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.
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