GRMN (Garmin): In 100 Meters... Don't Buy

To begin with, I own a Garmin. I love it. It's really changed the life of this person who is forever cursed with wanderlust. For the 300-400 bucks that was paid, it was worth every penny. The money is paid back 10 fold with the time and gas that was saved from not getting lost (it's a common thing for me).

OK, So there are a lot of good things about the product however the business is a completely different story. So right now, the stock is soaring at near 52 week, not to mention lifetime highs at $56 a share. Nearly every article and nearly every person who comments on CAPS on Motley Fool, thinks this is a winner. But I'm having trouble believing that it's going to be the next AAPL or GOOG and that it's just going to keep on going up. It just doesn't feel right. So I put some thought into it and wrote them all down. Here are my notes:

STICKINESS:
While they currently have 60% of the market, there is nothing that is keeping a consumer stuck to them. I think of Apple's iPod and the amazing success they have had. While the product is gorgeously designed, I can think of a hundred other MP3 players are that just as beautiful, usable and frankly, more capable. What keeps someone from buying another player is iTunes. Buying another player means giving up all the money you invested into iTunes and starting over from scratch. So tell me. What's holding back a buyer from buying an alternate system from say, Tom Tom?

LOWER MARGINS:
We all know that it's inevitable that the prices will go down as competition within this space becomes more fierce. Units that now sell for $400+ will soon be sold for $150. Unfortunately, they can't control prices like iPod and the bottom line is that in the short term, they might be OK as everyone else begins to buy GPS devices because of the low cost, but I see a very similar future for Garmin much like what has happened for Motorola and the RAZR.

SATURATION:
So I recently had lunch with a co-worker who just bought a brand spanking new Mercedes CLK and I was oohing and ahhing over her new ride. I asked her if she got it fully loaded and she said: "No, we left off the GPS navigation system."

I got all excited and said: "Oh, you can get a Garmin! It's only $400 bucks and you can put it both of your cars."

She politely passed and mentioned that she didn't need to because she could just install GPS software onto her cellphone. I then thought: "Gosh, it would really suck for Garmin if everyone started putting it into their mobile devices."

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So ya, I hear everyone that Garmin is pretty bad ass. Heck, I'm one of the people saying it. But with all the hoopla around the stock, I just don't feel good putting the money into it. What ever happened to "Buy low, sell high..." We need to feel good in a trade and believe we picked it for the right reasons because when the stock drops, we won't freak out. It's at all time highs, there is no stickiness to the product, the prices are going down and soon, anything mobile with a screen will be doing the same thing. I'm sure that there are a lot of things I don't know about the company and their strategy however 1) If you don't know the business, don't invest in it and 2) It doesn't pass the common sense test.

We'll see how well it does but I'll pass on this one.



Notes:
In Portfolio: Gosh no, Heck no, Please no.
Remember: The Silverhawks?
Bullshit: Sajaya Malakar is still on American Idol