The stock market is bouncing around, and the gyrations are real. But there are still countless good businesses out there that are doing well in the U.S. economy. Right now, the stock market’s trading on fear—fear that the Federal Reserve will withdraw stimulus and that global economic growth is disappearing. These fears are real, so I want to focus on businesses that don’t need the Fed’s easy money or the eurozone for economic growth.
I’ve been following the stock market for over 25 years, and the older I get, the more I find I’m kind of tuning it out, along with other systems we have to deal with in life. The stock market is a system that is totally beyond your control; it’s going to go where it’s going to go, no matter what your view. A long time ago, I learned not to fight the tape. Rather, at the end of the day, for an investor, it’s still better to focus on a company’s own fundamentals for economic growth.
Another solid company with an excellent track record of making money on the stock market is The Toro Company (NYSE/TTC). Based in Bloomington, MN, this company manufactures professional turf equipment for golf courses. Toro also makes sprinkler heads and all kinds of irrigation products for sports fields, golf courses, and home lawn care systems. The company also owns the Lawn Boy brand. Toro is a great business. Its stock chart is featured below:
Chart courtesy of www.StockCharts.com
On the stock market, Toro split its shares, two for one, three times over the last ten years, and it’s been increasing its dividend consistently. The stock did come apart during the financial crisis—but so did everything else. It’s a 10-bagger over 12 years, excluding dividends, and its 2013 economic growth should be solid.
While the stock market is so unsure of itself, worried about the Fed and global economic growth, Toro’s 2013 fiscal first-quarter earnings grew 58% to $31.4 million, well up from $19.9 million in the comparable quarter on “particularly strong channel demand” for landscaping and irrigation equipment. Revenues grew five percent to $448 million, and the company boosted its fiscal second-quarter and full-year earnings guidance above consensus.
Real economic growth in the U.S. and abroad is a tough thing to find. (See “First-Quarter Earnings the Catalyst for Correction?”) As Toro approaches its primary selling season, management said that its golf course customers are optimistic about business conditions. The company expects continued economic growth in its golf, landscape contractors, and irrigation businesses, with record first-quarter momentum expected to carry right through the spring season. Plus, the company just made a small acquisition in China, looking for additional economic growth in that market.
There are many good businesses out there that you don’t hear about. Toro is one of them. Like the stock market, economic growth this year is totally unpredictable. But when a good business says that things are solid and its products are in demand, this will beat the Fed every time.