12 Stocks Of Christmas: Garmin

24th Dec '24 by Megan Boxall

25 comments 2480 reads

Happy Christmas and welcome to our festive stock-picking series: the 12 Stocks of Christmas. Between now and the Twelfth Night (6 January), Graham, Mark and I will bring you four pieces of companies analysis each - these are all stocks that we’ve got on our watchlists, have added to our portfolios or we’re generally optimistic about for the coming year.

We hope these picks will give you some food for thought in the down time between Christmas and the start of a new year.

Let us know your thoughts on our choices and if there are any companies which are hot on your radar for 2025.

Garmin (NYQ:GRMN) - a cash generative tech company with more to offer in 2025

Market cap at the time of writing £32bn at a share price of $209

I’m kicking off with the sole US offering on our list because it’s Christmas Day and I am hoping to be unwrapping a Garmin as you are reading this.

In 2024, the US company is probably best known for its wearable devices and exercise tracking equipment. With good reason. Together ‘fitness’ and ‘outdoor’ operations made up 58% of revenues and 68% of operating profits in 2023. And they have been strong contributors to the company’s strong performance in 2024 with sales up 32% and 10% respectively in the nine months to September.

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But Garmin is more than a wearable devices business. Founded in 1989, the company’s first product was a GPS unit for boating. Within five years it had added the US Army as a major customer and reached annual sales of over $100m.

Through the 2000s, Garmin continued to build innovative tracking devices for maritime and aviation markets, but also made its first foray into consumer devices. The Forerunner (the world’s first training smartwatch) was launched in 2004 and the Edge (a GPS-enabled cycling computer) came the following year.

But it was the GPS-enabled navigation system for cars which gave the company’s sales a real boost. Alongside TomTom, Garmin shared a duopoly in the SatNav market which saw auto sales rise to 80% of total revenues.

The arrival of Google Maps alongside an acceleration in smartphone capabilities put paid to the SatNav party by the early 2010s, but…

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BnB

25th Dec '24

Garmin (NYQ:GRMN) looks a decent stock but seems overpriced to me

It’s priced about right for the US Rusty. Everything’s expensive

Spender71

Please continue after breakfast. Looks interesting.

Rusty2

26th Dec '24

Not everything is, but there quite a few stocks, that have seen large rises this year.

Warren Buffett thinks the market will crash soon.

The S&P 500's Shiller P/E Ratio was 37.68 On December 20th, over double it's historical average. It is at its third highest ever level, close to second highest. Over 30 tends to see a correction after it. Only time it has been above 40, was in 2000, dotcom bubble.

Over 30 tends to see a correction after it

Yes. I’m not alone in expecting one. But does it really matter if you’ve no intention to sell the companies you own for 5 to 10 years? A correction won’t even be discernible on the long term chart a decade from now. It’s a proper recessionary bear market you want to avoid.

Buying after a crash usually results in better returns. Look at 2000, it is certainly discernible after 10 years, even on a 100 year chart. I don't think we are quite at that level yet but think we heading that way. AI bubble?

The previous high before 2000 was in 1929.

timarr

Have held Garmin (NYQ:GRMN) for a while now. A few things:

It's listed in the US but headquarted in Switzerland
Dividends are paid out of capital reserves, so there's no withholding tax at the moment
Manufacturing is mainly in Taiwan, so there's risk there (one of the founders is Taiwanese)
Although the Fitness and Outdoor businesses account for nearly 60% of the revenue the Aviation and Marine businesses also contribute usefully - the Auto business remains resolutely loss making after a decade of investment.

I topsliced last month after a good run, mainly because of the China risk (although, frankly, if China invades that'll be the least of our problems). However, it's a wonderful business, its brand offers a strong moat and its culture clearly fosters innovation.

Hindsight it may be but you could have bought Garmin for less than half the current price last year when it was still suffering a bit of a pandemic hangover. It was cheap then, less so now.

Buying after a crash usually results in better returns

You don’t say?

We’re talking about a correction, not a crash. See your previous post. The US market will correct several times next year IMO. 3 per year is the average I think over decades. Will it crash and what would make it do so are the questions to ask? My belief is that nothing that causes the US to crash will leave any other market much less affected. The AI trade however will eventually deflate and US valuations will start to normalise, in particular if other geographies encourage a rotation. Or to put it another way, if you were a US investor, would you invest in Europe or the UK today? Certainly not at the moment - the thought is ludicrous! But smart money will be eyeing up Europe for an improvement in conditions.

Watch US Treasuries however. A significant rise caused by a spike in inflation will eviscerate Tech and may be good for value and commodities.

Will it crash and what would make it do so are the questions to ask? My belief is that nothing that causes the US to crash will leave any other market much less affected.

If we could see it coming it wouldn't happen.

In the end it doesn't take anything more than irrational exuberance to set up the conditions for a crash - a positive behavioural feedback loop accentuated by indexing leading to valuations that are out of kilter with any reasonable growth expectations. People start throwing money at stocks because they've gone up and because their friends and neighbours are making money by doing so. Generative AI - a genuinely interesting and probably useful technology - looks like the perfect meme to hang a market by.

There's no point in fighting this, we might as well hitch a lift. The eventual crash, if it comes, will be preceeded by the classical sawtooth market movements as valuations fight psychology. Valuations always win ... eventually.

And if it doesn't come, happy days, there's money to be made in them there data centres.

yiannos1

US market will not crash based on valuation. There is nothing wrong with the valuations. NVIDIA (NSQ:NVDA) still trades at the same multiple that was trading when the price was about $3!!

Earnings are still growing for the big 5 companies that direct the indices.

Micron Technology (NSQ:MU) lost about $100B for its highs and this had NO IMPACT. I can name many more-no need-there has been a crash in many stocks but the indices are basically made up of the big 5.

However, the market will crash when we all wake up one day and the Credit rating agencies decide to downgrade the country’s rating to one that we HAVE NEVER SEEN before and the yields will fly. The reason is the US debt and this will one day crash the market. This is the reason the US yields are rising again.
When this/if happens the earthquake will be felt worldwide. But , yet again , the recovery in the US will be faster than any other market.

All the best

StrawberryDreams

Happy Xmas everyone!Bit late but better than never.And thanks for all your brilliant content and work to all the Stocko team. P.S. Anyone not watch the Gavin & Stacey episode yesterday.?I won't give away the ending just in case!

There is nothing wrong with the valuations.

Completely agree re Nvidia, which is “normally” priced. But plenty of quality non-software/semi stocks with sub 10% revenue growth are on PERs around 40x. From my fund, Moody's (NYQ:MCO), Amphenol (NYQ:APH), MSCI (NYQ:MSCI), Tradeweb Markets (NSQ:TW), West Pharmaceutical Services (NYQ:WST), while MedTech that used to trade at 25x is now over 30x, eg Stryker (NYQ:SYK). All terrific companies worthy of a substantial premium. But these valuations only work while earnings keep growing at pace. I’m watching carefully while momentum is onside but we all know how easy it is to be caught out and I would not confidently assert that I can see trouble coming faster than better resourced market participants. In fact quite the opposite. Gulp.

Micron chip business has never been good.Not a chip expert but i know the chips they make are commodities pretty much and highly competitive with asian low cost suppliers from Chip War.Best to just try swing trade ranges there if you want and can.I'm staying away as i can't and don't understand all their different products and specific variables in their business at all.Nvidia sure has a moat.Even Advanced Micro Devices (NSQ:AMD) is getting battered.

I do like Unity Software (NYQ:U) though as i think they have a decent shot with all their data from their game engine on really working out a better, hopefully decent model to challenge Applovin's current 'moat' (NSQ:APP who did try to buy them out just a couple of years back.They've just hired a guy who created a lot of the data science stuff that Applovin (NSQ:APP) bought.If they can refine their models and get better returns for advertising metrics then Applovin's unusually large operating margins should decrease.. and Unity get some more ad business as the game engine business is currently hard to monetise.Data's easier and quicker to manipulate and process and use than developing a new chip and they have the data and now the new hire is the main talent which is so important too and who knows what to do and who else to hire.Why Musk is again currently looking for new probably Indian engineers.

Admittedly bad momentum currently though.ChatGpt says that machine learning models (with the right data assets importantly) don't take years to create depending.The difference between the marketcaps is naturally huge now.

No one cares about all these companies you have mentioned whether they grow or are delisted.

Amazon.com (NSQ:AMZN)

Apple (NSQ:AAPL)

Microsoft (NSQ:MSFT)

Alphabet (NSQ:GOOG)

Meta Platforms (NSQ:META)

When these top 5 stop growing you might get a crash?! Whatever that means.

In the meantime enjoy the ride.

Yes correct SD

Advanced Micro Devices (NSQ:AMD) is another one that lost over $200B! of its value and the market kept flying. It’s all about the Top5. Intel (NSQ:INTC) the same.

Newbies will probably do not know that Boeing Co (NYQ:BA) was once the stock that everyone was looking for the direction of the market. Lost half of its value the last 5 years.

Are these not counted as a crash?

Look at the yields , the 10 year especially , and if this passes 5.5%-6% then run fast, as the debt rollover on so many assets will crash things.

grumpy5

27th Dec '24

A bit of consumer feedback. I have used their aviation products for years. There is little doubt they are the quality benchmark. But there are increasingly capable competitors beginning to eat their lunch.

For my new machine, for example, I have specified Dynon - initial cost slightly cheaper, and database updates are free, unlike Garmin. So I think G's rating is up with events.

Coops

Go on please.

Mark Carter

Glad you like it. I have suggested a share on the recent report.

28th Dec '24

Hope you enjoyed your breakfast. A good list of compounders and savvy long term holds. Computacenter looks the best value of the list, though may be slightly influenced by an existing position.

Tortoise investor

6th Jan

A user perspective: my garmin forerunner is really great at tracking my runs and, more importantly, setting up training programmes and pace setting. I run 3x a week so I am fairly serious user.

However, the watch's smart features are much poorer than most other Apple and Android smartwatches. The Garmin map function is incredibly basic, my bank won't let me pay using Garminpay, the screen interface isn't as good, I can't ask it random questions I want answers to like you can with Apple and Google watches, and the apps available for Garmin are limited. That's why I also own a Google Pixel 2 watch.

I reckon if Apple, Google, Samsung have better running features it'd probably destroy Garmin's watch offering for runners. And there's some evidence they are catching up. For example, my running app Runna (which creates running programmes) now integrates with Apple watches, and Google bought FitBit and the Pixel Watch 3 looks much better for running stats and programmes: https://www.androidcentral.com... (although note this review criticises the GPS accuracy of the Google Pixel watch).

So personally I'd be nervous about whether some of Garmin's wearable tech products could soon become obsolete, being unable to integrate with a wider ecosystem of apps and features that other smartwatches have.

7th Jan

Hello Megan,

What happened to the survey about our performance for last year?

You said there would be an email coming out.

12 Stocks of Christmas: Garmin

Garmin (NYQ:GRMN) - a cash generative tech company with more to offer in 2025

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Megan Boxall

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