| Two
Up-and-Coming Bellwethers with Room to Run |
Published: October 20, 2004
By the time a
company reaches "blue-chip" status, it's heady growth days are
often behind it. As such, instead of investing in the bellwether giants
of today, we think a better strategy is to look for stocks that are on
their way to stardom -- companies that have already proven themselves
but have yet to fully expand their concept across the country/world.
These "Up-and-Coming Bellwethers" still have plenty of growth
potential ahead of them, and some will eventually become the Wal-Mart's,
Microsoft's and Home Depot's of the next 10-20 years.
In an effort to
capture the bellwethers of tomorrow during their prime growth years, my
staff and I recently unveiled a new "Up-and-Coming
Bellwethers" Portfolio. Available exclusively to paid subscribers
to our Market
Advisor newsletter, this portfolio focuses on
"up-and-coming" blue-chip stocks, as well as existing
bellwether firms that still have plenty of room for future expansion.
Here's a sneak peak at two of this portfolio's core holdings...
Central European
Distribution (CEDC) -- Poland's largest importer and distributor of
alcoholic beverages, this firm is one of the purest plays you'll find on
the booming Eastern European market, as well as one of the biggest
beneficiaries of Poland's recent accession to the EU (European Union).
The company distributes beer, wine and spirits to about 31,000 different
Polish businesses of all sizes.
In 1997 when the company
started operations, liquor distribution in Poland was controlled by a
patchwork quilt of small mom-and-pop operations. But CEDC changed all
that, garnering $12 million in funding from Wall Street and buying
Poland's liquor distributors one by one. As a result of its aggressive
acquisition spree, the company's growth has been impressive. Over the
past five years CEDC has posted annual revenue growth close to +50%.
Meanwhile, profit margins have risen in the process, leading to earnings
that have grown even faster than revenues.
The company's main business,
which currently accounts for about 70% of revenues, has been the
distribution of domestically produced products. However, the firm has
recently been moving aggressively into the market for imported spirits,
which carry significantly higher profit margins. The firm is already the
dominant alcohol distribution firm in Poland, and as it branches out
into new markets and expands its footprint across Europe, CEDC should
continue to grow at a fast clip. This young firm is still in its early
growth stages, but over the long haul it looks as though CEDC is well on
its way to becoming a blue-chip leader in the distribution business.
Panera Bread (PNRA) --
Panera operates a highly successful and popular chain of about 600
bakery cafes in 35 states. The firm's focus is on fresh ingredients and
made-to-order products. That includes an extensive line-up of
made-to-order sandwiches, ready-made soups, salads and beverages. The
company has developed a reputation for offering healthy foods at
reasonable prices, and this fits in well with the nation's trend towards
healthier eating.
Despite Panera’s outstanding
success over the past decade or so, the firm still has plenty of room
for future growth. With just 600 locations, Panera is still a tiny
fraction of the size of most major quick service restaurant chains, such
as McDonald's (MCD, 30,000 locations) and Yum Brands (YUM, 33,000
locations). It's also worth noting that Panera has yet to open a
location overseas. The opportunities for future expansion remain
enormous, and as such, we believe Panera is still in the early stages of
a multi-year growth cycle.
|
Please Note: The above article was merely a
small excerpt from an issue of our premium, long-term-oriented investing
newsletter -- the Market Advisor. To receive your copy of
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