By Paul Goodwin , Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory, 5/19/08 Sign up for free Cabot Wealth Advisory e-newsletter
For my investing idea in this issue, I'm going to stick closer to home than usual. I've been noticing a company called Lumber Liquidators (LL) advertising on National Public Radio and elsewhere. The company began in Boston in 1993 when a man named Tom Sullivan began buying wood that other companies didn't need and then reselling it. He dug out a niche market in hardwood flooring and opened its first store in 1996.
The company now has more than 120 locations nationwide, and an enormous inventory of pre-finished and unfinished hardwood flooring, plus laminates, bamboo, cork and butcher-block products.
Profits come from buying in enormous bulk (sometimes buying a mill's entire year's production) and passing the savings along to customers.
I like it for two reasons. First, the story reminds me of the early days of Home Depot and Lowe's, when an ambitious company starts using bulk buying and aggressive construction of new locations to consolidate a fragmented market. Lumber Liquidators looks to be the category king of whatever markets it enters.
Second, I like the chart of this November 2007 IPO. It came public just in time to be mauled by the winter bear, but since bottoming out at 6 in January, the stock has soared to 17 before pulling back slightly. Earnings trends are positive and just enough institutional investors have signed on to give the stock a sheen of respectability. It's worth checking out.
Paul Goodwin
Emerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets Report
A researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of
Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return, and the top-performing investment adivsory for five years with a 17.9% annual return.