The Next Addition to My Portfolio
At the beginning of the year, I set a few financial goals for myself. No. 1 was to stop using credit cards frivolously and work on paying off a decade of debt. No. 2, perhaps more important, was the building of my retirement portfolio through the purchase of stocks.
I started off with the purchase of megaconglomerate Berkshire Hathaway, whose broad company base and relative cheapness was attractive. I then added a couple of dividend payers in Waste Management and Ford to grow my portfolio through income afforded by a dividend reinvestment program. I then went looking for a growth stock, keeping an eye on five different "growth" stocks. After careful consideration, I have decided to add SodaStream International (NAS: SODA) to my burgeoning portfolio and will be purchasing shares within the week.
I still like the four companies that I am bypassing right now. They all rode the wave of a strong first quarter of 2012 to highs above what they were when I began considering them a month ago. Only SodaStream has seen its price drop over the past month:
|Amazon.com (NAS: AMZN)||$179.30||$199.66||11.4%|
|lululemon athletica (NAS: LULU)||$70.48||$76.61||8.7%|
|Under Armour (NYS: UA)||$92.22||$98.09||6.4%|
|Zipcar (NAS: ZIP)||$13.50||$13.92||3.1%|
Source: Yahoo! Finance; prices as of market close on respective days.
It's not all about price, however. These gains resulted in an increase in each price-to-earnings ratio, except for profit-free Zipcar. Meanwhile, the decrease that SodaStream has seen has actually made the stock cheaper, sliding its P/E from 29.3 to today's 23.5.
Why they didn't make the cut
Amazon still does retail better than everyone, and might be opening an actual brick-and-mortar store. The recent addition of Sony's PlayStation 3 to its list of streaming devices for its Instant Video service places more eyeballs on its fledgling video service. It has one of the fastest supercomputers in the world running its cloud services. All of these things seem to make it a great buy regardless of price. Nevertheless, its P/E near 150 still scares me, and I would like to see either more earnings going forward or a cheaper price before pulling the trigger on the e-tailing giant.
Both Under Armour and lululemon have seen record highs in the past 30 days, and it's not hard to see why. People who like Under Armour products tend to be crazy about the products -- myself included -- and lululemon inspires a similar level of loyalty. However, both have had issues with inventory in the past, with Under Armour's inventory growing faster than sales, and lululemon experiencing similar inventory pains. If both can overcome these perceived shortcomings, I can easily see one or both finding a home in my portfolio in the future.
Finally, being the preeminent car-sharing service has not helped Zipcar reach profitability, though things may be looking up for the company. Despite its negative free cash flow, Fool Rex Moore purchased Zipcar for his Rising Star portfolio, hoping that it will repeat the performance of a similarly situated Home Depot. Part of my initial interest in the company was a result of two of our top analysts' independently recommending the company at our annual investor conference last September. I am keeping an eye on the company going forward but will probably avoid it until it can start turning a profit.
Why SodaStream is my choice
It wasn't simply an elimination of the other candidates that led to my selection of SodaStream. I have been a fan of the company since partaking of the product last fall, and have been enjoying my own homemade soda for nearly a month. Beyond an appreciation for the product, however, there are plenty of other reasons to appreciate the company.
As part of its new Replant Our Planet initiative, the company will be planting 10 trees in Brazil for every purchase of its Rethink Your Soda line. The company tracks the number of bottles "saved" by its home soda makers on its website, with the count approaching 1.7 billion. The new Revolution machine will automatically fizz your soda for you, perhaps making it the must-have appliance during this year's holiday season.
Can't wait to add it
As soon as Motley Fool trading guidelines allow it, I will be adding SodaStream to my portfolio. This doesn't mean that I will stop following the four companies that didn't make the cut, as all the companies will remain firmly entrenched on My Watchlist. You can also click here to add these exciting companies to your watchlist as well.
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At the time this article was published Fool contributor Robert Eberhard owns shares of Berkshire Hathaway, Ford Motor and Waste Management, but he holds no other position in any company mentioned. Follow him on Twitter, or click here to see his holdings and a short bio. The Motley Fool owns shares of Waste Management, lululemon athletica, Under Armour, Amazon.com, Ford, Zipcar, and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, lululemon athletica, SodaStream, Under Armour, Amazon.com, Ford, Waste Management, Home Depot, and Zipcar, as well as creating a synthetic long position in Ford, and writing a covered strangle position in Waste Management. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.