Update - August 25, 2020

The Markets Keep Climbing… and Climbing

Portfolio Update

I talked with a couple of interesting folks this week.

The conversations led to an important topic… and served as a reminder of why I’m so excited for our stake in Logitech (LOGI).

“We’re both working from home now,” the wife, an accountant, said.

“We are not going back,” the husband, an IT manager for the county’s huge healthcare provider, chimed in. “The company loves it. It found out folks are more effective at home and overhead is way lower. The brick-and-mortar savings are huge.”

The couple agreed that it’s the future.

Companies can spend a bit on computer hardware today and save a ton on maintenance, rent, you name it… for years to come.

The trend is creating a historic sales surge in the computer industry.

The president of Acer – a major computer supplier – recently stated the company is “nowhere close” to keeping up with demand… especially now that schools have submitted orders for hundreds of thousands of new devices.

One industry analyst reports that “Sales have been up 20% to 40% every single week.”

That’s huge.

Of course, Logitech doesn’t sell computers… but it does sell the accessories that go with them.

That’s what makes those sales growth figures from above so interesting.

Right now, Wall Street’s consensus earnings estimates for the company’s third quarter have earnings coming in at $0.57 per share.

That’s just $0.07 (or 14%) above the same period last year.

The figure is way too low, which is why I’m expecting another big beat when the company releases its earnings on October 19.

You may recall, the company crushed its last earnings expectations. The Street expected $0.34 per share… and Logitech delivered a healthy $0.64.

I expect the beat to be by an even larger margin this fall.

We’re already up by double digits on this position that we entered in July. But if the company manages to beat earnings as strongly as I think it will, there’s no doubt the current trend will accelerate from here.

In other words, if you haven’t yet bought your shares of Logitech… now is a good time to do it.

It’s a similar situation with our stake in Scotts Miracle-Gro (SMG). And while the trend toward backyard gardening naturally slows down going into the fall season, my sources say what was an explosive spring and summer is now a steady, slow “hum.”

There’s no doubt that Scotts will continue to see strengthened year-over-year sales through upcoming quarters. What I’m looking for from here, though, is continued growth in its indoor and hydroponics units.

Remember, with brands like Sunlight, Hawthorne and General Hydroponics, Scotts is a leader in indoor cultivation… which surely will see a big boost in popularity this winter.

It’s the sector to watch, especially as many investors will overlook the opportunity… leaving room for a big pop in share price after a healthy earnings beat when the company reports in November.

Continue to hold your shares. We’re up more than 40%… and just getting started.

Be well,

Andy